1 APRIL 2009 - The Commerce Commission has issued formal warnings to Schindler Lifts New Zealand Limited (Schindler) and one current and one former employee for participating in a longstanding cartel arrangement which shared elevator installation contracts in the South Island. The Commission alleges the cartel operated from the early 1980s until late 1995. The warning was issued following an admission from the Schindler manager concerned.

Under the arrangement, the cartel participants would determine which firm would win upcoming elevator installation contracts. The losing bidder submitted a high 'cover' bid that did not succeed and was not expected to succeed, in order to give the impression of genuine competition.

The primary objective of the cartel was to secure the lucrative ongoing maintenance contracts for the elevators. The prevailing market conditions at the time of the cartel ensured that the company which installed the elevator was invariably awarded the contract for its ongoing maintenance. The Commission considers that the collusion over the installation contracts also had the purpose and effect of controlling or maintaining the prices of the maintenance contracts.

Commerce Commission Director of Competition Deborah Battell said, "Of particular concern to the Commission is the fact that maintenance agreements are still in force today which may be tainted as a result of this alleged cartel. Some of these contracts have not been subject to competition and building owners are potentially suffering higher prices as a result."

The limitation provisions of the Commerce Act prevent the institution of proceedings in relation to conduct more than ten years old, otherwise the Commission considers it would have been appropriate to issue proceedings against Schindler and one of the individuals in this case.

The Commission's investigation was opened following an application under the Commission's leniency policy. During the investigation the Commission obtained admissions from the key cartel participants and also uncovered evidence that senior executives within the cartel companies were aware of the behaviour and did little or nothing to stop it.

"It is important that companies take seriously any allegations made by staff about collusion with competitors and investigate such matters appropriately" said Ms Battell.