Legislation to criminalise anticompetitive collusion – the Commerce (Criminalisation of Cartels) Amendment Act 2019 – is due to come into full force on 8 April 2021. Under the new statutory regime, criminal penalties may be imposed on individuals and businesses that deliberately engage in cartel conduct.
What is cartel conduct?
Illegal collusion, or cartel conduct, occurs when two or more businesses agree to coordinate their activities in order to increase profits and limit competition. This coordination can take various forms, including price-fixing, dividing up markets, bid rigging, or restricting the output of goods and services.
Key features of the new criminal regime
Currently, cartel conduct constitutes a civil offence under the Commerce Act 1986. Businesses and individuals found guilty of engaging in cartel conduct can be fined up to $500,000 for an individual, or, for businesses, up to $10 million, three times the commercial gain derived from the illegal activity, or 10% of turnover per year per breach.
From 8 April 2021, cartel conduct will also constitute a criminal offence. Under the new criminal regime, individuals who intentionally engage in cartel conduct will face criminal penalties of up to 7 years imprisonment and/or a fine of up to $500,000 (i.e. the same as the maximum pecuniary penalty for individuals under the civil enforcement regime). Businesses will also be subject to the new criminal regime, and will face criminal fines equal in value to those which may currently be imposed under the civil enforcement regime.
The rationale for criminal penalties
It is well recognized that cartels can cause significant harm to markets and consumers by raising prices and restricting supply, placing goods and services beyond the reach of some consumers and rendering them unnecessarily expensive for others. In recognition of this, the OECD has long recommended criminal penalties for cartel conduct where this is consistent with legal and social norms.
Criminal sanctions for cartel conduct are considered a strong deterrent as the individual perpetrator feels the full effect of the criminal penalty, in contrast to imposing fines on a business, which impacts on profitability and, at worst, could be viewed by some firms as simply a cost of doing business.
New Zealand’s decision to introduce criminal penalties for cartel conduct follows Australia, which implemented a similar criminal regime in 2009. The initiative also brings New Zealand’s cartel laws in line with those of several other key trading partners, including the United States, the United Kingdom, Canada, Japan and Korea.
Preparing for the law change
In advance of the upcoming law change, Lane Neave is offering businesses in-house seminars on New Zealand’s cartel laws, to help staff understand their legal obligations and identify high-risk situations.
Lane Neave has also published a plain English guide on New Zealand’s cartel laws, which includes a list of practical steps that you can taken to ensure compliance. To request a copy of this publication and/or book a seminar for your staff on the incoming criminal regime, please email firstname.lastname@example.org.
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