New criminal regime for cartel conduct passes into law

Introduction

The Commerce (Criminalisation of Cartels) Amendment Act passed into law on 8 April 2019. The Act introduces a criminal regime which sits alongside the existing civil cartel regime under the Commerce Act 1986, making it a criminal offence punishable by up to 7 years imprisonment, for an individual to deliberately engage in cartel conduct.  However, the new criminal regime does not come into full into effect until 8 April 2021, giving businesses and individuals time to ensure they are compliant with the new cartel laws.

History

After many years of debate, the Commerce (Criminalisation of Cartels) Amendment Bill was introduced on 15 February 2018.  The objectives of the Bill were to:

• Promote detection and deterrence of cartels;
• Improve cartel enforcement by the Commerce Commission; and
• Facilitate New Zealand’s contribution to enforcement efforts against global cartels.

For further information on the Bill, see here.

What is cartel conduct?

Broadly speaking, “cartel conduct” concerns illegal collusion between competitors.  Such conduct generally lessens competition, resulting in consumers having fewer choices and/or paying higher prices for goods and/or services than they would if competitors were operating independently of each other.

The three forms of “cartel conduct” prohibited under the Commerce Act are:

• Price fixing;
• Output restriction; and/or
• Market allocation.

The Commerce Act also sets out a number of exemptions, including:

• Where parties are engaging in a “collaborative activity”;
• Vertical supply contracts; or
• Joint buying or promotion agreements.

For further explanation on cartel conduct, see here.

Criminalisation

Once the new criminal regime for cartel conduct comes into full effect in April 2021, the penalties for cartel conduct will include:

• For individuals: up to 7 years imprisonment and/or a $500,000 fine
• For companies: a fine of up to $10 million, three times the commercial gain of the offence, or 10% of the company’s turnover in each accounting period which the contravention was occurring (whichever is greater).
• Directors or managers may also be banned from similar roles in a company for up to 5 years if they have been involved in cartel conduct.

The new criminal penalties target any individual who is involved in cartel conduct. The key aspect is intention, meaning the person must have intended to engage in the cartel conduct or give effect to a contract which contains a cartel provision.

These criminal penalties not only create a strong deterrent for parties and individuals, but also encourage the reporting of cartels, as the Commerce Commission is offering conditional immunity from prosecution to the first member of the cartel who reports the behaviour to the Commission. The new laws also bring New Zealand’s cartel penalties broadly into line with a number of our key trading partners, including Australia, the United States, the United Kingdom, Canada, Japan and Korea.

If you would like to discuss how the new laws may impact your business, please do not hesitate to get in touch with a member of Lane Neave’s Corporate Team.

Business Law team

Gerard Dale, Claire Evans, Graeme Crombie, Evelyn Jones, Anna Ryan, Joelle Grace,  Peter Orpin, Ellen Sewell, Matt Tolan, Carlo Wan, Kristina Sutherland, Jacob Nutt, Whitney Moore, Alex Stone, Ben Cooper, Lisa Catto