The Government announced on December 8, 2015 that cartel conduct will not be criminalised under the proposed Commerce (Cartels and Other Matters) Amendment Bill (known as the Cartels Bill).

Previous FYIs have provided information on the changes proposed by the Cartels Bill (What does the Cartel Bill mean for your business? and Cartel Bill: report back from the Select Committee). The change that received the most publicity was the introduction of criminal penalties for cartel conduct. Yesterday’s announcement is a significant change in position from the Government.

Potential chilling effect cited as reason for change

The Minister of Commerce and Consumer Affairs, Paul Goldsmith, cites the potential that cartel criminalisation would have a chilling effect on pro-competitive behaviour as a reason for the change.  Mr Goldsmith said that the goal is legislation “that promotes healthy competition giving consumers confidence and choice”. Mr Goldsmith commented: “The criminalisation of cartels has remained an issue of major contention with the Bill. I have re-examined the case for criminalisation, and on balance I have recommended that the criminalisation provisions be removed”. Mr Goldsmith noted that cartel behaviour “will continue to be subject to civil sanctions, and these are strengthened in the Bill”. Under the current law, businesses that engage in cartel conduct already face sanctions of up to $10 million, or three times the commercial gain resulting from the conduct, or 10% of annual turnover – whichever is the greater number. It is yet to be seen how these civil penalties will be strengthened as stated by the Minister.

Cartels Bill will still impact significantly on New Zealand competition law

The Bill will still introduce significant changes into New Zealand competition law. Whereas currently only price fixing automatically breaches the Commerce Act, under the Bill this will be expanded so that price fixing, output restrictions and market allocation are all considered “cartel conduct” that automatically breaches the Act. The Bill also introduces an exemption for cartel conduct for “collaborative activity” that is broader than the current joint venture exemption. Businesses will also be able to seek clearance from the Commerce Commission for any proposed collaborative activities, similar to the clearance regime currently operated by the Commission for acquisitions. This will give businesses certainty that proposed collaborative activities will not fall afoul of the Commerce Act.

Where to for shipping?

Another important change proposed in the Cartels Bill was to allow international shipping to be covered by the Commerce Act. Indications were that debate over this issue was one of the causes of the delay in the passing of the Cartels Bill. Interestingly there was no mention of shipping in the Minister’s announcement yesterday.

Cartels Bill on track to become law in 2016

Mr Goldsmith says he will shortly introduce a supplementary order paper to the House to give effect to these changes. Mr Goldsmith announced that Act and United Future have agreed to support these changes to the Bill, allowing it to progress through its final stages in the House. On this basis the Bill should come into force in 2016.

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