Criminal sanctions for cartel conduct have now passed into law, almost a decade after they were first considered.
After almost a decade of debate, Parliament has passed into law criminal sanctions for cartel conduct. The Commerce (Criminalisation of Cartels) Amendment Bill (the Criminalisation Bill) has passed its third reading and is expected to be given royal assent shortly. The amendments mean that individuals convicted of engaging in cartel conduct – price fixing, restricting output or allocating markets – now face fines of up to $500,000 and/or up to seven years imprisonment. New Zealand now joins Australia, the US and the UK as having criminal sanctions for cartel behaviour.
However, criminal sanctions will not come into force for two years to give businesses and individuals time to review their arrangements to ensure compliance with cartel laws.
Criminal sanctions for cartel behaviour were first considered by Parliament in 2011, when the Commerce (Cartels and Other Matters) Amendment Bill (the Cartels Bill) was introduced into Parliament. After much debate and delay, in December 2015 then Minister of Commerce and Consumer Affairs, Paul Goldsmith, announced that the Government would drop criminal sanctions from the Cartels Bill. The Cartels Bill was given royal assent in August 2017, without its flagship criminalisation amendment.
In February 2018 the Coalition Government announced that it was putting criminalisation back on the table. Shortly after, it introduced the Criminalisation Bill into Parliament.
The 'new' regime
The new amendments aim to target individuals who are the 'decision-makers' in cartel arrangements. Accordingly, an element of 'intention' will form one component of the test for criminal liability.
To be found guilty of criminal cartel conduct an individual must 'intend' to enter into or give effect to a contract with a competitor containing a cartel provision. This is the key difference from the civil standard, where there is no requirement to prove intent.
However, where a person can show that they believed "on reasonable grounds" that a statutory exception applied at the time they entered into and/or gave effect to the provision, such that their actions did not amount to cartel conduct, then they will not be guilty of a criminal breach (although they may still be found liable on civil grounds). This defence will only be available if the defendant's belief is "reasonable" i.e. is not based on "ignorance, or mistake, or any matter of law".
The exceptions and exemptions for cartel conduct already in place e.g. for collaborative activities and vertical supply agreements will apply to the new criminal offence.
There will be a two-year transitional period before the criminal offence comes into force, to allow businesses and individuals time to learn from the experience of the current regime, with the Cartels Bill having passed into law less than two years ago.
The Commerce Commission will also no doubt use this period to prepare itself to deploy its new powers. Given the increased severity in penalties for cartel conduct, businesses and individuals should review their efforts to ensure that any arrangements with competitors comply with the law.