Passing of Cartels Bill marks new era in New Zealand competition law
After almost six years before Parliament, the Commerce (Cartels and Other Matters) Amendment Bill finally passed its third reading in Parliament today. Royal Assent is expected in the coming days.
The Bill was first introduced into the House in October 2011 with the primary aim of criminalising cartel conduct. While criminalisation has been removed, the amendments make significant changes to New Zealand's competition law.
The primary change is the new prohibition on "cartel provisions", which replaces the pre-existing "per se" prohibition on price-fixing. The new definition of "cartel provisions" expressly catches price fixing, "market allocation" and "output restriction" arrangements between competitors. While the broader express prohibition will require businesses to take extra precautions, the amendments also contain much improved exemptions to ensure that the prohibitions do not catch pro-competitive conduct. The new exemption for collaborative activities that replaced the current joint venture defence is, in particular, a welcome improvement.
Other key changes include:
Shipping: a new regime covering the international shipping industry, which was previously exempt from the Commerce Act sections dealing with anti-competitive arrangements between competitors,
- Enforcement powers: new powers for the High Court, on application by the Commerce Commission, to make orders against New Zealand companies including an order to cease trading or divest shares or assets. These particular orders can only be made where an overseas entity has acquired a controlling interest in the New Zealand entity and that acquisition is likely to substantially lessen competition in a market, and
- Cartel provision clearance regime: introduction of a clearance regime (much like the existing merger clearance regime) for entities considering entering into arrangements which include cartel provisions. If the Commerce Commission grants clearance, this provides certainty to the entities involved that the arrangements benefit from the collaborative activities exemption and do not substantially lessen competition in market.
The amendments include a nine month transition period to allow businesses to ensure that their existing arrangements are compliant with the new cartel prohibition, although this will not apply to arrangements that would have breached the pre-existing provisions, or to new arrangements entered into following the amendments passing.
These new rules govern agreements between potential, as well as actual competitors, which can in some instances include customers and suppliers. Accordingly, even common arrangements, such as territorial allocations in distribution agreements, have the potential to raise issues under the new prohibitions. Most arrangements with customers and suppliers, if properly structured, should fall within the new exemptions. Nevertheless, businesses should take advantage of the nine month grace period to carefully review any such arrangements and ensure compliance with the new laws.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.