Cartel conduct now a criminal offence in New Zealand
Businesses talking formally or informally to their competitors need to take care, as engaging in cartel conduct is now a criminal offence. From 8 April 2021, the Commerce (Criminalisation of Cartels) Amendment Act 2019 comes into effect, and an individual who deliberately engages in cartel conduct commits a criminal offence.
Individuals can face 7 years in prison or a fine of up to $500,000. Businesses can be fined up to $10 million, three times the commercial gain of the offence, or 10% of the turnover for each year in which the conduct took place.
What is Cartel Conduct?
A cartel is where two or more businesses agree that they will not compete with each other. This can take effect in many different ways, including:
sharing markets, where competitors agree to divide up a market and not compete for the same customers;
price fixing, which can include setting a specific price for goods or services, agreeing to set prices according to a formula, or agreeing to fix part of a price;
reducing or restricting the availability of products and services that they are buying or selling; and
rigging bids, where some or all of the bidders agree who should win a bid and or what prices each of the bidders will bid for a tender.
Cartel conduct can result in reduced competition in a market, leading to higher prices, lower quality, or reduced choice. Businesses which engage in cartel conduct risk large penalties under the Commerce Act, for example, a 2018 case involving real estate agents resulted in the Commerce Commission imposing over $20 million in penalties.
Unsure how this may affect your business?
Sometimes businesses can engage in cartel conduct without intending to or without realising that they are breaching the Commerce Act. Due to the significant penalties and high risk, businesses should seek legal advice immediately if they have any concerns. Time is of the essence, as the Commerce Commission can grant leniency to the first member of the cartel to approach it, provided they meet the leniency requirements.