Bid to criminalise cartel behaviour dropped

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Commerce Minister Paul Goldsmith has backed down on criminalising hard-core cartel behaviour after strong opposition from businesses claiming it would have a chilling effect on the market, leaving New Zealand out of step with the US, UK, Canada and Australia.

The Commerce (Cartels and Other Matters) Amendment Bill hasn't been debated in Parliament for more than a year when it passed its second reading, having first been tabled four years ago after an extensive drafting process.

Mr Goldsmith today says he plans to introduce a supplementary order paper to remove the criminalisation of cartel behaviour, saying stiff civil penalties should suffice. He has support from United Future and Act, meaning the bill will have enough backing to pass into law.

"I have re-examined the case for criminalisation, and on balance, I have recommended that the criminalisation provisions be removed," Mr Goldsmith says.

"In weighing up the benefits of criminalising cartel activity, the government had to consider the significant risk that cartel criminalisation would have a chilling effect on pro-competitive behaviour between companies."

Last year, a Productivity Commission report on competition in services industries warned criminalising cartels held a big enough risk that warranted a review within two to four years of implementation to measure its impact.

That echoed the business community's sentiments during the drafting and select committee process for the bill, which drew on international research suggesting consumers face prices of up to 20% higher because of price gouging.

To offset the impact of criminalising cartel behaviour the bill introduced a clearance regime for firms to test whether collaborations would breach competition law to give them greater legal certainty.

Mr Goldsmith will retain that collaboration aspect, which the Productivity Commission report said would ease smaller firms' reluctance to enter into those sorts of deals.

(BusinessDesk)