New cartel law targets activity rather than price - and throws prison into the mix

New draft legislation designed to imprison individuals running corporate cartels will target activities such as bid-rigging and price-fixing.

Under the proposed new Commerce (Cartels and Other Matters) Bill, prosecutors will not have to prove that the crime actually affected prices, but simply that people carried out prohibited activities, such as fixing prices, restricting output, allocating markets, and rigging bids.

The bill introduces criminal sanctions for individuals and companies, with a person liable to up to seven years’ imprisonment, while a company could be fined the greater sum of up to $10,000,000 or three times the value of the commercial gain.

If the criminal gain cannot be ascertained, the company can be fined 10 percent of its annual turnover.

Criminalisation of cartels would bring New Zealand into line with many of its trading partners, including the United States, Britain, Canada, and Australia, Commerce Minister Simon Power said.

The proposals were being put out for consultation to ensure it adequately supported pro-competitive business arrangements by providing greater certainty that they would not be prohibited.

Exemptions already provided for joint ventures have been broadened and renamed the "collaborative activity" exemption.

Companies uncertain whether their proposed collaboration activity might be in breach of the new rules would be able to seek clearances, in line with the Commerce Commission's clearance regime for mergers.

"The draft bill is designed to give businesses certainty about the boundaries of the proposed law," Mr Power said.

"If this can be achieved then there may be benefit in following international enforcement trends and criminalising cartel behaviour.

"Cartel activities such as price fixing and bid rigging are harmful forms of anti-competitive behaviour, and result in businesses and consumers paying inflated prices.

"Introducing criminal penalties, including imprisonment, could be a strong deterrent to individuals contemplating cartel behaviour."

Submissions on the bill close on July 22.