Avoiding jail time is no longer just a Pablo Escobar problem. Being a party to a cartel is now a criminal offence!

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Cartel activity is now a criminal offence. The best time to review your company’s arrangements, and policies as to how you interact, with competitors is now! A review will help ensure that you and your company are not charged with a criminal offence. Avoid the risk of being jailed, and save yourself and your company the serious financial and reputational risks that will come with a criminal charge.

Background

In April 2019 the New Zealand Parliament passed the Commerce (Criminalisation of Cartels) Amendment Act 2019 (Amendment Act). This amendment to the Commerce Act 1986 created a criminal offence for both natural and legal persons who are party to cartel provisions with the intent to engage in price fixing, restricting output or market allocating. The amendment came into force on Thursday 8 April 2021.

New Zealand’s treatment of cartels is aligned now with Australia and the UK which have already criminalised this type of cartel activity.

If convicted, an individual can be sentenced to a term of imprisonment of up to seven years. Being party to cartel conduct is subject to exceptions available under the Commerce Act 1986. Any person who is engaged in dealings with a competitor concerning a market which are not clearly within the scope of and exception is at risk.

The new criminal offences

This law makes cartel conduct a criminal office with penalties for individuals being a term of imprisonment up to 7 years and/or a fine not exceeding NZ$500,000.

The criminal penalties for a person other than an individual are the same as the pecuniary civil penalties already able to be imposed by the Commerce Act; a NZ$10million fine or either:

  1. If it can be readily ascertained and if the court is satisfied that the offence occurred in the course of producing a commercial gain, three times the value of any commercial gain resulting from the contravention; or
  2. If the commercial gain cannot be readily ascertained, 10% of the turnover of the person and all its interconnected bodies corporate (if any) in each accounting period in which the contravention occurred.

All the available exceptions and defences under the Commerce Act are still available including: collaborative activity, vertical supply contracts, and joint buying and promotion agreements.

The Amendment Act creates a defence to the new criminal offence. It will be a defence to a charge if the defendant believes on reasonable grounds that one or more the exceptions under the Commerce Act applied to the alleged contravention. The defendant’s belief cannot be based on ignorance or a mistake of law for the defence to apply.

Given that the new criminal offence is punishable by a term of imprisonment of up to seven years, the Commerce Commission also now has the ability to engage appropriate agencies to use greater investigation and detection powers, such as ‘wiretapping’, under the Search and Surveillance Act 2012.

The Commerce Commission’s discretion

A party to a cartel can ‘whistleblow’ about the cartel they are involved with to the Commerce Commission. If this party is the first within the cartel to ‘whistleblow’, and the Commerce Commission was not already aware of the cartel, the Commerce Commission can exercise leniency or immunity if the party who discloses the information meets certain requirements. Even if the person is not the first to notify the Commerce Commission, if the person admits to their participation in the cartel and assists the Commerce Commission in its investigation, the Commerce Commission has the ability to recommend lower penalties for that party’s offending.

The Commerce Commission’s discretionary powers when investigating cartels are outlined in their Cartel Leniency Policy and Guidelines which can be found here. We can to give you detailed advice on this policy.

Our recommendation

You need to take care to not engage in cartel activity if you want to avoid both the penalties and reputational stigma associated with being convicted of a criminal offence.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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