The Commerce (Cartels and Other Matters) Amendment Act
The Commerce (Cartels and Other Matters) Amendment Act amends the Commerce Act 1986 to better provide for pro-competitive collaboration between businesses, while also deterring anti-competitive cartel conduct.
About the Amendment Act
The Commerce (Cartels and Other Matters) Amendment Act received Royal Assent on 14 August 2017, and the majority of its provisions came into force the next day.
New provisions dealing with cartels
Cartels are formed when rival firms agree to not compete with each other. They allow businesses to raise their prices above the competitive level without fear of losing customers to rivals. This increases the profits of cartel participants, but doesn’t benefit consumers.
The Amendment Act redefines the prohibition against cartels to refer to the 3 ways in which businesses may lessen competition between each other — that is, by:
- fixing prices
- restricting output, or
- allocating markets.
At the same time, the new provisions recognise that collaboration between businesses can also increase productivity and growth. Consequently the Amendment Act introduces 2 new exceptions:
- a collaborative activity exception (which replaces the previous joint venture exemption), and
- an exception for vertical supply contracts.
Collaborative activity exception
The Amendment Act has redefined the collaborative activity exception to focus on the substance of the arrangement and not its form. It recognises that businesses may also agree to work jointly to lower costs, expand output or improve quality and innovation.
This exception covers arrangements that have a legitimate purpose — that is, their dominant purpose is not anti-competitive — and where the cartel provision is reasonably necessary to achieve that purpose.
If needed, businesses can apply to the Commerce Commission to seek clearance for their arrangements to provide greater certainty.
The Amendment Act also makes a number of other amendments, including:
- re-targeting extraterritorial jurisdiction provisions to better deal with international cartels
- introducing a new regime to regulate overseas mergers
- making agreements relating to international shipping subject to the Commerce Act after a 2-year transitional period
- introducing a new targeted exception for specified international liner shipping activities, such as vessel sharing, that improve the services supplied to importers and exporters
- improving the efficiency of the Commerce Commission’s authorisation process.
Criminal offence for cartels
The introduction version of the bill included a new criminal offence for cartels with sanctions of up to 7 years imprisonment.
In December 2015, the then Government agreed to remove the criminal offence for cartels from the bill. We were directed to monitor domestic and international developments to better assess the potential effects of cartel criminalisation and whether such an offence should be adopted in New Zealand.