Cartel reform

The Commerce (Cartels and Other Matters) Amendment Act received Royal Assent on 14 August 2017. The majority of provisions in the Act came into force the next day.

The Act amends the Commerce Act 1986 to better provide for pro-competitive collaboration between firms, while also deterring anticompetitive cartel conduct.

Cartels are formed when rival firms agree to not compete with each other. Cartels allow firms to raise their prices above the competitive level without fear of losing customers to rivals. This increases the profits of cartel participants but does not benefit consumers.

The Amendment Act redefines the prohibition against cartels to refer to the three ways in which firms 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 firms can also increase productivity and growth. Consequently it introduces two new exceptions: a collaborative activity exception (which replaces the previous joint venture exemption) and an exception for vertical supply contracts.

The Amendment Act has redefined the collaborative activity exception to focus on the substance of the arrangement and not its form. It recognises that firms 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 (i.e. its dominant purpose is not anti-competitive) and where the cartel provision is reasonably necessary to achieve that purpose.

In assessing whether conduct is prohibited, the Commerce Commission and the courts are likely to look at business documentation such as emails, file notes, board documents and business agreements, as well as oral evidence from individual persons. Businesses may apply to the Commerce Commission to seek clearance for their arrangements to provide greater certainty when needed.

The amendment Act also makes a number of other amendments, including:

  • retargeting extraterritorial jurisdiction provisions to better deal with international cartelsintroducing a new regime to regulate overseas mergers
  • making agreements relating to international shipping subject to the Commerce Act after a two-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.

The introduction version of the Bill included a new criminal offence for cartels with sanctions of up to seven years imprisonment. In December 2015, the Government agreed to remove the criminal offence for cartels from the Bill. MBIE officials are 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.

Read the press release welcoming the passage of the Cartels Bill.

Block exemption for specified international liner shipping activities

The Minister of Commerce and Consumer Affairs, Hon Jacqui Dean, has tabled a supplementary order paper to the Bill to introduce a block exemption for specified international liner shipping activities.

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Removal of the Criminal Offence for Cartels from the Commerce (Cartels and Other Matters) Amendment Bill

The Minister of Commerce, Paul Goldsmith tabled a supplementary order paper to remove the criminal offence for cartels from the Bill.

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Commerce committee report

On 13 May 2013, the Commerce Committee tabled its report on the Commerce (Cartels and Other Matters) Amendment Bill.

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Transiting International Shipping to the Commerce Act

The Government has announced that international shipping to and from New Zealand will be regulated under the Commerce Act, improving oversight and delivering competitive outcomes for exporting industries.

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Commerce (Cartels and Other Matters) Amendment Bill – First Reading

First reading speech of the Minister of Commerce, Hon Craig Foss, on 24 July 2012.

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Cabinet paper – Proposed changes to the Commerce Act in relation to cartels [PDF 82KB]

Paper seeking Cabinet approval of final policy recommendations and introduction of the Bill.

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Regulatory Impact Statement – Cartel criminalisation

Final regulatory impact statement analysing options to promote deterrence of hard-core cartels, while not deterring efficiency enhancing collaborative activity; and to facilitate New Zealand’s active contribution to enforcement efforts against global cartels.

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Submissions on exposure draft bill

The Companies Act sets out the requirements for the incorporation, organisation and operation of companies.

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Exposure draft Commerce (Cartels and Other Matters) Amendment Bill [PDF 148KB]

The exposure draft bill was developed to test whether it was possible to define with sufficient clarity the cartel prohibition and exemptions, such that any downsides of criminalisation would be remedied or at least mitigated.

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Exposure draft bill – Explanatory material

The explanatory material explains the key policy positions that underpin the exposure draft bill; and the reasons why a particular approach has been adopted, both in the design of the regime and the drafting of the bill.

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Draft guidelines on immunity from prosecution for cartel offences

Draft immunity guidelines were provided to detail how a leniency regime might work in a criminal context.

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Press release announcing consultation on exposure draft Bill [PDF 53KB]

Minister Power’s press release 'Draft bill clarifies law around cartels' 16 June 2011.

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Cabinet paper – Cartel criminalisation [PDF 2.2MB]

Paper reporting back on the outcome of consultation on cartel criminalisation and seeking agreement to the development of an exposure draft bill for further consultation.

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Discussion document - Cartel criminalisation

Discussion document exploring what can be done to better deter and detect cartels.

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