Cartel rules assist joint ventures

Companies wanting to work together but avoid breaking the laws on price-fixing or marketcontrolling behaviour have been given a helping hand by the Commerce Commission.

A final version of the guidelines has been released to accompany changes to the Commerce Act, which came into force in August last year for addressing cartels.

Exceptions have been added for vertical supply contracts or ‘‘collaborative activity’’, alongside an existing exception for firms with joint buying arrangements.

But these must still meet the test over whether they substantially lessen market competition. So the commission is introducing a single-stage clearances regime for collaborative activity only, which can give full clearance.

Commission chairman Dr Mark Berry said the new law was aimed at making it easier for ‘‘procompetitive collaboration’’ or joint ventures, while still deterring cartel conduct.

A contentious aspect of the law changes, which had been in the

Exceptions have been added for vertical supply contracts or "collaborative activity".

system since 2011, was the decision to not criminalise cartel conduct.

Originally the bill made cartel behaviour a criminal offence with a punishment of up to seven years in jail. But this was dropped in 2015, due to the risk of a ‘‘chilling effect’’ on pro-competitive activity.

The then-Commerce Minister Paul Goldsmith said in a note to Cabinet that there were two views of criminalising cartels.

One was that it was a strong deterrent, and another that compliance costs were high and international evidence for sanctions as a deterrent was weak.

Goldsmith said criminality could be difficult to pinpoint. For instance, ‘‘joint bids for contracts can be pro-competitive or anticompetitive depending on the facts and an in-depth investigation may be required to identify the difference in some cases’’.

‘‘Criminal sanctions are most effective where the unlawful conduct is unambiguously harmful.’’

The Ministry of Business, Innovation and Employment has an ongoing brief to monitor the effects of cartel criminalisation overseas, and says that there have been varying levels of success.

Australia has taken just one criminal prosecution for cartel conduct since the introduction of criminal sanctions in 2009, and prosecutions have also been thin on the ground in the United Kingdom, which introduced criminalisation in 2003.

The United States is understood to have had had more luck with prosecutions.

While cartel activity is not a crime, it still carries civil penalties in New Zealand, with maximum fines of $500,000 for individuals and $10 million for companies.

Fines have also been sizeably boosted for failing to assist the Commerce Commission in investigations, from $10,000 to

$100,000 for an individual and from

$30,000 to $300,000 in other cases.