No criminal liability for cartels

Thursday 10 December 2015

Authors: Torrin Crowther, Andy Glenie and Glenn Shewan

​Earlier this week, the Minister of Commerce and Consumer Affairs Paul Goldsmith announced that the Govern​​ment has decided not to proceed with a plan to criminalise cartel conduct.

No criminalisation of cartel conduct

In 2011, the Commerce (Cartels and Other Matters) Amendment Bill was introduced to Parliament to amend the Commerce Act 1986. The Bill put forward a number of changes to the Act. Most controversially, it proposed to introduce criminal sanctions for cartel conduct – with individuals involved liable to imprisonment for up to seven years. That proposal has now been abandoned, via amendments to an existing Supplementary Order Paper.

The Minister came to the view that the arguments in favour of criminalisation, which included:

  • increased deterrence, and
  • consistency with overseas regimes,

were outweighed by those against which included:

  • the risk of chilling legitimate commercial activity,
  • increased enforcement cost without increased funding,
  • the difficulty of differentiating legitimate from illegitimate conduct, and
  • the existence of a range of substantial existing civil sanctions. 

Although there is currently not a clear case for criminalisation, agencies will continue to monitor international developments.

The significance of this decision

This decision is an encouraging reflection of the Government’s willingness to engage with stakeholders and consider carefully the costs and benefits of making any changes to the regulatory system. The clear majority of submissions made throughout the policy and legislative phases of this process were opposed to criminalisation. Although the decision sets us on a different path to major trading partners like Australia, in a small country like ours the possible increases in deterrence could not justify the increased costs and complexity involved in imposing a further layer of compliance obligations on business.

The Bill will make important changes to other parts of the Act, such as redefining cartel conduct and bringing much needed clarity to exemptions for competitor collaborations and vertical supply arrangements.

When will the Bill now come into effect?

The Bill was introduced into Parliament in 2011 and the ongoing delays in passing the legislation have been a source of some frustration to those in the business and legal community eager to see that clarity passed into law. Now that the criminalisation aspects have been removed, the Bill seems likely to be passed early in 2016.

If you or your business would like to know more about the other changes to be made by the Bill, please contact your usual Bell Gully advisor.


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Torrin Crowther

    Partner Auckland
  • Jenny Stevens

    Partner Wellington
Related areas of expertise
  • Competition