Jail time for business cartels mooted

Jail time, not fines, would be a better deterrent for cartel members, says Lianne Dalziel. Photo /Brett Phibbs

Commerce Minister Simon Power is considering the possibility of jail sentences for those operating price-fixing cartels.

Power appeared before the commerce select committee today and was quizzed at length about the investigation and punishment of cartels.

Cartels, often operating informally and in secret, collude on tendering, fix prices, exclude competitors, rig bids and agree to share markets.

They are investigated by the Commerce Commission and large fines can be handed out, but unlike some countries it is not a criminal offence that can be punished with imprisonment.

Select committee chairwoman Lianne Dalziel said fines did not seem to be a deterrent.

"They don't mind paying the fines, but they do mind going to jail," Ms Dalziel said.

When she wondered whether Power was considering criminalising cartel behaviour, he paused for a long time before saying it was on his work programme.

After the meeting Power was reluctant to talk about the issue to NZPA, saying it was a "notion" at this stage.

Cartel prosecutions are usually long and complex.

The commission is accusing Air New Zealand of operating with other airlines as a cartel to raise the price of freighting cargo by imposing fuel and security surcharges for more than seven years. Air NZ denies the charge.

There have been appeals following the successful prosecution of a number of companies for running a wood chemical cartel.

The penalty for colluding over price and business deals can be high -- up to $500,000 for an individual or more than $10 million for a company.

The commission has been using a leniency policy, which means that if one member of a cartel gives evidence and co-operates with the prosecution then it will not be treated as harshly as its fellow cartel members.

NZPA