Criminal status for cartels comes a step closer

Justice Minister Simon Power. Photo / Mark Mitchell

Price-fixing will become an imprisonable offence carrying a sentence of up to seven years if public consultation on a proposed new law cracking down on "hard-core" cartel behaviour is supportive.

Justice Minister Simon Power released a draft of the Commerce (Cartels and Other Matters) Bill for public comment yesterday.

Penalties for corporations will include paying three times the value of the commercial gain, "if it can be ascertained", fines up to $10 million, or 10 per cent of annual turnover if the value of the commercial gain couldn't be calculated.

The move comes two days after some of the world's largest freight-forwarding companies were fined a further $5.2 million in the Auckland High Court for anti-competitive price fixing in air cargo freight rates.

That brought to almost $24.4 million the total penalties imposed in other cases, and with further action to come.

If the new law were adopted, the Commerce Commission would be equipped for the first time to advise collaborating enterprises on whether they might be in breach of the revamped anti-cartel law.

A new clearance regime would operate, using the term for "collaborative activity" to cover a wider range of business relationships than the current law's concentration on joint venture exemptions.

"The breadth of the exemption should create greater certainty for businesses that are proposing to enter in collaborative, efficiency-enhancing arrangements," Power said.

The new bill proposes to define "the forms of conduct which are illegal (i.e., fixing prices, restricting output, allocating markets, and rigging bids), not the outcome (i.e., the effect on price)."

The bill is "designed to give businesses certainty about the boundaries of the proposed law. If this can be achieved then there may be benefit in following international enforcement trends and criminalising cartel behaviour."

While the problem of cartels was well-recognised, the most effective solution to it was "less clear".

"Introducing criminal penalties, including imprisonment, could be a strong deterrent to individuals contemplating cartel behaviour," and would be in line with practice in the Anglophone developed world countries.