Move on cartels linked to Australia

The move towards a single economic market with Australia is behind the push to "criminalise" cartel behaviour in New Zealand rather than any widespread problem with price fixing, competition lawyer Andy Matthews of Minter Ellison Rudd Watts says.

Last week, the Ministry of Economic Development published a discussion document proposing the criminalisation of cartels, which would make price fixing and similar offences punishable by up to seven years' jail.

Matthews said the proposal was not unexpected "given that Australia has recently criminalised cartel conduct". Australia made the move last year, joining a list of countries that includes the United States, Britain, Canada, Israel, Korea and Japan.

Matthews does not believe cartels are a huge problem in New Zealand, "but then again you don't know what you don't know".

New Zealand already has tough sanctions for those found guilty of participating in cartels, particularly for individuals, who can be banned from corporate management, fined heavily and cannot be indemnified against these penalties by their employer.

The Commerce Commission also has an effective "leniency" regime to encourage whistleblowers.

Nevertheless, Matthews sees the proposed move to criminalisation as sensible and inevitable.

"It's pretty uncontroversial - I haven't seen anyone stand up in defence of price fixing.

"While my own view is that the harm from price fixing is sometimes overstated, often it's very real and people are right to describe it as a form of theft. Why shouldn't white-collar criminals be punished the same as other people?

"We need to be seen to be doing this as part of our international obligations."

Matthews says the increasing recognition that white-collar crime should draw penalties in line with other types of crime is an ongoing international development. It is taking place at the same time as similarly widespread moves to tighten up on offences such as money laundering, financing of terrorism and securities fraud.

However, he sees the development of a single economic market with Australia as perhaps the most important factor behind the proposal rather than any particular problem in New Zealand.

"I would question whether there is any individual or company we think should have been criminally prosecuted, but I do think it is really important for the reason of doing business with Australia.

"I see this principally about harmonisation with Australia, or international best practice rather than fixing a particular New Zealand problem."

However, criminalisation of cartel behaviour does present significant challenges for regulators. Any offence that could potentially draw a jail sentence requires a higher "beyond reasonable doubt" burden of proof from the prosecutor.

Public submissions on the proposal close at the end of March.