Cartel conduct now a criminal offence
Key points following the legislative change
- From Thursday 8 April 2021, it is a criminal offence to enter into or give effect to an agreement containing a cartel provision. Individuals who participate in cartel conduct can be imprisoned for up to seven years. A cartel provision is a provision in an arrangement between competitors that has the purpose, effect or likely effect of fixing price, restricting output, and/or allocating markets.
- The criminal offence must be proven to the criminal standard of proof – beyond reasonable doubt – and will require proof of intent. Therefore, inadvertent cartel behaviour will not give rise to criminal liability but may still breach the civil prohibitions which will continue to apply in parallel with the new criminal regime.
- Individuals convicted for intentionally engaging in cartel conduct in breach of the Commerce Act 1986 could face a penalty of imprisonment of up to seven years or a criminal fine of up to NZD500,000 or both. Companies convicted for intentionally engaging in the same conduct will face a criminal fine of up to $10 million, three times the commercial gain from the conduct or 10% of their turnover for every year during which it engaged in the offending conduct.
- Importantly, as has always been the case, companies cannot indemnify individuals for penalties or reimburse their legal costs if they are found to have breached the cartel prohibition and a penalty is ordered.
Have you prepared?
The prospect of criminal conviction and jail terms for individuals means that education about cartel conduct in New Zealand has never been more important. Businesses should immediately:
- undertake a risk review to identify high risk situations for their employees and directors;
- ensure that all employees and directors are aware of their obligations under the Commerce Act, especially cartel conduct; and
- review and update their compliance programmes.
The criminal regime creates a different environment for decision making and strategy needs to be carefully considered at an early stage. Last year, our panel of experts shared some insights from Australia’s experience of cartel criminalisation to date. A link to our webinar can be found here.
To help businesses ensure that their employees are aware of their obligations, Safetrac has also partnered with MinterEllisonRuddWatts to develop an interactive online training refresher course on cartel conduct. The course is authored by our competition law team. More information about Safetrac can be found here.