NZ’s new law will simplify cartel suits and encourage lawful collaboration
AirCargo Archive Stories #225
Tuesday, 10 September 2013
NEW Zealand is moving towards much clearer – and potentially more punitive – criminalisation of cartel behaviour, with the draft Commerce (Cartels and Other Matters) Amendment Bill reported back to parliament by the commerce select committee and likely to come up for further consideration soon, despite parliament’s busy agenda, writes Kelvin King.
Other governments, Australia included, are believed to be keeping a close eye on developments.
The country’s long-running airline and freight forwarder cartel blitz that spread internationally caused considerable angst, not only because cartel-type behaviour had occurred but also because it proved complicated to tackle legally.
Many target companies opted for a type of plea bargain, agreeing to a fine and costs because it was too debilitating and expensive to keep fighting. Now the NZ government is making it clear that it will have the tools to hit hard ... and it will use them.
Commentators have pointed out that the law is something of a significant shift in corporate regulation, one that will have wider implications than many people envisage.
Anne Callinan, senior partner for law firm Simpson Grierson said: “Arrangements between competitors that have a significant anti-competitive impact are now going to be criminalised.
“This is going to be (treated as) serious white collar crime.”
Encouraging collaboration But the amended law also seeks to ensure companies are not deterred from legitimate, pro-competitive and efficient arrangements with other firms. It does this through a number of new exemptions as well as a clearance mechanism that allows those intending to be involved in collaborative conduct to test with the Commerce Commission (NZCC) whether the arrangement would raise concerns.
The collaborative activity exemption would cover arrangements such as joint ventures, strategic alliances, syndicated loans and consortium bidding, providing the dominant purpose of the arrangement is not anti-competitive.
In assessing whether conduct is prohibited, NZCC and the courts are likely to look at business documentation such as emails, file notes, board documents and business agreements, as well as oral evidence from individuals.
The select committee’s report recommended the bill be passed with some amendments, such as repealing the outdated competition regime for international aviation and international shipping. This had been asked for by the responsible minister.
Significant reform The minister of Commerce, Craig Foss, describes it as “a significant piece of law reform as the competition provisions of the Commerce Act have not been subject to any substantial amendment since 2001”.
Discussing the bill, he noted that “the initial stages of the policy process focused on whether or not to criminalise hard-core cartel conduct ... .so it is understandable that when people think about the bill, they focus on criminal sanctions”.
But, he stressed, it is a lot more than that.
“It aims to clarify the scope of the prohibition against hard-core cartels, in part by introducing the collaborative activity exemption. The scope of the collaborative activity exemption is broad and focuses on the substance of the activity, not the form of the arrangement.
“As a result, it should apply to all pro-competitive collaborations.”
The minister said that the exemption “has also been designed so that businesses can assess for themselves whether their proposed collaboration falls within the exemption. The exemption sends a clear signal that the government recognises that pro-competitive, innovative and efficiency-enhancing collaborative activities are essential to New Zealand realising its productive potential”.
Foss said the government was “not shy about the fact that people intentionally participating in hard-core cartels deserve to go to jail. Any behaviour that distorts prices and undermines the competitiveness of New Zealand markets is not acceptable.
“People who intentionally participate in hard-core cartels deserve to be sanctioned in the same way as those that participate in tax evasion, fraud and other white collar crimes.”
Most of the bill’s provisions will come into effect on the day the law is given royal assent. However, it has been decided to hold off on the criminal sanctions for a period. “This should leave sufficient time for the regime to bed in, alleviating some of the uncertainty,” said Foss.
NZ’s new law will simplify cartel suits and encourage lawful collaboration
AirCargo Archive Stories #225
Tuesday, 10 September 2013
NEW Zealand is moving towards much clearer – and potentially more punitive – criminalisation of cartel behaviour, with the draft Commerce (Cartels and Other Matters) Amendment Bill reported back to parliament by the commerce select committee and likely to come up for further consideration soon, despite parliament’s busy agenda, writes Kelvin King.
Other governments, Australia included, are believed to be keeping a close eye on developments.
The country’s long-running airline and freight forwarder cartel blitz that spread internationally caused considerable angst, not only because cartel-type behaviour had occurred but also because it proved complicated to tackle legally.
Many target companies opted for a type of plea bargain, agreeing to a fine and costs because it was too debilitating and expensive to keep fighting. Now the NZ government is making it clear that it will have the tools to hit hard ... and it will use them.
Commentators have pointed out that the law is something of a significant shift in corporate regulation, one that will have wider implications than many people envisage.
Anne Callinan, senior partner for law firm Simpson Grierson said: “Arrangements between competitors that have a significant anti-competitive impact are now going to be criminalised.
“This is going to be (treated as) serious white collar crime.”
Encouraging collaboration But the amended law also seeks to ensure companies are not deterred from legitimate, pro-competitive and efficient arrangements with other firms. It does this through a number of new exemptions as well as a clearance mechanism that allows those intending to be involved in collaborative conduct to test with the Commerce Commission (NZCC) whether the arrangement would raise concerns.
The collaborative activity exemption would cover arrangements such as joint ventures, strategic alliances, syndicated loans and consortium bidding, providing the dominant purpose of the arrangement is not anti-competitive.
In assessing whether conduct is prohibited, NZCC and the courts are likely to look at business documentation such as emails, file notes, board documents and business agreements, as well as oral evidence from individuals.
The select committee’s report recommended the bill be passed with some amendments, such as repealing the outdated competition regime for international aviation and international shipping. This had been asked for by the responsible minister.
Significant reform The minister of Commerce, Craig Foss, describes it as “a significant piece of law reform as the competition provisions of the Commerce Act have not been subject to any substantial amendment since 2001”.
Discussing the bill, he noted that “the initial stages of the policy process focused on whether or not to criminalise hard-core cartel conduct ... .so it is understandable that when people think about the bill, they focus on criminal sanctions”.
But, he stressed, it is a lot more than that.
“It aims to clarify the scope of the prohibition against hard-core cartels, in part by introducing the collaborative activity exemption. The scope of the collaborative activity exemption is broad and focuses on the substance of the activity, not the form of the arrangement.
“As a result, it should apply to all pro-competitive collaborations.”
The minister said that the exemption “has also been designed so that businesses can assess for themselves whether their proposed collaboration falls within the exemption. The exemption sends a clear signal that the government recognises that pro-competitive, innovative and efficiency-enhancing collaborative activities are essential to New Zealand realising its productive potential”.
Foss said the government was “not shy about the fact that people intentionally participating in hard-core cartels deserve to go to jail. Any behaviour that distorts prices and undermines the competitiveness of New Zealand markets is not acceptable.
“People who intentionally participate in hard-core cartels deserve to be sanctioned in the same way as those that participate in tax evasion, fraud and other white collar crimes.”
Most of the bill’s provisions will come into effect on the day the law is given royal assent. However, it has been decided to hold off on the criminal sanctions for a period. “This should leave sufficient time for the regime to bed in, alleviating some of the uncertainty,” said Foss.
