Significant reforms to New Zealand competition law are one step closer following a recommendation by the Commerce Select Committee that the Commerce (Cartels and Other Matters) Amendment Bill (the Bill) be passed with various amendments.
The Bill was introduced to amend the New Zealand Commerce Act through promoting ‘collaboration between firms, while also deterring hard-core cartel conduct.’ However, the progress of the Bill has been slow to date; the Bill was introduced in October 2011 following the release of the discussion paper by the Ministry of Economic Development and is yet to be read for a second time.
The Bill seeks to clarify the scope of prohibited cartel behaviour, introduce new exemptions to cartel conduct and most significantly, introduce criminal sanctions for ‘hard-core’ cartel behaviour.
The Bill also proposes a number of general amendments, such as clarifying the scope and jurisdiction of the Commerce Act, introducing a new regime to regulate foreign acquisitions that have an adverse effect on competition within a New Zealand market and amending the authorisation process to reduce the associated risk and cost.
While promoting competition and deterring cartel conduct is the primary objective of the Bill, the new regime is also intended to bring New Zealand’s cartel regime in line with trading partners such as Australia, the United States and the United Kingdom, each of which have criminal sanctions for cartel conduct (especially in light of New Zealand recently entering numerous free trade agreements that call for harmonisation of competition law between states).
The Commerce Select Committee welcomed the introduction of the Bill but recommended numerous amendments, including that:
- bid-ridding be removed from the definition of cartel conduct to prevent unnecessary overlap with other categories of cartel conduct such as price-fixing, restricting output and market allocation;
- the defence to criminal prosecution for cartel conduct be confined to circumstances only where a defendant honestly believed that the conduct was necessary for the purposes of collaborative activity;
- extraterritorial jurisdiction of the Commerce Act only applies to conduct “if any act or omission forming part of the conduct occurs in New Zealand”;
- the vertical supply contracts exemption is extended so that it applies to services as well as goods and also so that it exempts suppliers who stipulate maximum resale prices from cartel conduct; and
- clearances that provide immunity from prosecution are able to be revoked by the Commission in the event of a ‘material change of circumstances’.
Following the Committee making these recommendations, the Bill will be read a second time and is anticipated to be enacted into law later this year.