The Guidelines

The New Zealand Commerce Commission's Cartel Leniency Policy and Process Guidelines (Guidelines) set out the way in which companies and individuals can apply to the Commerce Commission for conditional immunity from prosecution (or cooperation where immunity is no longer available), if they have knowledge of a cartel and are willing to assist the Commission's investigation.

The purpose of the leniency policy is to create an incentive for cartel participants to "whistle-blow" on other cartel members, in order to uncover "hard core" cartel conduct such as price fixing, market allocation, output restriction and bid rigging. The policy is also intended to deter participation in cartels by encouraging fear that other cartel members will blow the whistle.

Applicants should remember that immunity protects a cartel member from legal action by the Commission, but it does not prevent third parties from making claims for damages.

When will the Commission grant immunity?

The Commission will grant immunity to the first member of a cartel that approaches it, admits it may have engaged in illegal cartel activity and has ceased its involvement in that activity, provided that applicant meets the further immunity requirements set out below. Immunity is conditional because it depends on the applicant continuing to provide information and cooperating with the Commission throughout its investigation and any court proceedings.

First applicant

Conditional immunity is available to the first individual or company participating in a cartel that applies to the Commission for a marker or conditional immunity and:

  • provides information about a cartel that the Commission is not aware of; or
  • provides further information about a cartel that the Commission is already aware of, but previously did not have sufficient evidence to warrant issue proceedings against.

No coercion

Leniency will only be granted if the applicant has not coerced others to participate in the cartel. The Guidelines state that coercion includes "conduct such as threats of physical or serious economic harm, or intimidation, to compel or force persons to take part in the cartel". This condition may cause difficulties given that it is unlikely to be clear at the outset of a cartel investigation whether a company has "coerced" another cartel participant. If it later transpires that the leniency applicant was involved in coercion, they will lose their conditional immunity. All documents provided by them up to that point can then be used against them in proceedings.

Full and continuing cooperation

An applicant must provide enough information throughout the Commission's investigation and any resulting court proceedings to show that the law has been broken, identify who is involved and explain how the cartel operated and affected New Zealand consumers. Where an applicant is a company, the Commission may require it to conduct an internal investigation to obtain more detailed information. Commission access to IT systems and relevant IT personnel is also usually required.

How does a cartel member apply for immunity?

As with leniency policies in place in Australia and the United States, an application for leniency is possible even when the Commission is already aware of the particular cartel, as long as the Commission does not yet have sufficient evidence to initiate proceedings. This means that, even if a company is already being investigated by the Commerce Commission (for example, it has already received a request for information from the Commission), that company can contact the Commission regarding whether leniency is possible. This inquiry can be made on a hypothetical "no name" basis.

If there is no existing leniency applicant, the cartel member can then ask the Commission to determine whether conditional immunity is available to them. Availability will depend on whether the Commission already has enough evidence to launch proceedings. The Commission will make this decision based on the information and documents it already has. The Commission will not ask the prospective leniency applicant to provide any documents of their own at this stage.

Is there a marker process?

A company or individual can apply for a "marker" to secure its place in the queue while it gathers enough information to apply for conditional immunity. This allows an applicant to approach the Commission as soon as they have decided to apply for conditional immunity, rather than having to first assemble all relevant information and before, for example, undertaking or completing an internal investigation.

Once the applicant has gathered enough information to "perfect" the marker, it must then provide this information to the Commission. This is called a "proffer". Applicants are usually given 28 days to present a proffer to perfect the marker, although the Commission has discretion to extend this timeframe.

The provision of the proffer does not automatically mean conditional immunity will be granted. The Commission may decide that an applicant has not perfected the marker, either because it has not provided the necessary information or because it has not provided the information within the prescribed time. In that case, the leniency application will be declined and the next applicant in line will be given the opportunity to apply. The next applicant will be assessed on the same criteria as the first applicant, meaning that leniency will only be available if the Commission does not yet have enough evidence to bring proceedings.

Can oral applications be made?

Given that timing is a critical aspect of the marker system, applications for a marker or for conditional immunity can only be made orally, by telephone or in person, to the General Manager of Enforcement of the Commission or an authorised delegate. The time and date of that contact will be recorded and will secure the applicant's place in the queue should others also apply.

The Guidelines specifically refer to the Commission's willingness to run a "paperless process", where communications between the leniency applicant and the Commission are kept oral (rather than written) where at all possible. The paperless process is particularly important where the leniency applicant is a multi-national company who is exposed to civil claims from customers in multiple countries around the world.

What if immunity is not available?

Cartel members may still get significant benefit from cooperating with the Commission throughout its investigation and in any resulting court proceedings. In exchange for the provision of information that adds significant value to an investigation and full, continuing cooperation, the Commission may choose to take a lower level of enforcement action against the cartel member or recommend a lower penalty to the court.

Cartel members that cooperate as early as possible in an investigation are likely to receive the greatest benefit. In exceptional circumstances, the Commission can choose not to prosecute at all. However, in the case of companies, the maximum discount for cooperation is likely to be 50% of the penalty that would otherwise apply. The Commission considers it necessary to ensure that the value of conditional immunity is not compromised by any greater reductions in corporate penalties.

Amnesty Plus

Amnesty Plus allows a company or individual to obtain penalty concessions in respect of a cartel for which the Commission is pursuing proceedings against them, if they inform the Commission of their participation in a separate cartel of which the Commission is unaware or does not have enough evidence to file proceedings. They also have the opportunity to gain conditional immunity for the second cartel.

The Commission has made it clear that the key issue in the decision to grant Amnesty Plus is determining whether the second cartel is in fact separate from the one they already know about, or whether it is simply another aspect of the same cartel.