A new law for Businesses comes into affect in April 2021 which means that cartel conduct could be punished with up to 7 years’ imprisonment.
What is a cartel and how could it affect my business?
A cartel is where two or more businesses agree not to compete with each other.
This conduct can take many forms, including price fixing, allocating markets, rigging bids or restricting output of goods and services.
Cartels deprive consumers and other businesses of a fair deal.
If you are not sure if this applies to you and your business, check out these examples:
Example One : Market allocation and price fixing
Three businesses compete to sell farm machinery. They agree to allocate the areas that they could sell to by agreeing one business would only sell in the North Island and the other two businesses would only sell in the South Island. They also agree 6-monthly price increases and a “scoresheet” to make sure all of them stuck to the agreement.
This is a cartel involving market allocation and price fixing.
Example two: Bid rigging
A group of companies in the fire alarm and sprinkler installation business meet regularly meet to discuss tenders. They call it a “coffee club”.
With every tender, participants decide who will win the tender and submit prices just above the agreed winner. This makes the tender process look legitimate while ensuring bidders supply at higher prices.
This is a cartel involving bid rigging
When does cartel criminalisation take effect?
The new law criminalising cartels comes into effect on 8 April 2021.
Any cartel agreement entered into after 8 April 2021 will be subject to the new law, including possible imprisonment.
If a cartel agreement was entered into before 8 April 2021, conduct after that date will be subject to the criminal legislation.
If you think you are in a cartel – what should you do?
You need to act fast.
The Commission can grant leniency to the first member of a cartel to approach them, provided they meet the requirements for leniency.
That means you/your company will not be subject to court action from the Commission provided you fully cooperate with the Commission’s investigation and proceedings. This is called leniency. See the Leniency policy.
If you think other businesses are in a cartel – what can you do?
There is a tool called an anonymous whistleblower tool. that you can use.
This information comes from The Commerce Commission of New Zealand, you can find out more by going to their website.
