Businesses Warned About The Consequences Of Cartels

Businesses are being reminded that agreements they reach with their competitors can result in imprisonment, in the latest education campaign from the Commerce Commission.

The ‘Scene of a Crime’ campaign shows examples of situations where competitors agree to fix prices, divide markets, and rig bids – all of which are illegal activities.

The financial penalties for cartel conduct are significant individuals can be fined up to $500,000 and companies can be fined up to $10 million, three times the commercial gain, or 10% of turnover per year per breach. Since April 2021, businesses and individuals can also be liable for criminal conviction and individuals convicted of engaging in cartel conduct could face imprisonment.

“Cartel conduct harms consumers through higher prices or reduced quality, and it harms other businesses that are trying to compete fairly,” said Commerce Commission Chair Anna Rawlings. “The possibility of imprisonment for cartel conduct underlines just how serious and harmful this offending is.”

Law changes introduced last year mean individuals involved in cartels can now be liable for a term of imprisonment of up to seven years, making it more important than ever that businesses, their directors, and employees understand how to stay on the right side of the law.

The Commission is running an online, social media, and radio campaign to help educate directors, business owners, managers and employees about cartels, and how to report cartel conduct to the Commission.

“Businesses and their staff need to be able to recognise and avoid the kinds of business conduct that amount to cartel conduct. This campaign is part of a range of educational initiatives by the Commission to help increase businesses’ understanding of cartel conduct and its consequences,” says Ms Rawlings.

Businesses or individuals wishing to report cartel conduct can contact the Commission. The Commission can grant leniency to the first member of a cartel to approach it, provided they meet the requirements for leniency.

Businesses and individuals can also use the Commission’s anonymous whistleblower tool.

Background
Cartel conduct

A cartel is where two or more businesses agree not to compete with each other, including by price-fixing, allocating markets or customers, rigging bids, or restricting the output or acquisition of goods and services.

Cartel conduct is prohibited under section 30 of the Commerce Act. Changes introduced in April 2021 mean cartel conduct is punishable with a term of imprisonment of up to seven years. Conduct which occurred before 8 April 2021 is not subject to the new penalties.

In September 2021, penalties were imposed for taxi cartel conduct after the Commission filed proceedings against Hutt & City. Penalties were also imposed in a container depot price-fixing case last year.

In September 2020 two Hamilton-based real estate companies were fined a total of $4 million. This brought to $23 million the total penalties in a series of cartel cases against 13 real estate companies and three individuals.

Other recent cases include:
- Settlement reached in equine air freight price-fixing proceeding, July 2020
- Nelson pharmacy fined $344,000 and director $50,000 for price-fixing, June 2020
- Ronovation to pay $400,000 for price-fixing in Auckland real estate market, September 2019

There is more information about cartel conduct on the Commission’s website.

© Scoop Media