MEDIA RELEASE – For immediate use, 25 October 2012

Commerce (Cartels And Other Matters) Amendment Bill Needs Clarity

The Commerce (Cartels and Other Matters) Amendment Bill should be clarified to give greater certainty to people in business acting in good faith, the New Zealand Law Society says.

Law Society Law Reform Committee member Andy Nicholls presented the Law Society submission to the Commerce Select Committee today.

In its submission the Law Society suggested improvements that will increase certainty for legitimate business activity.

“The Law Society believes criminalisation of cartels is a significant development in competition law, and when making this change it is important that there remains certainty for bona fide business people,” Mr Nicholls says.

“For example, the Bill proposes a safe harbour for genuine collaborative arrangements. However the particular wording used in the Bill will exclude from the safe harbour a range of bona fide activities such as franchise arrangements.

“These are arrangements between competitors or parties that would otherwise compete. Yet these arrangements are legitimate and frequently pro-competitive as they provide a platform for the participants to compete vigorously in the market.”

The Law Society also suggests that the Bill should be changed so business arrangements are assessed at the time they are entered into, rather than being subject to the risk of a revised assessment later on.

“The current proposal exposes legitimate business people to an accusation that an arrangement that was bona fide at the time it was entered into is now not reasonably necessary, and for this reason they are cartelists,” Mr Nicholls says.

In its submission the Law Society raised concerns that the Bill proposed to introduce a new section, which among other things, provided that an employee’s conduct could be attributed to his or her employer.

“The result of this clause is that the employer can be prosecuted for a breach of the Commerce Act by the employee, say, entering into an arrangement to fix prices,” Mr Nicholls says.

“The employer could be liable where it did not know of the employee’s behaviour, and even in situations where the employer took active steps to ensure employees complied with the Commerce Act.”

The Law Society recommends that the attribution scheme includes an “all reasonable efforts” defence to recognise the legitimate interests of honest employers.

Given the significance of the change introduced by the Bill, the Law Society has recommended that it be reviewed after five years.

“This will enable outcomes under the new law to be assessed against the intended objectives,” Mr Nicholls says.

ENDS

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