Consumers and business benefit from new law addressing price fixing, cartel behaviour

Consumers and businesses will be better protected from dishonest commercial conduct following a law change tonight that makes price fixing and other cartel behaviour a criminal offence, Commerce and Consumer Affairs Minister Kris Faafoi says.

The Commerce (Criminalisation of Cartels) Amendment Bill passed its third reading, meaning that offenders found guilty of intentional cartel behaviour face a new penalty of up to seven years’ imprisonment, or fines that are equivalent to the existing civil penalties.

“Healthy competition benefits everyone in the economy,” Kris Faafoi says. “Consumers get choice and can buy to suit their needs and price range, and honest business has a marketplace where firms compete on the basis of price and quality to sell products.

“What this Bill aims to prevent is the cartel behaviour where businesses collude against the interests of consumers and other businesses, and this is detrimental to our economy.

“Cartels allow firms to raise their prices above the competitive level by producing less and charging more. This increases the profits of the cartels at other people’s expense – consumers miss out on a fair deal and other businesses are not able to compete.

“This Government believes the economy should be working for consumers and honest business, so this Bill enables strong action to stop this cartel behaviour. By criminalising cartels, we are sending a clear signal that if you’re part of a cartel, you risk jail time.”

Under the law change, individuals who are convicted of engaging in cartels face up to seven years imprisonment, a fine of up to $500,000, or both. Previously there was only a civil penalty, of fine of up to $500,000 for an individual. Penalties for businesses will still be the same as those that applied under the civil regime (up to $10 million).

The criminal regime will run in parallel to the current civil regime, with Crown Law guidance determining when to proceed from civil to criminal proceedings.

“I expect that the seriousness of the harm caused by the conduct would be one of the criteria taken into account when deciding to pursue criminal proceedings,” Mr Faafoi says.

Not only does criminalising cartels improve protections for consumers and businesses, it brings us in line with the law in most developed countries.

“It also helps the Commerce Commission investigate international cartels, as overseas competition agencies in jurisdictions with criminal sanctions will have greater ability to co-operate with the Commission.”

While it’s a criminal offence to intentionally engage in cartel behaviour, exceptions or defences apply in some circumstances – for example, in legitimate collaborative activities such as joint ventures.

Mr Faafoi says businesses will be supported to adjust to the changes.

“Following the Bill’s passing, there is a two-year transition period to ensure businesses have sufficient time to familiarise themselves with the law change.

“I expect that the Commerce Commission will also be publishing guidance so that businesses can be clear what is considered criminal conduct under the new legislation.”