Collaboration and Cartels Clarified – The Commerce (Cartels and Other Matters) Amendment Bill

The Commerce (Cartels and Other Matters) Amendment Bill has finally passed following its introduction in 2011.  It received royal assent on 14 August 2017.

The amendments are designed to benefit businesses and consumers by providing greater certainty for firms to collaborate and compete. 

Many of the amendments introduced by the Bill come into force immediately.  However, there is a nine month transition period to allow businesses time to check that existing arrangements do not breach the new cartel prohibition. The changes will be will be enforced by the Commerce Commission.

Early drafts of the Bill imposed criminal sanctions for cartel conduct.  These provisions have been dropped.

The Commission is developing non-binding guidelines which will outline its proposed approach to the changes introduced by this Bill. 

Key provisions

• Cartel provisions:  price fixing, market allocation, and output restriction arrangements between competitors are defined as cartel provisions which are illegal under the Commerce Act.
• Clearance regime: introduction of a clearance regime through which the competition implications of proposed arrangements, which may include cartel provisions, can be tested. Clearance by the Commerce Commission will provide certainty that the collaborative activities exemption applies and the arrangements do not substantially lessen competition in market.
• Shipping: the international shipping exemption has been removed from the Commerce Act and a new regime covering the international shipping industry introduced. This includes an exception for “specified activities" relating to the provision of coordinated international liner shipping services with a 2 year transition period.
• Enforcement powers: the High Court, on application by the Commerce Commission, can make orders against NZ companies including orders to cease trading or divest shares or assets where an overseas acquisition of a controlling interest in that company is likely to substantially lessen competition in a market
• New exceptions: certain restrictions (for example territory allocations in vertical supply contracts) and other genuine collaborative activities fall outside the complete ban on cartel conduct. Most arrangements with customers and suppliers, if properly structured, should fall within the new exemptions.
• Maximum resale prices: suppliers are expressly allowed to stipulate maximum resale prices.

For more information or advice on the implications of the Bill, please contact Jeremy Carr or Nick Lovegrove.