The frequently asked questions are structured as follows:
- General Questions
- Step 1: Initial Contact - Placing a Marker
- Step 2: Proffer and Perfecting a Marker
- Step 3: Conditional Immunity and Agreement
- Formal Cooperation - Cooperation Concessions
1. Why give immunity from proceedings to a party that has broken the law?
The leniency policy is a key tool for the Commission (and for other competition agencies overseas) to detect cartels, it is not a reward for applicants. Without the detection that is achieved by parties coming forward to apply for conditional immunity, more cartels would continue to operate and harm the New Zealand economy. Cartels generally operate in secret and allowing one cartelist to escape sanction in exchange for the opportunity of uncovering a cartel and taking enforcement action against the other participants provides overall benefits. Additionally the knowledge that leniency is available deters competitors from trusting each other to keep illegal arrangements secret and this deters the establishment of new cartels.
2. What are the major changes in the updated Cartel Leniency Policy and Guidelines?
The major changes are:
- the introduction of a marker system;
- the ability to apply for immunity after the Commission is aware of, or is investigating, a cartel;
- a formal cooperation agreement; and
- amnesty plus: if a party that does not qualify for a marker or conditional immunity reports another (e.g., separate) cartel, they can secure immunity for the new cartel and increased cooperation concessions for the first cartel.
3. Why would I/my company apply for immunity - what is in it for me/us?
You/your company will not be subject to court action from the Commission provided you fully cooperate with the Commission's investigation and proceedings. Penalties under the Commerce Act can be significant: up to $500,000 per breach for individuals; or the greater of $10 million, three times the commercial gain, or 10 per cent of turnover for companies per breach.
4. What actually is a cartel - the term is not present in the Commerce Act?
Cartels are formed when companies collude with their competitors to increase or maintain prices, divide geographical territories between themselves, agree to limit production, and engage in bid-rigging. This is usually done in secret.
Cartels may consist of one or more anti-competitive agreements that direct how the involved parties will act (e.g., a minimum price to be charged for a product or service, or no discounting) - or in some cases not act (e.g., not bidding on a tender). An anti-competitive agreement can be very informal (a 'nod and a wink') and still remain illegal. Cartel conduct is prohibited by sections 27 and 27 via 30 of the Commerce Act 1986.
5. Why are cartels a priority for the Commission?
Price-fixing, market or geographic division, output restriction, and bid rigging can impact on the competitiveness of markets and may raise prices as well as negatively impact on other factors such as choice, innovation, quality and investment. International studies show cartels can cause prices to rise by (on average) between 18 and 20 per cent. However, because cartels operate in secret, buyers usually do not know they have been overcharged. Cartels may be based in New Zealand or they may involve international parties that participate in, and/or affect markets in New Zealand.
6. How do I approach the Commission to enquire if leniency is available?
All approaches must be made in person or by phone to the General Manager Enforcement (or a delegate if relevant) during the Commission's normal hours of business (8.30am to 5.00pm Monday to Friday) to enquire if immunity is available in a specified market. This ensures that applicants are treated strictly in order of application. If desired, this can be done on a hypothetical, 'no names' basis so as not to identify the company who is contemplating applying for immunity.
7. How do I approach the Commission to apply for immunity?
A phone call must be made to the General Manager Enforcement (or a delegate if relevant) during the Commission's normal hours of business (as above).
8. What is an immunity marker?
A 'marker' is the confirmation given to an immunity applicant (company or individual) who is the first party to approach the Commission to request a grant of immunity with respect to a particular cartel and who meets the relevant conditions. The marker guarantees the applicant's place at the front of the line and provides for a period of time for the applicant to collect further information to provide to the Commission in a formal application for immunity.
9. What if the Commission is already aware of, or is investigating, a cartel when an application for immunity is received?
Immunity may still be available. The Commission will review all the evidence it already holds at the time of the application (for either a marker or conditional immunity). If the evidence is likely insufficient to be able to initiate proceedings, a marker and/or conditional immunity will be available at the Commission's discretion. If the Commission has sufficient evidence, a marker and/or conditional immunity will not be available and the party concerned can enter the cooperation process if they wish.
10. What if conditional immunity is not available?
Parties may choose to cooperate when they find that immunity is not available to them; or they may choose to cooperate after they become aware of the Commission's investigation. Applications for formal cooperation can be made at any point in a cartel investigation, including after proceedings have been instigated. More about cooperation is discussed in questions 21 and 22 below.
11. How is the marker perfected?
After the marker is granted, the applicant then has 28 calendar days (or possibly more if there are exceptional circumstances), to perfect its marker by provision of one or more 'proffers'. A proffer is a written, or oral, statement. It describes the cartel and any evidence to support the cartel's existence. Typically, it will include relevant documents or a description of those documents in the applicant's possession, and information from interviews of the applicant's staff and former staff (cartelists and witnesses) in respect of the cartel.
See also Information Required to Perfect a Marker.
12. What about international cartels that affect multiple jurisdictions?
Immunity applicants will often simultaneously apply for markers in multiple jurisdictions.
The Commission will request immunity and cooperation applicants to provide waivers so that the Commission can share information provided by the party concerned with other competition agencies. This will allow the Commission to investigate the cartel more efficiently.
13. What happens if a marker is not perfected as required?
The marker will lapse and the Commission will retain the information provided. The next party in line for a marker will be awarded the marker. This party then has the opportunity to deliver a proffer and perfect their marker towards a grant of conditional immunity.
A party whose marker has lapsed can still apply for cooperation and enter that process.
14. What happens after a satisfactory proffer has been delivered and the marker perfected?
Once a marker is perfected, conditional immunity is granted and an agreement with the Commission is entered into. This agreement details ongoing obligations for the conditional immunity holder to assist the Commission in the investigation and prosecution (where appropriate) of the cartel.
15. What is required on an ongoing basis in order to maintain conditional immunity?
This is detailed in the Commission's Cartel Leniency Policy and includes:
- providing full and ongoing cooperation and assistance;
- ceasing the cartel conduct unless otherwise directed by the Commission;
- accepting the jurisdiction of New Zealand courts;
- providing all relevant documents and information;
- preserving records and computer-based information; and
- encouraging and requiring staff and officers and former staff and officers to attend interviews with the Commission in the Commission offices in Wellington.
In relation to parties based overseas, the Commission expects that in most circumstances, the applicant will bring its witnesses to the Commission offices in New Zealand for interviews (or to a mutually agreed location).
16. How do individuals fit into their company's or former company's conditional immunity?
These individuals will be covered by the corporate immunity, but they will be requested to sign an acceptance document that states they have:
- considered their legal position and sought advice or decided to represent themselves;
- read and understood the guidance document for individuals;
- read and understood the agreement with their company or former company; and
- read and understood the Commission's Cartel Leniency Policy.
Individuals who do not cooperate with the Commission may face revocation of their immunity.
17. What does the conditional immunity apply to?
The immunity granted is from Commission initiated civil proceedings against the cartel. Criminal offences such as obstruction (lying, destroying documents, etc) are not covered by the immunity.
The immunity granted by the Commission does not prevent customers or other parties taking private civil actions in the New Zealand courts against applicants and other participants in respect of the cartel. However, in any proceedings initiated by any other party, the Commission will only make disclosures such as required by law.
18. What about confidentiality?
The Commission takes all practical steps to protect the identities of conditional immunity applicants and any confidential information they provide. This is balanced against the need for the Commission to investigate the other members of the cartel and, where relevant, to take proceedings against the cartel.
Conditional immunity applicants are also themselves required to keep fact of their immunity application confidential and they can only disclose their immunity and/or its status if required to do so by law (or otherwise by consent of the Commission).
Confidentiality helps to maintain the integrity of the Commission's investigation and protects evidence from willful destruction.
19. Is there anything not covered by conditional immunity?
Criminal obstruction offences are not immunised by the Commission and they are not covered by conditional immunity. Any person who has concerns about their exposure to such offences should read the Commission's Cartel Leniency Policy and other leniency documents, and seek legal advice.
20. Can a conditional immunity agreement be revoked?
Yes. If the conditional immunity applicant does not meet its obligations under the immunity agreement, a warning and rectification process is triggered (detailed in the Cartel Leniency Policy). If the problems are not remedied, immunity may be revoked.
Cooperation Concessions are formal agreements entered into by the Commission with parties who wish to admit to the behaviour and assist the Commission's investigation in exchange for discounts to any penalty.
21. What has changed in the process for formal cooperation in regard to a cartel investigation?
The existing cooperation policy no longer applies to cartel investigations. The cooperation policy is now part of the cartel leniency policy which now covers immunity (from Commission proceedings) and cooperation (negotiated resolutions for investigations and proceedings).
22. Can cooperation be applied for after cartel proceedings have been initiated?
Yes. Even parties who have little evidence at their disposal to assist the Commission can negotiate for cooperation concessions in the form of discounts to apply to agreed penalty ranges.
The Commission is always prepared to engage with parties who wish to admit to the behaviour and would aim to be able to jointly present as agreed statement and (discounted) penalty to the court.