Cartel leniency policy updated by Commerce Commission
1 March 2010
The Commerce Commission has today released its updated cartel leniency policy.
The updated leniency policy explains how a company or an individual can apply for conditional immunity or formal cooperation if immunity is not available. Key changes in the updated policy include changes to the eligibility for conditional immunity and the related processes.
Leniency is a key tool in detecting and deterring cartels in New Zealand. It is widely used around the world to tackle cartels. Cartels are often difficult to detect and may damage the economy by removing the benefits of competition leading to higher prices and less choice for customers. To enhance detection of cartels, conditional immunity from prosecution is offered to the first member of a cartel who informs the Commission about its operation and provides evidence to the Commission. This destabilises cartels and maximises the opportunities for the Commission to stop the harmful effects of cartels.
The Commission's updated policy provides for a company or individual to apply for conditional immunity even after the Commission has knowledge of the cartel, but does not have sufficient evidence to launch court proceedings.
The updated policy also provides for the granting of a 'marker' or placeholder. In circumstances where a person wishes to apply for conditional immunity from prosecution for cartel conduct, a marker preserves their place as an immunity applicant for a specified time, while they collect information to provide to the Commission. If this is not done in a timely and satisfactory manner the marker will lapse and the next company or individual offering information on that cartel would become eligible to apply for a 'marker' or conditional immunity.
The updated policy also encourages applicants who admit to being in a cartel, but are only eligible for cooperation benefits and not for conditional immunity, to gain a further reduction in their recommended penalty by informing the Commission, if they are participating in another cartel.
"So far the Commission's leniency policy has been very effective at bringing cartels to light and we expect these changes, which are in line with those in many other countries, to further improve the effectiveness of our cartel detection programme," said Kate Morrison, Commerce Commission General Manager Enforcement.
The updated policy can be accessed from the Commission website www.comcom.govt.nz under Cartel Leniency Policy
Penalties. Under the Commerce Act the High Court may impose penalties for companies found guilty of cartel behaviour of up to $10 million or the higher of three times the gain or 10 percent of turnover. Penalties for individuals can be up to $500,000. The Ministry of Economic Development is currently consulting on whether cartel conduct should be criminalised.
Current cartel cases. The Commerce Commission currently has 19 active cartel investigations, ten of which have resulted from the leniency programme.
What is a cartel? Cartels are formed when companies secretly collude with their competitors to keep prices high, increase prices, divide geographical territories between themselves, or agree to limit production. Each of these actions 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.
Consultation. The Commission consulted the public on the updated leniency policy over September and October 2009. The Commission was grateful to receive a number of submissions. These generally supported the proposed changes as increasing the clarity and the effectiveness of the policy.