The purpose of the Commerce Commission’s Leniency Policy for Cartel Conduct is to assist in the detection of anti-competitive cartel behaviour. The Commission will grant immunity from Commission initiated proceedings to the first person involved in a cartel to come forward with information about the cartel and co-operate fully with the Commission in its investigation and prosecution of the cartel.

The Commission enforces the Commerce Act. Part II of the Commerce Act prohibits a range of anti-competitive arrangements between competitors that are often secret and difficult to detect. The Leniency Policy applies to arrangements between competitors which substantially lessen competition. It does not include conduct which amounts to a company taking advantage of a substantial degree of market power.

The Commission wishes to encourage those involved in anti-competitive cartel conduct to report the cartel to the Commission. The first person to formally apply to the Commission for leniency will be granted immunity from Commission initiated proceedings provided they co-operate fully with the Commission throughout any investigation and related proceedings.

Click here to read a speech on the Commission's approach to Leniency and Co-operation.

Interpretation

For the purpose of the Leniency Policy:

• immunity means immunity from Commission initiated proceedings;
• person includes a company or an individual; and
• information includes all information, documents, material and evidence of any kind whatsoever, including all oral, written and electronic information.

Principles
The Commission’s Leniency Policy is based on three key principles:

• Immunity is available to the first person involved in a cartel who reports the cartel to the Commission.
• The person seeking immunity must provide full co-operation to the Commission.
• If the person fails to fully co-operate with the Commission, the Commission may initiate proceedings against that person.

Background
Cartels are arrangements between competitors that breach Part II of the Commerce Act. Cartel conduct includes price fixing, excluding competitors, collusive tendering, bid rigging, production or sales quotas, and market sharing. Cartels usually operate informally and in secret. Cartel conduct is recognised as being a seriously damaging form of anti-competitive behaviour.

Penalties for a company and its officers engaging in cartel conduct are high. The court may order the following pecuniary penalties for a contravention of Part II of the Commerce Act:

• in the case of an individual, $500,000; and
• in the case of a company, the greater of $10,000,000; or either:
  
  a. three times the value of any commercial gain resulting from the contravention; or
  b. 10 percent of the turnover of the company.

Where cartel members engage in price fixing, the Commerce Act prohibits a company from indemnifying any current or former director, officer or employee against any pecuniary penalty imposed by the court.

The first person involved in a cartel who reports the cartel to the Commission and co-operates fully with the Commission may apply for leniency and gain immunity from Commission initiated proceedings.

Where immunity is granted to a company, it may extend to any current or former director, officer or employee of that company.

Leniency may be available to a person directly involved in the cartel or to a company officer directly involved in the cartel where that individual acts independently in coming forward to the Commission. On the grant of immunity to an individual acting independently from a company, immunity will not then be available to the company.

Immunity granted by the Commission from Commission initiated proceedings cannot exclude claims by third parties who may have suffered loss as a result of the activities of the cartel. Under the Commerce Act, third parties may pursue private claims for compensatory or exemplary damages.

Leniency Conditions
First person
Subject to the conditions below, the Commission will grant immunity from Commission initiated proceedings to the first person involved in the cartel to come forward with information regarding the existence, activities, operation and membership of the cartel.

Full co-operation
The person must:

• provide the Commission with access to all information available to that person regarding the existence, activities, operation and membership of the cartel;
• maintain continuous, complete and expeditious co-operation with the Commission throughout the Commission’s investigation and any ensuing proceedings initiated by the Commission;
• provide promptly and without witness summons, all further information requested by the Commission;
• confirm that the person has now ceased its involvement in the cartel, or otherwise has acted or will act as directed by the Commission; and
• fully and truthfully co-operate with the Commission on a continuing basis;

and in the case of a company, the person must:

• use the person’s best efforts to secure the complete and truthful co-operation of current and former directors, officers or employees;
• encourage and facilitate the person’s current and former directors, officers or employees to voluntarily provide the Commission with any information, and to appear for interviews and to give evidence in court as required by the Commission; and
• use the person’s best efforts to ensure that each of its related entities provides all assistance reasonably requested by the Commission;

or in the case of an individual, the person must:

• make themselves available for interviews and respond fully and truthfully to all inquiries of the Commission in relation to the cartel; and
• appear as a witness in any proceeding relating to the cartel, if required to do so by the Commission.

If the Commission at any time determines that a person granted leniency has failed to meet any of the above conditions, the Commission will not be bound by its grant of leniency to that person and may use information provided to the Commission to initiate proceedings against that person.

Confidentiality
The person must not disclose to, or communicate with, any third party (except as required by law, or in the case of their communications to other competition authorities, or otherwise with the prior written consent of the Commission):

• the person’s leniency application;
• any request by the person for clarification regarding their leniency application;
• any grant of conditional immunity from Commission-initiated proceedings to the person; and
• any information provided by that person to the Commission for the purposes of, or in connection with, the leniency application information created by the Commission by reason of, or as a consequence of, the person’s leniency application.

Prior awareness of the cartel
Immunity from Commission initiated proceedings will not be granted where the Commission is currently investigating conduct relating to the leniency application.

Company leniency
In respect of a leniency application by a company, the admissions and co-operation of a company must be a truly corporate act, as opposed to isolated admission and co-operation of individual representatives.

Co-operation Policy
Other cartel members who co-operate with the Commission, but who are not the first to formally make a leniency application may make an application, under the Commission’s general Co-operation Policy.

The earlier the approach to the Commission, the more likely the Commission’s Co-operation Policy will be available.

Confidentiality
The Commission will endeavour, where possible, to keep confidential the identity of successful and unsuccessful applicants for leniency.

Leniency Procedure
The Commission’s procedure for leniency applications is as follows:

• enquiry;
• formal application;
• conditional grant of immunity; and
• final letter.

Enquiry
If you wish to know whether the Commission’s Leniency Policy will apply to you or your company, you (or your advisers) may approach the Commission for clarification.

The Commission will deal with such inquiries on a ‘hypothetical’ or ‘off the record’ basis.

Any information provided to the Commission in this context will not be used by the Commission for any purpose other than to provide the requested clarification.

Enquiries will not be considered to be an application for leniency under the policy and will not count as ‘coming forward with information’ so as to establish first approach to the Commission.

Enquiries must be directed to the CEO of the Commerce Commission, 04 924 3620 or email ceo@comcom.govt.nz

Formal application
To be the first person to apply for leniency, you must be the first person to make a formal leniency application.

Leniency applications must be directed to the CEOof the Commerce Commission, 04 924 3620 or email ceo@comcom.govt.nz

A corporate leniency application must be made by an officer who has the authority to represent the company for this purpose.

Conditional grant of immunity
The person applying for leniency will be informed as soon as possible whether they are first. At the same time, the Commission may require the person to sign a ‘Conditional Grant of Immunity’ agreement confirming the above Leniency Conditions.

Final letter
The Commission will advise the person in writing when the Commission’s investigation and any Commission initiated proceedings, are concluded.