ecessary for the purpose of the collaborative activity.
tion for cartel provisions that constitute a restraint of trade
June 2022
11
he cartel prohibition does not apply to a cartel provision that constitutes a restraint of trade if:
Cartel activity is illegal
34.1 the parties were involved in a collaborative activity that has ended;
34.2 the cartel provision constitutes a restraint of trade and was reasonably necessary to achieve
aims of the collaborative activity; and THE CONSEQUENCES of a conversation over agreeing cover pricing – an illegal practice coffee or a beer can be serious if you’re meeting with a competitor to discuss prices, tenders, markets, or services. This could be cartel activity and individuals who take part can face jail time.
where bidders agree the price each party will bid. In 2019, Ronovation Limited, a property investment membership business, was fined $400,000 after admitting to price fixing in Auckland’s residential real estate market by developing a set of rules to ensure members were not competing against each other for investment properties.
competition and can damage the welfare of New Zealanders generally by raising prices, and also by negatively affecting other factors such as choice, innovation, quality and investment.
34.3 the agreement did not end because the lessening of competition between two or more par
became its dominant purpose.
Cartel conduct harms consumers through
his provision is potentially a collaborative is higherin prices or reduced quality, and activity it harms What is cartel activity? relevant when a franchisor that is involved other businesses that are trying to compete You may have heard the term cartel before, o enforce a restraint of trade clause in a franchise agreement that comes to an end. fairly. but perhaps not in this context. A cartel is where two or more businesses agree not to compete with each other. It can take many forms, including price fixing, rigging bids, sharing markets, or restricting services. Cartel activity can take place in any business setting – including in the transport and logistics sector.
Market sharing is when businesses agree to carve up markets and not compete for the same customers. This could be in relation to the sale of a specific product, a geographic area or a particular type of customer. For example, if two competing transport businesses agree to divide an area so each only accepts business in an agreed region, that could be market sharing. Similarly, market sharing agreements can be customer specific.
agreed formula. It’s important to maintain
they are selling. In the transport and logistics
How to report cartel activity
Bid rigging happens when there is an agreement between bidders about who should win a tender. This may involve potential bidders not bidding for a tender to support the proposed winner, or bidders
the potential consequences of taking part.
more about cartel activity and how to report it on the Commerce Commission’s website at https://comcom.govt.nz/business/ avoiding-anti-competitive-behaviour/whatis-a-cartel/reporting-cartel-conduct.
Example
What are the penalties? The penalties for taking part in cartel activity are significant – individuals can be fined up to $500,000 and companies can be fined up to $10 million, three times the commercial gain, or ten percent of turnover per year per breach. Since April 2021, businesses and individuals can also be liable for criminal conviction and individuals convicted of engaging in cartel conduct could face imprisonment
ta Cleaning operates a nationwide domestic cleaning franchise. Its standard franchise Price fixingServices is when businesses agree on what prices they will charge to avoid having to reement includes a clause restricting the franchisee from owning or operating a competing busin compete which each other. It includes Restricting services happen when competitors competitors agreeing tofor fix anyapart of thin five kilometres period of 3 months after the franchise agreement comes to an end. agree to prevent, restrict, or limit the services a price, or to set prices according to an
e collaborative activity apply after thecould franchise agreement comes to an end if the sector, restricting services include independent pricing decisions.exception Agreeing with will Businesses or individuals can report cartel agreeing with competing freight services to competitors to pass on additional fees or activity by contacting the Commerce To test straintsurcharges, of trade was reasonably for the purposes of establishing the franchise. limit the number of weekly services to an for example fuel surcharges, are necessary Commission. The Commission can grant area. examples of price fixing. In 2021, the High leniency the first member a cartel is more s, we would, for example, ask Rata Cleaning Services to explain why thetorestraint ofoftrade Court imposed penalties on Specialised The Commerce Commission is reminding to approach it, provided they meet the Container Services and its director for directors,We business owners, also managers and to consider an simply desirable, easier or preferable. would need the restraint is requirementswhether for leniency. Businesses and attempted price fixing of vehicle booking employees in the transport and logistics individuals can also use the Commission’s fees charged to transport operators. asonable at common law. sector of what constitutes cartel conduct and anonymous whistle-blower tool. You can read Why is cartel activity illegal? Cartel activity can harm consumers and businesses. It prevents open and effective
