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In New Zealand the Commerce Commission is the competition law enforcement agency. Like its
international equivalents, our Commerce Commission wants to encourage competitive markets
and one of its strategic priorities is to take action against anti-competitive conduct, particularly
price-fixing or market sharing arrangements by cartels.
Increasingly Simpson Grierson is seeing referrals generated by off-shore cartels whose reach may extend as far as our local markets. Our Commerce Commission has declared a policy of prosecuting cartel conduct even if the participants are based overseas, as it does not want New Zealand to be seen as a "soft touch" for international cartels. Specifically, the Commission has warned that companies engaging in anti-competitive conduct in New Zealand "will not be tolerated".1
In practical terms the Commerce Commission has recently launched proceedings against French companies Alstom Holdings SA and Schneider Electric Industries SA, as well as the German company Siemens AG, in relation to an alleged global cartel supplying gas insulated switchgear, which the Commission claims had an effect on the New Zealand electricity industry. These proceedings mirror those taken by the European Commission in relation to the same corporations, and are comparable to those initiated by the Commerce Commission in 2002 against global vitamin companies who also engaged in cartel conduct which affected New Zealand markets.
The Commerce Commission has also launched investigations into possible price fixing cartel conduct in the airline industry and in relation to the corrugated cardboard industry. The genesis of both of these investigations was off-shore.
The Commerce Commission's Chair has stated that the Commission expects to prosecute four to six cartel cases in each of the next two years under the New Zealand Commerce Act.2 This is a considerable amount of enforcement activity in a small economy like ours.
Against that background, you and your clients may be in interested in some general information in relation to the Commerce Commission's policy of taking legal action in New Zealand against multinational corporations who engage in cartel conduct.
Jurisdiction of the New Zealand Courts Over Multinational Corporations
Section 4 of the New Zealand Commerce Act provides that the Act has extraterritorial reach if certain criteria are met. The Commerce Act "extends to the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand".
However, in a recent case the New Zealand High Court rejected a submission that if section 4 was not satisfied then the Act would have no application to persons outside of New Zealand, and held that the Act applies where part of the allegedly anticompetitive conduct took place within New Zealand.
Accordingly, even where section 4 does not apply, activities such as the following can be enough to establish jurisdiction for the purposes of service by the Commerce Commission:
a) A person being physically present in New Zealand and carrying out acts in breach of the Commerce Act.
b) The sending of communications (ie telephone calls, faxes or emails) by an overseas party from outside New Zealand to persons within New Zealand who receive and act on those communications.
c) An overseas party directing an agent in New Zealand to carry out certain contravening conduct in New Zealand even though the agent was unaware that their actions would contravene the Commerce Act.
The threshold established so far by the New Zealand Courts with respect to establishing jurisdiction is therefore reasonably low.
Commerce Commission's Leniency Policy
The Commerce Commission introduced a Leniency Policy in 2004 which was designed to increase the detection of cartel conduct and to aid the Commission in its enforcement actions against cartels. The Commission's Chair in a speech in 2005 declared that the policy "is intended to encourage a race to provide evidence to the Commission, and to foster distrust between members of a cartel".3
The basic elements of the Leniency Policy are as follows.
- Immunity from Prosecution
Full immunity from prosecution by the Commerce Commission is available to the first person involved in a cartel who reports it to the Commission where the Commission does not already know about the cartel. Immunity from prosecution does not protect a cartel member from individual claims for damages brought by third parties able to show loss as a result of the cartel's conduct.
- Full Co-operation Required
Immunity is provided on the proviso that the person fully co-operates with the Commerce Commission throughout any investigation and related proceedings. Immunity will be granted to current or former directors, officers or employees of a company on the basis that they also fully co-operate with the Commission, but will not extend to a company where the first person to apply for leniency is an individual employee of the company. Immunity can be withdrawn where there is failure to fully co-operate, and at that point the Commission may use information provided to it to initiate proceedings against the person.
- Available to "Ringleaders"
In New Zealand, unlike some jurisdictions, immunity is available to the "ringleader" or person who instigated the cartel.
In New Zealand, applications for leniency must be in writing – there is no paperless process by which applications can be made. Although a person may initially telephone the Commerce Commission to establish whether they will qualify for immunity under the Leniency Policy, the call will not establish that person's position as the first applicant.
New Zealand operates on a "first past the post" system – only the very first applicant under the Policy qualifies for immunity and all others miss out. Unlike some other jurisdictions, New Zealand has no "marker system" in place to hold a late applicant's position in line for leniency in the event that the first successful applicant fails to sufficiently co-operate with the Commerce Commission.
A person, having acquired immunity under the Leniency Policy, is bound not to disclose their leniency application, or any other information provided to the Commerce Commission in connection with their application, to any other person.
Commerce Commission's Co-operation Policy
The Leniency Policy only applies to persons involved in cartel conduct. The Commerce Commission also has a second policy entitled the Co-operation Policy, which applies to a broader range of anti-competitive behaviour. Under this Policy, the Commission can exercise its discretion to take a lower level of enforcement action, or no action at all, against an individual or business in exchange for information and full continuing and complete cooperation with the Commission. Parties who are ineligible for immunity under the Leniency Policy may therefore choose to take advantage of this second policy, although the Commerce Commission has stated that it is unlikely to agree to a lower level of enforcement action where an individual or business forced or encouraged others to take part in an activity which contravened the Commerce Act.
Penalties Under the New Zealand Commerce Act
In the event that a cartel member does not acquire immunity under the Leniency Policy in New Zealand and is subject to proceedings brought by the Commerce Commission, for each contravention of the Commerce Act the Commission may seek penalties up to the greater of: NZ$10 million; or three times the value of the commercial gain from the contravention; or 10% of the New Zealand turnover of the company and its interconnected New Zealand companies. The maximum penalty which can be awarded against an individual is NZ$500,000. There are currently no criminal sanctions for cartel conduct in New Zealand.
What We Can Do For You
Simpson Grierson's competition law specialists are well placed to provide assistance if you need any further information about the Leniency or Co-operation Policies or whether multinational clients are at risk under New Zealand's competition laws. In the first instance we suggest you direct any questions to Anne Callinan, the Partner who heads our Competition Group and who specialises in cases of this nature.
1 Commerce Commission Media Release No 132, 16 May 2007.
2 The Dominion Post, 17 May 2007.
3 Paula Rebstock, Commission Chair, Speech to the New Zealand Centre for Public Law, Victoria University, Wellington New Zealand, 20 September 2005.
This newsletter is produced by Simpson Grierson. It is intended to provide general information in summary form. The contents do not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.
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