Page 21 - English-DBINZ brochure-2019

Buddle Findlay 18

Restrictive trade practices - Prohibitions of restrictive trade practices
The Commerce Act prohibits various restrictive trade practices which may be classified as follows:

ə Collective practices:
– cartel provisions are provisions in contracts, arrangements or understandings amongst
competitors that, regardless of the effect on competition, have the purpose, effect, or likely effect
of price fixing, restricting output, or market allocating. The Commerce Act includes an exception
from the prohibition of cartel provisions for cartel provisions that are reasonably necessary for the
purpose of certain collaborative activities
– contracts, arrangements or understandings that have the purpose, effect, or likely effect of
substantially lessening competition in a market
ə Unilateral practices:
– a firm fixing minimum resale prices for goods it supplies
– a firm with a substantial degree of power in a market taking advantage of its market power for an
anti-competitive purpose. An anti-competitive purpose is a purpose of restricting the entry of
a person into a market, preventing or deterring a person from engaging in competitive conduct
in a market, or eliminating a person from a market. In early 2019, the Government consulted
on a proposal to broaden the prohibition to capture any conduct by a person with a substantial
degree of power in a market that has the purpose, effect, or likely effect of substantially lessening
competition in a market. Whether or when any such change might come into effect is uncertain.

Clearances and authorisations
As is the case with proposed mergers and acquisitions, businesses may apply for a clearance or
authorisation from the Commerce Commission for particular types of restrictive trade practices if there is
a risk (or a perceived risk) that a proposed restrictive trade practice may breach the Commerce Act.
The Commerce Commission may grant clearance for a cartel provision if it is satisfied that the parties to
the cartel provision are involved in a collaborative activity, the cartel provision is reasonably necessary
for the purpose of the collaborative activity, and the arrangement containing the cartel provision would
not have the effect or likely effect of substantially lessening competition.
Alternatively, if a proposed restrictive trade practice is likely to substantially lessen competition in a
market, the relevant business may apply for an authorisation for the restrictive trade practice. In order
to grant an authorisation for a restrictive trade practice, the Commerce Commission must be satisfied
that any lessening of competition is outweighed by the public benefits of the restrictive trade practice.

Restrictive trade practices penalties
The Commerce Commission may impose penalties on individuals of up to NZ$500,000 for breaching
the restrictive trade practices prohibitions in the Commerce Act. Companies are prohibited from
indemnifying their directors, employees or agents for penalties incurred as a result of cartel conduct.

A company may be fined an amount which does not exceed the greater of:
ə NZ$10m
ə Three times the value of any commercial gain resulting from the contravention or, if the commercial
gain cannot be established, 10% of the turnover of the group of companies to which the company
breaching the Act belongs.
As of February 2019, there is a Bill before the House proposing to criminalise cartel conduct, which is
expected to pass some time in 2019. In addition to the criminal penalties equivalent to the civil penalties
described above, individuals could be imprisoned for up to seven years.