What is a cartel?

Cartels are formed when companies or individuals agree with their competitors to fix prices, allocate markets, restrict output, and/or engage in bid-rigging. These are not mutually exclusive and may overlap, eg, a cartel provision may both fix prices and allocate markets. Because they are illegal, cartel agreements are usually made and maintained in secret.

Cartels consist of an agreement that influences how the involved parties will act (eg, a minimum price to be charged for a product or service, or no discounting) – or in some cases not act (eg, not bidding on a tender or competing for a particular customer). A cartel agreement can be informal (eg, a 'nod and a wink') and still be illegal. In essence, there needs to be a shared expectation about how at least one of the parties to the agreement will act or refrain from acting. Cartel conduct is prohibited by sections 30 and 82B of the Commerce Act 1986.

Why are cartels a priority for the Commission?

Cartels are a priority for the Commission because they harm New Zealand consumers and businesses. International studies show cartels can cause prices to rise by (on average) between 18–20%. Both domestic and international cartels are a priority for the Commission – whether they are based in New Zealand or involve international parties that participate in, and/or affect markets in New Zealand.

What is the difference between Leniency and Immunity?

The Commission can grant leniency to any individual or company engaged in cartel conduct that meets the requirements set out in the Commission’s Cartel Leniency and Immunity Policy. Leniency means that the Commission agrees not to take civil enforcement action against a company or individual for their involvement in the cartel conduct. If leniency is granted by the Commission it does not prevent customers or other parties taking private civil actions in the New Zealand courts against an applicant and other participants involved in the cartel conduct. However, in any proceedings initiated by any other party, the Commission will only make disclosures as required by law.

The Solicitor-General can grant immunity to any individual or company engaged in cartel conduct. Immunity means that no-one can take criminal proceedings in New Zealand against the company or individual for involvement in the cartel conduct.

Applicants can obtain both civil leniency and criminal immunity for the same cartel conduct.

The Solicitor-General has published guidance on immunity from prosecution for cartel offences which can be found on the Crown Law website.

In what circumstances will the Commission recommend immunity?

If the Commission is satisfied that an applicant has met the conditions to be eligible for leniency, the Commission may recommend that the Solicitor-General grants immunity to the applicant and any related persons. The Commission will make such a recommendation where:

  • some or all of the reported cartel conduct is likely to be prioritised for further investigation; and
  • there is a prospect that criminal proceedings may be brought in relation to the prioritised conduct.

Please see paragraphs 47 – 51 and 89 – 94 of the Cartel Leniency and Immunity Policy.

Why give leniency and/or immunity from proceedings to a party that has broken the law?

The Cartel Leniency and Immunity Policy is a key tool for the Commission to detect cartels. It is not a reward for applicants. Without the detection that is achieved by parties coming forward to apply for leniency and/or immunity, more cartels would continue to operate and harm the New Zealand economy. Additionally, the knowledge that leniency and/or immunity is available may deter competitors from entering into cartel agreements, and may destabilise/disrupt existing cartel agreements.

Why would I/my company apply for leniency and/or immunity – what is in it for me/us?

You/your company will not be subject to court action from the Commission provided you fully cooperate with the Commission's investigation and enforcement proceedings, and comply with the conditions of leniency/immunity. Financial penalties and fines under the Commerce Act can be significant: up to $500,000 per breach for individuals; or the greater of $10 million, three times the commercial gain, or 10% of turnover for companies per breach. Individuals may face jail terms of up to seven years for their involvement in cartel conduct. Individuals can also be disqualified from acting as a director, promoter or manager of a company for up to five years.

How do I approach the Commission to enquire if leniency and/or immunity is available?

All approaches must be made by phone or by email to the General Manager – Competition (or a delegate if relevant) during the Commission's normal hours of business (8.30am–5pm, Monday to Friday) to enquire if a marker for leniency and/or immunity is available in a specified market. This ensures that applicants are treated strictly in order of application. An enquiry can be made on a hypothetical, 'no names' basis so as not to identify the company or individual who is contemplating applying for leniency and/or immunity. However, a hypothetical enquiry about whether a marker is available does not constitute an application for a marker.

You must contact the General Manager Competition via either:

Enquiries or applications made other than via the methods described above will be disregarded. For more information see paragraphs 152 – 157 of the Cartel Leniency and Immunity Policy.

How do I apply for leniency and/or immunity?

You must contact the General Manager Competition, via one of the methods of communication described above, during the Commission's normal hours of business. Enquiries or applications made other than via the methods described above will be disregarded.

For more information see paragraphs 152 – 157 of the Cartel Leniency and Immunity Policy.

What is a leniency and/or immunity marker?

A 'marker' is the confirmation given to a leniency and/or immunity applicant (company or individual) that is the first party to approach the Commission to request leniency and/or immunity with respect to a particular cartel and that meets the relevant conditions. The marker guarantees the applicant's place at the front of the queue and allows the applicant a limited time to collect further information to provide to the Commission in support of their application for leniency and/or immunity.

For more information see paragraphs 70 – 74 of the Cartel Leniency and Immunity Policy.

What if the Commission is already aware of, or is investigating, a cartel when an application for leniency and/or immunity is received?

Leniency and/or immunity may still be available.

The Commission will review all the evidence it already holds at the time of the application for a marker. If the Commission already has sufficient evidence to issue civil proceedings a marker will not be available.

If a marker is available, the Commission will review the proffer and assess whether the applicant’s evidence is valuable and whether the same or similar evidence could reasonably be obtained elsewhere. If the Commission determines that the applicant’s evidence is valuable and is not reasonably obtainable elsewhere, then leniency will be available. For more information see paragraphs 35 – 36 of the Cartel Leniency and Immunity Policy.

If a marker is not available or the threshold for granting leniency is not met, the party concerned can apply to cooperate with the Commission.

What if leniency and/or immunity is not available?

Parties may choose to cooperate when they find that they are unable to receive leniency and/or immunity, or they may choose to cooperate after they become aware of the Commission's investigation. Applications to cooperate can be made at any point in a cartel investigation, including after proceedings have been instigated.

Further information on the Commission’s approach to cooperation in cartel cases is set out in the Commission’s Cartel Leniency and Immunity Policy at paragraphs 117 – 133.

How is the marker perfected?

After the marker is granted, the applicant usually has 40 working days (unless the Commission specifies otherwise), to provide the Commission with a 'proffer', including relevant supporting evidence. A proffer is a written, or oral, statement. It describes the cartel conduct and includes an admission to the conduct and any evidence to support the cartel's existence. Typically, it will include relevant documents or a description of those documents in the applicant's possession, and information from interviews of the applicant's staff and former staff in respect of the cartel conduct.

After the Commission receives the proffer it may request further information from the applicant. The Commission may also ask to interview individuals involved in the conduct before deciding whether to grant leniency (and recommend immunity, if applicable).

For more information see paragraphs 75 – 84 of the Cartel Leniency and Immunity Policy.

What about international cartels that affect multiple jurisdictions?

Leniency and/or immunity applicants can, and do, simultaneously apply for markers in multiple jurisdictions.

The Commission may request leniency/immunity and cooperation applicants to provide waivers (within five working days of leniency, immunity and/or cooperation being granted) so that the Commission can share information provided by the party concerned with other competition agencies. This allows the Commission to investigate the cartel more efficiently.

If an applicant has applied or intends to apply for leniency and/or immunity in another jurisdiction, we would generally expect to be granted a waiver to share information with the competition regulator in that jurisdiction, unless the applicant can satisfy us that it would face unreasonable prejudice or harm if such a waiver was granted.

See paragraph 144 of the Cartel Leniency and Immunity Policy.

What happens if a marker is not perfected?

If the proffer is not sufficient to meet the threshold for granting leniency/immunity, the applicant will be given an opportunity to address these shortcomings (within a specified time period).

If the applicant is unable to address those shortcomings and the marker is therefore not perfected, the next party in line for a marker will then be awarded a marker. The holder of an expired marker is eligible to re-apply for immunity and/or leniency, but it loses its original place in the queue upon re-applying.

A party whose marker has lapsed can still apply for cooperation.

For more information see paragraphs 85 – 88 of the Cartel Leniency and Immunity Policy.

What happens after a satisfactory proffer has been delivered and the marker is perfected?

Once a marker is perfected, the Commission will grant leniency to the applicant.

If the applicant has also applied for immunity, the Commission will assess whether it is also appropriate to recommend to the Solicitor-General that the applicant be granted immunity from criminal prosecution. In such cases, the Commission will generally communicate its decision on leniency and the Solicitor-General’s decision on criminal immunity to the applicant at the same time.

When leniency is granted, the Commission will enter into an agreement with the applicant. This agreement details ongoing obligations for the leniency holder to assist the Commission with the investigation and (where appropriate) enforcement proceedings against other cartel participants.

If the Solicitor-General decides to grant immunity, the Solicitor-General will provide an undertaking in writing to stay any prosecution commenced in respect of the applicant’s involvement in the particular cartel conduct.

For more information see paragraphs 89 – 99 of the Cartel Leniency and Immunity Policy.

What is required on an ongoing basis in order to maintain leniency and immunity?

This is detailed in the Commission's Cartel Leniency and Immunity Policy and includes:

  • providing full and ongoing cooperation and assistance during the investigation of the cartel conduct and any subsequent proceedings
  • ceasing the cartel conduct (unless otherwise directed by the Commission)
  • accepting the jurisdiction of New Zealand courts
  • providing all relevant documents and information
  • preserving records and computer-based information, and
  • encouraging and facilitating staff and officers (including former staff and officers) to attend interviews with the Commission and give evidence in court in any subsequent proceedings (if required).

There may be other conditions imposed by the Solicitor-General in order to maintain immunity.

In relation to parties based overseas, the Commission expects that in most circumstances, the applicant will bring its witnesses to the Commission’s offices in New Zealand for interviews (or to another location specified by the Commission).

For more information see paragraphs 95 – 102 of the Cartel Leniency and Immunity Policy, together with clause 6 of the Template Leniency Agreement.

How do individuals fit into their company's or former company's leniency and immunity?

Individuals who have been involved in the conduct and cooperate with the Commission during the leniency and/or immunity assessment process will usually be covered by leniency and/or immunity derived from the corporate applicant. Key individuals, ie, those individuals who the Commission considers were directly involved in the cartel conduct and/or hold relevant information in relation to the cartel conduct, will likely receive a letter explaining their obligations and be asked to confirm that they understand and accept their obligations.

For more information see paragraphs 59 - 63 of the Cartel Leniency and Immunity Policy, together with clause 7 of the Template Leniency Agreement.

Individuals who do not cooperate with the Commission during the investigation and any subsequent proceedings may face revocation of their leniency and/or immunity.

For more information about revocation of leniency and/or immunity see paragraphs 103 – 107 of the Cartel Leniency and Immunity Policy, together with clauses 16 – 20 of the Template Leniency Agreement.

What about confidentiality?

The Commission takes all practical steps to protect the identities of leniency and/or immunity applicants and any confidential information they provide. This is balanced against the need for the Commission to investigate other members of the cartel and, where relevant, to take proceedings against the other cartel participants.

Leniency and/or immunity applicants are also required to keep the fact of their leniency and/or immunity application confidential. They can only disclose their leniency and/or immunity (and/or its status) if required to do so by law and/or the rules of their stock exchange, if the Commission’s investigation becomes public other than as a result of the applicant breaching its obligations under the leniency agreement, or otherwise with the Commission’s consent.

Confidentiality helps to maintain the integrity of the Commission's investigation and protects evidence from wilful destruction.

For more information about how the Commission can use an applicant’s information see paragraphs 108 -111 of the Cartel Leniency and Immunity Policy.

Can leniency and/or immunity be revoked?

Yes. If the leniency and/or immunity applicant does not meet its obligations under the leniency agreement and/or immunity letter, a warning and rectification process is triggered. If the problems are not remedied, leniency and/or immunity may be revoked.

For more information about revocation of leniency and/or immunity see paragraphs 103 – 107 of the Cartel Leniency and Immunity Policy, together with clauses 11 – 15 of the Template Leniency Agreement.

What are cooperation concessions?

Cooperation concessions are usually formal agreements entered into by the Commission with parties that wish to admit to engaging in cartel conduct and assist the Commission's investigation. Parties that cooperate with the Commission will usually be entitled to a discount to any court sanctions imposed to reflect their assistance.

Can cooperation be applied for after cartel proceedings have been initiated?

Yes. The Commission is always prepared to engage with parties that wish to admit to their behaviour.

For more information about cooperation concessions please see paragraphs 117 – 133 of the Cartel Leniency and Immunity Policy.

Can an individual or company obtain leniency/immunity if they have attempted (without success) to form a cartel?

Generally, the Cartel Leniency and Immunity Policy does not apply to an individual or company that has only attempted to engage in cartel conduct, without the attempt resulting in actual cartel conduct. However, where an applicant has attempted to engage in cartel conduct they may still be eligible for leniency and/or immunity if they are able to provide material assistance in proceedings/prosecution against another party (eg, if the attempt is part of a broader set of cartel conduct the applicant has been involved in).