Anyone who runs a business in New Zealand must comply with the Commerce Act, which aims to promote competition in markets for the long-term benefit of consumers.
Competitive markets help to keep prices down and ensure that the quality of goods and services remains high. Competition also ensures consumers have a range of choices, and firms have incentives to innovate, invest and operate efficiently. Anti-competitive behaviour can jeopardise all of this, as well as a company’s ability to win new customers.
It is important that businesses are aware of what they can and cannot do when talking to their competitors. The Commerce Act prohibits anti-competitive agreements between firms such as agreements to fix prices, allocate markets or restrict output.
In addition, it is important for purchasers, such as procurers, to be aware of the rules around anti-competitive conduct so they can help detect illegal behaviour, such as bid rigging. This type of anti-competitive conduct prevents open and effective competition and means procurers are unlikely to achieve best value for money for their business, customers, and in some cases, taxpayers.
The Commission can take enforcement action against businesses and individuals who breach the Commerce Act and the court can impose significant penalties for breaches against both businesses and individuals.
Businesses should seek independent legal advice to ensure they are not at risk of breaching the Commerce Act.
One of our central purposes is to safeguard the integrity of competitive markets to ensure businesses and consumers feel confident they are not being unfairly disadvantaged. To achieve this, it is important New Zealanders understand our role and the ways in which we exercise our powers and functions.
Cartels deprive consumers and other businesses of a fair deal. A cartel is where two or more businesses agree not to compete with each other. This conduct can take many forms, including price fixing, dividing up markets, rigging bids or restricting output of goods and services.
In April 2019 the Commerce Act was amended. It means that engaging in cartel conduct can now be a criminal offence with a maximum penalty of 7 years imprisonment. The civil penalties contained within the Commerce Act continue to apply.
Agreements between businesses are a normal and important part of how markets work. But some agreements harm competition, resulting in higher prices, fewer choices and lower quality of goods and services for consumers.
Some businesses have substantial market power. This in itself is not illegal. However, under the Commerce Act it is illegal for a business with a substantial degree of market power to take advantage of that power for an anti-competitive purpose.