New Zealand Competition Law and Collusive Agreements
This article is intended to help ensure that you don't breach the Commerce Act. Breaching the Commerce Act can lead to large fines and reputation damage.
You may have some good reasons to talk with your competitors, for example to discuss industry-wide issues and practices, or to share knowledge and technical information. These discussions are fine. However, you need to remember that you are competing for customers, tenders, and contracts; and you should be careful to avoid colluding with your competitors - this would be illegal. In a competitive environment businesses strive to produce better goods or services and to produce these more efficiently and this benefits the economy and overall welfare in our society.
Collusive agreements breach the Commerce Act 1986; they involve behaviour that directly or ultimately affects pricing- this harms competition. Any decision that affects pricing should be a decision you have reached independently and competitively. It is okay to get input from advisers, such as your accountant. But you should avoid any discussions with your competitors about prices (including any components of price such as discounts, margins or surcharges), allocating customers (including by geographic area), tenders, and output (e.g. production volume). Agreements in these areas are likely to breach the Commerce Act.
A Nod or a Wink is Enough
You don't have to have a formal written agreement with a competitor to be in breach of the Commerce Act. It can be just an understanding reached between two or more competitors about how at least one of them will act, or not act. So beware - the Courts have a found a "nod or a wink" is enough to constitute a collusive anticompetitive agreement.
There are heavy civil penalties for breaching the Commerce Act - up to $10 million for companies and up to $500,000 for individuals per breach. Even private indemnity insurance won't help. Adverse publicity will make matters worse and it could result in your customers choosing to go elsewhere. Even an attempt by one party to make a collusive agreement breaches the Commerce Act. Parties who are not in competition but involved in the agreements (e.g. consultants) are also liable if they facilitated such agreements.
Exactly who Are Your Competitors?
Make sure you understand who your competitors are in the eyes of the law. Under the Commerce Act, a competitor is a business that can bid for the same work and customers as your business - this includes any businesses that are not currently bidding for a type of work or customer but could do so if they wanted to. If you are involved with subcontracting work in any way you need to be extra careful, as businesses that are your customers can also be your competitors and even bid for the same tender or contract. You should avoid discussing anything about the pricing or bidding for the main contract with any persons who are, or who may be, your competitors - keep your discussions strictly to the subcontract work only.
Where to Find Further Information
The Commerce Commission enforces the Commerce Act and for more information about collusive (illegal) agreements see the Commission's website http://www.comcom.govt.nz/avoiding-illegal-agreements
The Commission also has a Leniency Programme that offers immunity from any civil court proceedings brought by the Commission. This immunity is only available to the first party involved in a collusive agreement that applies for immunity and satisfies the relevant criteria - see http://www.comcom.govt.nz/cattel-leniency-policy If you have been party to a collusive agreement it is your opportunity to get out of it.
If you are aware of collusive conduct that you are not involved in and wish to report it to the Commission you can do so on 0800 94 3600, by emailing contact@comcom.govt.nz or by completing the online complaint form at http://www.comcom.govt.nz