Matt Nippert is a business investigations reporter.

Government u-turn on cartels ran counter to advice

In December 2015 then-Commerce Minister Paul Goldsmith announced criminalisation would be cut from the Bill. Photo / Chrris Loufte
In December 2015 then-Commerce Minister Paul Goldsmith announced criminalisation would be cut from the Bill. Photo / Chrris Loufte

A government u-turn making directors not criminally liable for running cartels ran counter to official advice.

The revelation, obtained under the Official Information Act by the Green Party, saw the party's co-leader James Shaw describe the episode as "clearly not an example of good policy-making" that showed "National are weak on cartels".

Introducing criminal sanctions to New Zealand's anti-competition laws had been a key plank of the Commerce (Cartels and Other Matters) Amendment Bill introduced to Parliament by then-Justice Minister Simon Power in 2011.

But in December 2015 then-Commerce Minister Paul Goldsmith announced criminalisation would be cut from the Bill. Goldsmith this week said he stood by his decision and policy advice supporting criminalisation was not unanimous.

Ministry of Business, Innovation and Employment principal policy adviser Karen Chant broke the news of the decision to her counterparts in Australia in an email.

"As you will see the Ministry did not change its advice on criminalising cartels. This was a political judgment," she wrote.

Auckland University associate professor of law Chris Noonan said the description of the decision as one of "political judgement" confirmed his earlier assessment of the policy change.

"It doesn't surprise me it was a political decision. On reading the cabinet paper accompanying the announcement there really weren't strong reasons given for the change of course," he said.

Noonan noted the past few decades had seen many countries -- including New Zealand's trading and diplomatic partners Australia, Canada and the United States -- adopt criminal sanctions for cartels.

He said the u-turn would complicate extradition proceeding over such cases, which typically required both jurisdictions to rule the behaviour in question a crime.

Noonan said political considerations were inevitably part of government decision-making processes.

"Making law is Parliament's job. To some extent it's elected officials who make decisions. Whether that's good or bad, as far as the resulting policy is concerned, is a different matter," he said.

The Green Party's Shaw said the disharmony with Australia's policy ran counter to Closer Economic Relations.

"We've had a program for decades now to move closer and closer, and it's quite unusual for New Zealand to say we're going in the other direction," he said.

Shaw said Goldsmith had told RNZ following the initial decision the u-turn had followed consultation with law firms and directors, whose position on the subject should surprise no one.

"It's unsurprising that directors felt that they shouldn't be subject [to] criminal sanctions for cartel behaviour. I think he basically got lobbied on this one," he said.

In a 2015 cabinet paper Goldsmith cited "further engagement with stakeholders" as having informed him of "significant risk that cartel criminalisation will have a chilling effect on pro-competitive behaviour".

The government duty minister during the Parliamentary break, appropriately Goldsmith, denied decriminalisation represented the over-ruling of official advice.

"The advice of officials for criminalisation was never unanimous," he said, and Treasury had concluded the net benefits of such a decision were "unclear".

Quoting Treasury advice, Goldsmith said: "On balance, it is difficult to see how the likely benefits of cartel criminalisation in terms of international cooperation would exceed the likely costs imposed on businesses, the Commerce Commission, and the Courts."

Goldsmith had instructed officials to monitor developments to assess whether the lack of criminal sanction had resulted in any negative consequences for international co-operation with the Commerce Commission.

The Bill, awaiting its third reading, is now the responsibility of Minister of Commerce and Consumer Affairs Jacqui Dean.

The proposed law retains civil penalties for cartel behaviour, with the maximum fines such activity can bring at $500,000 for individuals and $10 million for companies.

- NZ Herald

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