A news article from the Manawatu Standard in New Zealand reports that “Price-fixing executives will not be subject to jail terms after Government u-turn.”  Paul Goldsmith, the Minister of Commerce and Consumer Affairs said he was stripping criminal sanctions for cartel behavior currently contained in the Commerce (Cartels and Other Matters) Amendment Bill.  He said that after a year of consideration he had made an “on balance decision” that the costs of introducing criminal penalties outweighed the benefits.

The Minister said “If we keep providing new ways for directors to go to prison if the judgements are wrong then overall there’s a potential chilling effect on innovation.”  New Zealand’s decision is counter to the trend toward criminalization of cartel behavior, although in many countries criminal penalties, while available, are rarely imposed.  Countries that do impose criminal penalties, such as the United States, reserve criminal prosecution for “hard-core” cartel conduct (price-fixing; bidding rigging) where there is an element of fraud: i.e. buyers (or sellers) believe there is competition when in fact competition has been reduced or eliminated by a secret agreement among the bidders/vendors.  These types of secret cartel arrangements are deemed to have no pro-competitive benefit as opposed to joint ventures where entities share risk, resources and the buyer can independently weigh the merits of contracting with the joint entity.

The full Manawatu Standard article can be found here.