Faafoi KrisCOMMERCE (CRIMINALISATION OF CARTELS) AMENDMENT BILLSecond ReadingHon KRIS FAAFOI (Minister of Commerce and Consumer Affairs): I move That the Commerce (Criminalisation of Cartels) Amendment Bill be now read a second time. The Government is committed to protecting consumers and honest business from serious cartel conduct and while most businesses operate fairly and comply with competition law there are some in New Zealand who unfortunately engage in cartel conduct. This hampers competition in our markets and results in higher costs for New Zealanders reduced choice and lower quality goods and services for ordinary New Zealanders. Cartels are the most egregious form of anti-competitive conduct and undermine the efforts of honest business. Criminalising cartel conduct sends a clear message that we as a Government and we as a country will not tolerate unjustified interferences in our markets. Importantly it will serve as a strong deterrent to deliberately engaging in cartel conduct and will make firms better consider the competitive impacts of their actions and operations.The Economic Development Science and Innovation (EDSI) Committee received 20 written submissions and 11 oral submissions from interested stakeholders and parties on the bill. I would like to thank all of those that took time to submit on the bill. I also want to take the opportunity to thank members of the committee for their work on this bill. It is regrettable that the committee was not able to agree on changes to enhance the robustness of this proposed criminalisation regime.The submissions on the bill mainly focused on the targeting of the new criminal offence the impact on businesses and the exceptions and defences available. The voices and perspectives of the business community and experts are important to this Government and help to ensure that New Zealand has an honest business environment which is conducive to encouraging competition and innovation.Some submitters believe that the offence is not sufficiently targeted to serious cartel conduct. However the bill distinguishes criminal liability by reference to the actual intention of the defendant so that the person must have intentionally engaged in price fixing restricting output or allocating markets and no exemption applies to the conduct. In this way the bill only criminalises cartel conduct where the person intended to interfere and distort the market. The offence is designed to ensure the necessary level of culpability by the defendant so that merely entering into an arrangement that contains cartel provision is not automatically construed as intention.There was also some concern over the impacts of criminalisation on pro-competitive business activity. However as I mentioned previously honest business should have no concerns in relation to this bill. It will not chill legitimate business conduct and I will ask the Commerce Commission to assist by preparing good guidance from business as well as supporting collaborations by providing businesses with clearances on arrangements.The bill provides for a defence to the criminal offence where the defendant believes that their conduct was reasonably necessary for the purposes of collaborative activity. There are also exceptions to the offence for joint-buying agreements vertical supply contracts and international vessel-sharing agreements. Between now and the committee of the whole House I will look at whether the defence should be expanded to other exemptions in the Commerce Act and whether it should be based on reasonable grounds. I also intend to look at the setting up of a specialised panel to prosecute these offences the categorisation of the offence and other minor changes to ensure the effectiveness and appropriateness of the proposed criminal regime.To ensure that businesses have time to become familiar with the proposed changes the bill provides for a transitional period of two years from enactment until the criminal offence comes into force. This will provide businesses the opportunity to use this time to familiarise themselves with the new offence and ensure that current activities are legally sound. They already should be doing this and the conduct to be criminalised is already unlawful under the Commerce Act's civil regime. Businesses are already able to voluntarily apply to the Commerce Commission for clearance of their proposed collaborative activity that if granted would provide immunity from the civil and criminal regimes. The two-year lead-in gives them time to do so if they wish.As the Minister leading off the debate I don't have the opportunity to rebut some of the comments that I anticipate from the other side of the House but I would say that this piece of legislation extends a criminal regime over a civil regime that already exists. The criminal regime that we are implementing through this bill was part of an earlier piece of legislation which I believe passed through on the last day of the previous Government. So what I'm saying is that the previous Government enacted the bill with a criminal regime but saw fit to take that out. And I'm assuming that we will hear about the possible chilling effect of this for business. As I have said there is nothing to fear for good honest businesses—the majority of New Zealand businesses. But in anticipation that there will be speakers following me who will talk about the dread that will fall upon the markets if this piece of legislation is enacted I just want to remind the other side of the House of some of their own words when criminalisation was part of the earlier legislation.I'd like to point to the former Minister of Commerce and Consumer Affairs Jacqui Dean who said the introduction of criminal sanctions against cartels via this bill will bring New Zealand into line with many of its trading partners including the United States the United Kingdom Canada and Australia. This will allow New Zealand to play a more active role in the global fight against hard-core cartels."I think it's the current commerce spokesperson for the Opposition Brett Hudson who said "I am delighted with this bill."—when it included the criminal regime—"It is clearly taking on the evils the worries and the concerns around hard-core cartel behaviour … it does address the negatives of cartel behaviour and it is important that it does so because if it did not we could end up with that terrible situation where the tiny minority—the nameless and the faceless—are controlling outcomes delivering things that … many [people] do not want."So my question for the anticipated criticism of this piece of legislation from the other side of the House is: what's changed? What happened from when you first introduced that bill to when you lost your bottle and removed the criminalisation from the piece of legislation? What happened? Because you were talking tough at the first and the second readings and then something happened. Something happened along the way and they lost their nerve and oops the criminal part of the regime disappeared. If it wasn't for the help of this party on the last day of the previous Parliament they wouldn't have even got the civil process through this House because it was passed on 17 August 2017—the last day that this House sat.It's not the committee stage but my question to the other side of the House is: what happened? Why did you lose your nerve and remove this? As I say honest business has got nothing to fear here. If you were so committed to making sure that you were going to crack down on hard-core cartel behaviour and criminalisation was the way to achieve that why did you stop it? We are committed to making sure as we said on 17 August 2017 that if there is cartel behaviour we discourage it and if it happens that we bring it into the criminal regime. I think it would probably be the chair of the EDSI Committee who will go first so maybe he's the one that wants to answer for the former commerce Minister as to why the previous Government lost their nerve and decided to take it soft—to go soft on hard-core criminal behaviour. I want to know the answer to that question. I'm proud to bring this piece of legislation to back up what the previous National Government lost its nerve and couldn't do and we're going to make sure that we support honest business and competition because at the end of the day it means better services and better prices for New Zealanders and I want to know what the previous Government had a problem with."