Uncertainty over act's penalties

Friday 1st June 2001

Law firm Simpson Grierson has just published the June edition of The Competitive Edge, its Competition Law Group newsletter. This extract provides some thoughts on the treatment of penalties which may arise from the Commerce Act which became law last week.

"Commerce Minister Paul Swain has said the penalties under the act are "merely a cost of doing business of the largest firms in this country and in instances of large-scale offending."

Several amendments have been made to help make anti-competitive conduct uneconomic.

For companies, the maximum penalty has been increased from $5 million to the greater of:

* $10 million; or

* three times the value of the illegal gain made as a result of the breach; or

* 10% of the turnover of the company and interconnected companies, if the illegal gain cannot be readily ascertained.

Problems are likely to arise in determining exactly the value of the illegal gain and even the appropriate measure of the turnover of the company involved.

What should have some real impact is the court must now order any individuals who have breached the act to pay a penalty unless the court considers that there is good reason for not making that order.

Companies are now prohibited from indemnifying their employees or agents for penalties imposed on them for price fixing, and the courts are given the discretion of banning individual offenders from directing or managing a company for up to five years if they have price fixed or entered exclusionary arrangements.

It will be even more important now for individuals to have separate legal representation from their company if proceedings are brought against both.

In private claims, a plaintiff can now seek exemplary damages against a defendant for breaching the act even though the commission may have already obtained pecuniary penalties against that defendant.

For more on aspects of the new Commerce Act go to <www.simpsongrierson.com>

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