Cartel conduct is illegal – what you need to know

The consequences of a conversation over coffee or a beer with a competitor can be problematic if you find yourself talking about prices, tenders, markets, or services. It could amount to cartel conduct and individuals who take part can face jail time.

So, what is cartel conduct?
You may have heard the term cartel before, but perhaps not in this context. Under the Commerce Act, a cartel is where two or more businesses who are competitors agree not to compete. Cartel conduct can occur in various forms, including price fixing, bid rigging, market or customer sharing, or output restriction. It can also occur in any business setting – including between members of industry and trade associations.

A formal written contract is not always needed for cartel conduct to be illegal. Even informal understandings, like a ‘wink and a nod’, or attempts to enter into cartel agreements, may breach the law.

Price fixing

Price fixing occurs when competitors agree on what prices they will charge to avoid competing. This includes agreeing on any part of pricing (eg, discounts, rebates, fees or surcharges) or setting an agreed formula for pricing. It’s important that you act unilaterally and maintain independent pricing decisions. Agreeing with competitors to pass on additional fees or surcharges, like fuel surcharges, would be an example of price fixing.

Price fixing also includes bid rigging, which is when bidders agree on who should win a tender. This can involve potential bidders not submitting bids to support the proposed winner or agreeing a cover price – an illegal practice where competitors agree the price each party will bid. In 2024, the High Court issued New Zealand’s first criminal sentence for cartel conduct. A construction company and its director were convicted for bid rigging on publicly funded infrastructure projects – the company was fined $500,000 and its director was sentenced to six months community detention and 200 hours of community work. In this case, the Judge accepted that if there were not several mitigating circumstances, appropriate sentences would have been two years in prison for the director, and a penalty of around $1 million for the company. In late-2025, a second company was fined for its involvement in the conduct.

Market allocation

Market allocation occurs when competitors agree to divide markets and not compete for the same customers. This can apply to the sale of a specific product, a geographic area or a type of customer. For example, if two competing plastics suppliers agreed to operate only in designated regions it could amount to market allocation.

In 2022, the High Court imposed penalties of $4.9 million and $4.6 million on two international freight forwarding companies and between $65,000 to $100,000 on four associated individuals for engaging in longstanding cartel agreements not to compete for existing customers. Some of the conduct also involved submitting quotes to customers that were not competitive (ie, cover pricing). Eight other freight forwarders also received warnings for similar conduct.

In 2026, two courier businesses were penalised $700,000 and $525,000 for cartel conduct which included agreements to allocate customers and fix prices between competitors in the courier services market. The Commission also issued warnings to nine courier providers for similar conduct.

Output restriction

Output restriction occurs when competitors agree to prevent, restrict, or limit the goods or services they sell or buy. It also covers the goods or services they would likely buy or sell. In the plastics sector, this could include agreements between competing suppliers to limit the number of products they will supply to a market.

Why is cartel conduct illegal?
Cartel conduct can harm consumers and businesses – it prevents open and effective competition and can damage the welfare of New Zealanders generally by raising prices. It can also negatively affect other factors such as choice, innovation, quality, and investment. Specifically, it harms consumers through higher prices or reduced quality, and it harms other businesses who are trying to compete fairly.

What are the penalties?
There are significant penalties for engaging in cartel conduct – individuals can be fined up to $500,000, and companies can be fined up to $10 million, three times the commercial gain, or 10% of turnover per year per breach. Individuals can also be disqualified from acting as company directors for up to five years.

Since April 2021, individuals and businesses can also be liable for criminal conviction – individuals convicted could face up to seven years’ imprisonment.

What can you do?
To protect yourself and your business:

• Make independent decisions about pricing, tenders, customers, and outputs, and avoid discussing these with competitors.

• Stay informed about association activities to ensure compliance – under the Commerce Act, any recommendation made by trade associations is deemed to be an arrangement between all members.

• If you employ staff – educate them about what constitutes cartel conduct and how to report it.

• Get legal advice if you are ever unsure about whether a discussion, agreement, or arrangement might be anti-competitive.

How can you report cartel conduct?
Anyone can report suspected cartel conduct to the Commerce Commission and information how to do so can be found here: https://www.comcom.govt.nz/business/avoiding-anti-competitive-behaviour/what-is-a-cartel/reporting-cartel-conduct/.

The Commission can grant leniency, including recommending full immunity, to the first member of a cartel to come forward, provided they meet the requirements for leniency and immunity. Businesses and individuals can also use the Commission’s anonymous whistleblower tool.

You can find out more about cartel conduct (including useful videos about the types of cartel conduct) at: https://www.comcom.govt.nz/business/avoiding-anti-competitive-behaviour/what-is-a-cartel/.

Commerce Commission website: https://www.comcom.govt.nz/

Upcoming webinar : Tuesday, 15 September 2026, 12:30 - 1:15pm

Cartels – what they are, why they matter, and how to stay clear of them

• Who is the Commerce Commission, and what do we do?

• Competition and the Commerce Act

• What is a cartel?

• What are the consequences?

• How to steer clear of cartels

• What to do if you become aware of one, or if you are involved

• Q&A

• Guidance / Resources