A proposal to criminalise cartels, with jail sentences as long as seven years and fines of up to $5 million, has been welcomed by the Opposition.
A Ministry of Economic Development discussion paper has been released looking at the pros and cons of criminalisation, and it says there is case for it.
Hard-core cartels are formed when rival firms agree not to compete with each other, allowing them to raise prices above the competitive level without losing customers to rivals. Behaviour includes price fixing, bid rigging, market allocation and output restrictions.
Hard-core cartels are already prohibited under the Commerce Act but are only subject to civil sanctions.
Business New Zealand is not commenting on the report until it has had a chance to have a good look at it, but Labour commerce spokeswoman Lianne Dalziel welcomed the report and said white collar criminals should be treated as thieves.
Until they were actually recognised as such, they would continue to prey on New Zealanders and on the economy, she said.
Overseas experience showed that imprisonment was a much stronger deterrent than financial penalties for white collar crime.
"Price-fixing activities are anti-competitive. They drive prices up for kiwi consumers. They undermine trust in the business sector. They distort the market. They slow productivity. They are bad for New Zealand and for New Zealanders."
Australia had criminalised cartel behaviour and it was important that the same rules for businesses applied on both sides of the Tasman, she said.
Commerce Minister Simon Power said cartel activities like price fixing and bid rigging were the most harmful form of anti-competitive business conduct - they reduced economic output, undermined trust in markets, slowed productivity growth, and distorted investment signals.
"Businesses suffer and so do consumers, who have to pay inflated prices. And ultimately the wider economy also suffers." Penalties, including jail time, could deter organisations from engaging in cartel behaviour, he said.
"Many cartels are so big that the current fines are seen as a cost of doing business, rather than a deterrent, so I believe it's time to look at further measures to deter potential cartels.
The United States, the United Kingdom, Canada, and Australia have criminalised cartel behaviour and it's important New Zealand kept in step, he said.
The report said criminal prosecutions would require a higher standard of proof which "may make it difficult to obtain convictions". There were also costs to be considered.
The report recommended a maximum sentence of between five and seven years for cartel offences.
It also canvassed other ways to deter cartels including more funding for the Commerce Commission to enforce and educate on the issue, improving the leniency programme, rewarding whistle blowers and granting investigators covert surveillance powers.
It suggested increasing the level of financial penalties, from the current maximum of $500,000 to $5 million.
The public can mkae submissions on the document, which is available on the website www.med.govt.nz, until March 31.
