The responsible minister struggled to explain himself on the radio but fortunately for the cartels plenty of written commentary supported him. It came mainly from the big law firms, as Donal Curtin observed in a great post, but Oliver Hartwich and Paul Walker applauded from the sidelines.
The cheer squad are all arguing the same thing: that criminalisation would deter pro-competitive conduct because business people would be uncertain about the rules, so they wouldn't compete hard for fear of breaching the rules, so the whole idea is self-defeating. Lew Evans relied entirely on the same line when I debated cartel criminalisation with him at a LEANZ event a few years ago. It is an exceptionally weak argument as explained below.
First though, since appeals to (dead economist) authority appear to carry some weight for these folk, now is a good time to hear from our old mate Adam Smith, also known as Mr Invisible Hand:
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."That was 1776 and I challenge anyone who currently hangs around with business people to deny they've ever heard such talk. Smart guy that Adam Smith.
Back to the main point though: the alleged uncertainty about the rules and the resulting chilling effect on competition itself.
Uncertainty and risk are different. Managing risk is usually fairly easy because markets sell insurance against risk. Sellers of insurance use statistical models to estimate the probability of events and set prices for insurance products using those probabilities.
Uncertainty is more like Rumsfeld's unknown unknowns. Continuing the insurance example, suppose you paid for property insurance in Christchurch for years and years before the earthquakes. You had a contract with an insurer and naturally assumed that it would be respected, but you got a nasty surprise because the world changed unexpectedly. That's uncertainty: pretty hard to deal with in advance.
Now let's stand in the shoes of our would-be cartelists for a minute so we can feel their uncertainty and their fear: jail time. Here's a potential boardroom conversation.
Alice: lets do this thing.
Brooke: isn't that a cartel? we could go to jail.
Cheryl: jail?! we don't want that. let's pull the plug now
Donna: but, but, but,... it could be very profitable, do we really want to just blow that off?
Elsie: hey, why don't we just apply for authorisation
Elsie is right. There is already a safety valve in New Zealand's competition law covering exactly this situation. Part 5 of the Commerce Act 1986 is all about how firms can get certainty about whether they're breaching competition law. In particular, section 58 establishes a regime whereby firms considering conduct that might breach laws against collusion between firms (s27) can proactively seek an authorisation or clearance on well understood grounds.
In my view the uncertainty argument is seriously wounded by the existence of a well-trodden path by which would-be cartelists can resolve their uncertainty, in advance.