Contents

Chapter 3
The current landscape

Use of pecuniary penalties

3.9The vast majority of pecuniary penalties have been sought and imposed under the Commerce Act 1986. Most of these have been resolved by an admission of liability by the defendant, and an agreement between the defendant and the Commerce Commission as to the level of penalty that should be imposed. Such agreements must be approved by the High Court. More than 50 substantive penalty proceedings have been commenced since the first penalty was imposed in 1990.45 The penalty in that case, imposed for restrictive trade practices, amounted to $5 per defendant. The highest penalty imposed, also for restrictive trade practices, was against Telecom New Zealand in 2011 and was set at $12 million.46 The vast majority of Commerce Act penalties have been imposed on corporate bodies rather than individuals. The table below shows the number and size of penalties imposed under the Commerce Act since 2006:47
Year Number of penalties imposed Total monetary amount of penalties
06/07 7 $6.07m
07/08 0 -
08/09 1 $1.05m
09/10 0 -
10/11 10 $35.05m
11/12 2 $5.275m
12/13 7 $26.2m
3.10By comparison, pecuniary penalties have so far formed a minor part of the enforcement of the Securities Act 1978 and the Securities Markets Act 1988. Both those Acts are also enforced by way of criminal offences (unlike the bulk of the Commerce Act), and up until 2002 pecuniary penalty proceedings for insider trading under the Securities Markets Act were instituted by the issuer of the security, not the Securities Commission.48
3.11New Zealand’s securities law will be overhauled once the Financial Markets Conduct Act 2013 comes into force. Several parts of that Act have already come into effect, and the penalty provisions will come into force on 1 April 2017 or earlier as provided by Order in Council. The enforcement regime is more prescriptive and contains more statutory rules that are enforced by way of pecuniary penalties, so a wider range of conduct may result in pecuniary penalties under the new regime than under the Securities Act and Securities Markets Act.49
3.12Pecuniary penalties in the Overseas Investment Act 2005 have been sought very rarely.50
3.13A number of proceedings have been brought under the Unsolicited Electronic Messages Act since it came into force and a number of penalties have been imposed. Penalties totalling $250,000 were imposed on three individuals in 2008,51 one penalty of $95,000 was imposed on an individual in 2013,52 and the largest single penalty under that Act of $120,000 was imposed (by agreement between the defendant and the Department of Internal Affairs) on a corporate entity in 2014.53
3.14Although the penalties in the Hazardous Substances and New Organisms Act, the Dairy Industry Restructuring Act 2001, the Takeovers Act 1993 and the Telecommunications Act 2001 have been in place for some time, none have been sought under those Acts.54
3.15The relevant provisions of the Anti-Money Laundering and Countering Financing of Terrorism Act came fully into force on 30 June 2013 and thus far no penalties have been sought under that Act.55

45Commerce Commission v Otago and Southland Vegetable and Produce Growers’ Association (Inc) (1990) 4 TCLR 14 (HC).
46Commerce Commission v Telecom Corporation of New Zealand Ltd (2011) 13 TCLR 270 (HC). Upheld by the Court of Appeal in Telecom Corporation of New Zealand Ltd v Commerce Commission [2012] NZCA 344.
47Email from Rebecca McAtamney (Chief Adviser, Competition, Commerce Commission) to Susan Hall (Law Commission) (25 November 2011); email from Daire Queenan (Adviser, Competition, Commerce Commission) to Mihiata Pirini (Law Commission) (9 May 2014).
48J Diplock and L Longdin “The Journey Towards Effective Insider Trading Regulation in New Zealand” (2007) 13 NZBLQ 290 at 295.
49Financial Markets Authority A Guide to the Financial Markets Conduct Act 2013 Reforms (November 2013).
50The Overseas Investment Office reports that they have been sought “perhaps 4 times”. Email from Annelies McClure (Manager, Overseas Investment Office) to Susan Hall (Law Commission) (18 November 2011).
51Chief Executive, Department of Internal Affairs v Atkinson HC Christchurch CIV-2008-409-2391, 19 December 2008.
52Department of Internal Affairs v Mansfield [2013] NZHC 2064.
53Department of Internal Affairs v Image Marketing Group Ltd [2014] NZHC 139.
54For instance, we were told during consultation that the penalties in the Hazardous Substances and New Organisms Act 1996 would most likely be used only once a research facility had released new organisms, but at the time of the release of the Issues Paper (several years after the introduction of the penalties themselves), there had been no full approvals for release of new organisms in any case (Law Commission Civil Pecuniary Penalties (NZLC IP33, 2012) [Issues Paper]).
55Email from Kate Reid (Department of Internal Affairs) to Mihiata Pirini (Law Commission) (6 March 2014); email from Rob Edwards (Reserve Bank of New Zealand) to Mihiata Pirini (Law Commission) (6 March 2014); email from Kirsty Campbell (Financial Markets Authority) to Mihiata Pirini (Law Commission) (6 March 2014).