Kickbacks - business as usual or a corrupt practice?
Let's get a bit serious for a minute. There is a little known law called the Secret Commissions Act 1910(!) that make undisclosed or unconsented commissions and similar gifts to an agent (eg an architect or builder) illegal. This law is enforced by the Serious Fraud Office (SFO) and is intended to address corruption in the commercial space.
The key elements of the law, that particularly relate to purchase of goods and services, are:
• Suppliers cannot pay commissions or give rebates (or similar gifts) to agents who are placing orders on behalf of customers without the consent of those customers;
• Agents cannot receive rewards such as commissions and rebates from suppliers in returning for placing customer orders without disclosing this to the customer.
Many sectors in New Zealand, such as building, travel, wedding planning and real estate have payment of rebates and commissions as every day practices. While these practices are common, if the law is not complied with then they are illegal.
As a customer, you might wonder whether your agent has recommended the best option for you if they receive a gift. Have they been swayed by the gift to choose a particular supplier? These are valid concerns that the law is aiming to address.
There have been some high profile prosecutions taken by the SFO over the years, generally relating to very large gifts. Small gifts aren't usually the subject of
prosecutions, but the SFO does sometimes take a look at an industry if it receives complaints from the public.
If you have any questions about practices in your industry and whether this law might affect you please get in touch.