Foreshadowing the enactment of the Commerce (Cartels and Other Matters) Amendment Bill (Bill), which is expected to be passed later this year or early in 2014, the New Zealand Commerce Commission (NZCC) has just released draft Competitor Collaboration Guidelines (Draft Guidelines) for public consultation.
The Bill amends a number of provisions of the Commerce Act 1986 including, in particular:
- introducing a new cartel prohibition, which replaces the current prohibition on price fixing;
- providing three exemptions to the cartel prohibition (for vertical supply contracts, joint buying arrangements and collaborative activities);
- introducing a new clearance regime for collaborative activities; and
- introducing criminal sanctions for cartel conduct.
The Draft Guidelines, which were published on 1 October 2013, are intended to help New Zealand businesses prepare for the upcoming legislative changes. The Draft Guidelines set out the NZCC’s anticipated approach to the cartel prohibition, the exemptions and the clearance regime, and provide a range of examples to clarify how certain provisions are likely to operate in practice. The NZCC published these Draft Guidelines at the same time as the Criminal Prosecution Guidelines (blogged about in our previous post), highlighting that the NZCC appears to be focused on keeping the public informed.
One of the key legislative changes in the Bill is the introduction of a clearance regime for collaborative activities. The Draft Guidelines provide that the NZCC will give clearance where:
- the applicant and any other party to the arrangement are or will be involved in a collaborative activity;
- the cartel provision is reasonably necessary for the purpose of the collaborative activity; and
- entering into or giving effect to that arrangement will not have, or will not likely have, the effect of substantially lessening competition in the relevant market.
The NZCC will consider a cartel provision to be reasonably necessary where “the parties would be materially hindered in achieving the collaborative activity’s purpose” if they were to use “a significantly less restrictive alternative to the cartel provision”. Any significantly less restrictive alternative must be “practically workable” and “may not be reasonably necessary when it applies for a significantly longer period of time, or have a significantly greater geographic scope” than is required for the parties to achieve the collaborative activity’s purpose. The NZCC will take a “pragmatic and commercial assessment” as to whether the parties would be materially hindered, and consider a range of factors including:
- how long the cartel provision will apply for;
- what the cartel provision covers; and
- how feasible it is to exit or terminate the arrangement.
Criminal sanctions for cartel conduct will not be available until two years after the Bill comes into force, and the NZCC will issue specific guidance on its anticipated approach in seeking to impose criminal sanctions before that time.
The NZCC has hosted two public presentations on the Draft Guidelines in Auckland and Wellington, and is inviting comments from interested parties. Submissions on the Draft Guidelines should be sent to [email protected] by 5.00pm on 12 November 2013.