In Commerce Commission v Visy Board Pty Limited [2012] NZCA 383, the Court of Appeal has further clarified the extent to which conduct taking place outside New Zealand may contravene the Commerce Act 1986 (Act).  The decision reinforces that overseas companies, particularly if they have integrated New Zealand subsidiaries, may be subject to the Act, regardless of whether or not they have a permanent place of business in New Zealand.

In the High Court, the Australian defendant (Visy) had succeeded in arguing that, as its conduct did not come within the scope of section 4(1) of the Act, the New Zealand Courts did not have jurisdiction under that section to hear the Commerce Commission's claim against it.  Section 4(1) of the Act provides that the Act extends to "the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand"

The Court of Appeal upheld the Commission's appeal against that decision.  It held that in determining whether a person is "carrying on business in New Zealand", the analysis is not confined to whether or not a company maintains a systematic and continuous physical presence in New Zealand.  A number of factors will be relevant in any particular case but the conduct in question must have some degree of continuity or repetition – a transitory or tangential connection with New Zealand is not enough.

As to whether conduct "affects a market in New Zealand", the Court held that an effect does not need to be demonstrable in order for it to have affected a market in New Zealand.  Moreover, "affects" is not a legal term of art and may bear the meaning "relates to".  Overseas conduct would only "relate to" a market in New Zealand to the extent that it impacts or will likely impact upon competition in the market in New Zealand in which a contravention of the Act is alleged to have occurred.  Prohibited conduct overseas will not be amenable to jurisdiction if it only had a derivative or "ripple down" effect on a market in New Zealand.

Applying the above principles to the case before it, the Court held that there was a good arguable case that, although based in Australia, Visy carried on business in New Zealand.  The reasons for this view included the following:

  • Visy operated its New Zealand subsidiary (Visy NZ) as an integrated division and presented itself to customers as one business, including the New Zealand division
  • Visy was directly involved in Visy NZ's operations
  • Customers considered Visy to be operating in New Zealand and Visy dealt directly with customers in New Zealand on occasion
  • Industry practice saw Australian firms as carrying on business here in respect of trans-Tasman customers.

Moreover, the Court held that the relevant market in New Zealand was potentially affected by Visy's conduct, noting:

  • In entering into the anti-competitive understandings alleged by the Commission, Visy arguably intended to fix prices for the relevant goods in New Zealand.  By virtue of such conduct, the competition process was damaged and the interests of New Zealand consumers were arguably prejudiced in significant ways
  • Furthermore, the conduct was arguably entered into in order to substantially lessen competition in the relevant market and had that effect.

As a result of the above analysis, the Court of Appeal concluded that the New Zealand Court had jurisdiction under section 4(1) to hear the Commission's claim.  Subject to any further appeal, the matter will now proceed to a full hearing.