Over recent months, there have been a number of significant developments in New Zealand’s competition law landscape. In this FYI, we outline these recent developments, and look ahead to what further changes can be expected over the coming months.

Cartel Criminalisation

The Commerce (Cartels and Other Matters) Amendment Bill is currently before the Commerce Select Committee. The Select Committee was due to report back in March, but this has now been pushed back to May.

As outlined previously (see our previous October 2011 FYI), the Bill makes a number of significant changes to the Commerce Act, including:

  • replacing the current price fixing prohibition with prohibitions on "cartel provisions" (defined as price fixing, market allocation, output restriction and bid rigging);
  • replacing the current joint venture exemption with a new broader exemption from the cartel prohibitions for "collaborative activities";
  • introducing a clearance regime, akin to that for mergers and acquisitions, for collaborative activities containing a cartel provision; and
  • introducing criminal penalties (including potential jail terms of up to seven years) for intentional cartel conduct.

With the new cartel provisions of the Bill likely to come into force later this year, and the criminal penalties to follow two years later, now is an opportune time to assess whether you comply with the new laws - the fact that your arrangements complied with the old laws does not mean they will comply with the new ones.

ACCC Co-operation Arrangement

Last November, we wrote about the new International Co-Operation Act (see article here). In February, the Commerce Commission (Commission) entered into a co-operation arrangement with the Australian Competition and Consumer Commission (ACCC), the first such arrangement under the International Co-Operation Act.

The co-operation arrangement allows the Commission to provide investigative assistance and compulsorily acquired information to the ACCC. The Commission will be able to provide information it has acquired in accordance with its powers under the Commerce Act, Fair Trading Act, Credit Contracts and Consumer Finance Act and Telecommunications Act.

The co-operation arrangement signals a further step in the move towards a single economic market for Australia and New Zealand, and the harmonisation of our business laws. It recognises the fact that, in the modern day, anti-competitive behaviour can be truly international.

To give effect to the International Co-Operation Act, we can expect to see the Commission entering into co-operation arrangements with other international agencies, such as the United States Department of Justice and the United Kingdom's Office of Fair Trading, over the coming years.

Commerce Commission Mergers and Acquisitions Guidelines

On 8 March, the Commission released draft Mergers and Acquisitions and Authorisation Guidelines for consultation. These Guidelines are intended to replace the current Mergers and Acquisitions Guidelines, released in 2003 and the Benefit and Detriment Guidelines, released in 1997.

Until the draft Guidelines are finalised later this year, the Commission will continue to have regard to the current Guidelines.

Mergers and Acquisitions Guidelines

The Mergers and Acquisitions Guidelines outline the Commission's approach to assessing whether an acquisition of shares or business assets would have the effect of substantially lessening competition in a market. While the Guidelines have no legal force, the Commission follows the approach set out in them in assessing the competitive effects of mergers and acquisitions.

As well as providing guidance in relation to mergers and acquisitions, the Guidelines also show how the Commission approaches market definition and competition issues when carrying out investigations relating to restrictive trade practices under the Commerce Act.

While the updated Guidelines do not demonstrate any major change in the Commission's approach to assessing mergers and acquisitions, they have been updated to reflect international best practice and recent decisions of the Courts and the Commission. The Guidelines are also intended to become a "one stop shop", and will eventually incorporate the Commission's Merger Clearance Process Guidelines, Failing Firms Guidelines and Divestment Remedies Guidelines.

Authorisation Guidelines

The Commission can grant an authorisation for a merger, or a restrictive trade practice, if it is satisfied that any lessening of competition is outweighed by other public benefits arising from the relevant transaction. The draft Authorisation Guidelines outline the Commission's approach to identifying, and balancing, such benefits and detriments.

Like the Mergers and Acquisitions Guidelines, the draft Authorisation Guidelines do not reflect any major change in approach from the Commission. Rather, they reflect recent Commission and Court decisions, and developments in the assessment of benefits and detriments.

Consultation

The Commission is consulting with interested parties and has asked for comments on the draft Guidelines by 9 April. After consultation, it is likely that the Guidelines will come into full force later in the year.

Other things to look out for

Taking advantage of market power

The Commission has indicated that it is hoping for legislative reform to clarify the law related to section 36 of the Commerce Act, which prohibits the taking advantage of a substantial degree of market power for an anticompetitive purpose. Following the Supreme Court's 2010 decision in the Telecom 0867 litigation, the Commission has chosen only to investigate cases where there is clear harm. We can expect to see the Commission continuing to push for amendments to section 36 to clarify the correct approach to whether a firm has taken advantage of its market power.

Christchurch

The earthquake rebuild means that Christchurch is likely to be the hub of economic activity and growth in New Zealand for the coming years. This brings with it a number of Commerce Act risks. Overseas experience shows that there is a considerable potential for collusion and other anticompetitive behaviour. The Commission is turning its education focus to Christchurch to ensure that firms participating in the rebuild are aware of their competition law obligations during reconstruction.

Health Sector

The Commission is also launching a campaign to assist health professionals with their competition and consumer law obligations. Guidance notes are likely to be issued in relation to rosters, setting fees safely, advertising, offering credit terms to patients, and the obligations of professional health associations.