Competition Law & Regulation in New Zealand

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COMPETITION LAW AND REGULATION

The Commerce Act 1986 (Commerce Act) provides the framework for promoting competition in markets for the long-term benefit of consumers. The Commerce Act prohibits certain anti-competitive behaviour or practices, including:

collective behaviour by two or more persons or businesses which has, or is likely to have, the effect of substantially lessening competition, excluding competitors or resulting in price fixing; and

unilateral behaviour by a single person or business which takes advantage of a business' market power (defined as a substantial degree) or results in the specification of minimum prices at which a supplier's goods can be sold by other businesses.

There are certain exceptions including:

practices which have been authorised by other statutes;

agreements between business partners who are in partnership where none of the

partners are body corporates;

non-competition provisions for a certain time and period, such as on the sale of a

vendor's shares in a business or the sale of an employee's shares in an

employment contract;

agreements between related parties such as subsidiary companies, except any

such agreement that falls within the ambit of the trans-Tasman (ie, the Australian and

New Zealand combined) market provisions;

intellectual property rights, except once again, for any sort of agreement that falls within

the ambit of the trans-Tasman market provisions; and

a number of others as detailed in section 44 of the Commerce Act.

The Commerce Act also prohibits any mergers or acquisitions which would have the effect of, or are likely to have the effect of, substantially lessening competition in a market. The term "market" is defined to mean a market in New Zealand for goods and services as well as other goods and services that, as a matter of fact and commercial commonsense, are substitutable for those goods and services. Therefore, if, as a result of an acquisition, there is an increase in the scope of the exercise of unilateral or coordinated market power, it is likely that the acquisition will be deemed to substantially lessen competition in a market. The Commerce Commission (Commission), which regulates competition in New Zealand, has stated that bare transfers of market power from one party to another are unlikely to raise competition concerns from its perspective.

The Commerce Act provides a mechanism for the seeking of clearance from the Commission (prior to the implementation of any agreement) that the proposed acquisition will not result in a substantial lessening of competition and, therefore, will not constitute a breach of the Commerce Act. It is also to be noted that an authorisation can be granted where, even though a particular transaction may be deemed to substantially lessen competition in the market, it is able to proceed on the basis that its benefits to the public outweigh its detriments.

The penalties for breach of the Commerce Act are substantial by New Zealand standards, being $NZ500,000 for individuals and for companies the greater of $NZ10 million or 3 times the commercial gain resulting from the breach or 10% of the turnover of the company and its subsidiaries. The Commission also has power to unwind a transaction that is subsequently found to be in breach of the Commerce Act.

Regulation
The Commerce Act allows for the Minister of Commerce, on advice from the Commission or on his or her own initiative, to impose price controls on particular goods and services.

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