New Zealand: Commerce Commission
New Zealand
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New Zealand: Commerce Commission

New Zealand: Commerce Commission

New Zealand

New Zealand: from the enforcer

Address: Competition Branch, 44 The Terrace, PO Box 2351, Wellington 6140, New Zealand
Tel: +64 4 924 3600
Fax: +64 4 924 3700
Email: [email protected]
Web: www.comcom.govt.nz

Contacts

Commissioners

Anna Rawlings
Chair

Sue Begg
Deputy Chair

Tristan Gilbertson
Telecommunications Commissioner

Dr Derek Johnston
Commissioner

Elisabeth Welson
Commissioner

John Crawford
Associate Commissioner

Dr John Small
Associate Commissioner

Sarah Court
Associate Commissioner

Joseph Liava'a
Associate Commissioner

Senior Leadership Team

Adrienne Meikle
Chief Executive Officer

Antonia Horrocks
General Manager, Competition

Nick Russ
General Manager, Regulation

Geoff Williamson
General Manager, Organisation Performance

Questions and answers

How long is the head of agency’s term of office?

New Zealand’s competition authority, the Commerce Commission (the Commission), is headed by the chairperson. The chairperson’s term of office is subject to section 32(1)(b) of the Crown Entities Act 2004, which provides that the term of office of members (which includes chairpersons) of independent Crown Entities shall be ‘five years or any shorter period stated in the notice of appointment’. The Crown Entities Act 2004 provides also that members may be reappointed.

When is he or she due for reappointment?

Ms Rawlings was appointed as Chair for a term commencing on 1 June 2019 and ending on 31 May 2022.

Which posts within the organisation are political appointments?

Commissioners are appointed by the governor general on the recommendation of the relevant government minister. Associate commissioners are appointed directly by the relevant government minister. However, the position is not automatically vacated following a change of government and, once appointed, there are measures to ensure commissioners act independently of government in the performance of their statutory functions. These measures include transparent criteria and processes for the removal of commissioners from office. There are no political appointments of Commission staff.

What is the agency’s annual budget?

The Commission has an operating expenditure budget of NZ$66.692 million for the 2020–2021 financial year. This compares to NZ$59.504 million for the 2019–2020 financial year.

How many staff are employed by the agency?

As at 30 June 2020, 251 people work at the Commission.

To whom does the head of the agency report?

The Commission is accountable to the Minister of Commerce and Consumer Affairs for its performance. The Commission’s performance is measured against a very detailed set of output measures, agreed with monitoring agency the Ministry of Business, Innovation, and Employment (MBIE). We produce a statement of intent every four years setting out our future direction and an annual statement of performance expectations that details the Commission’s annual performance measures and forecasts financial statements. We report progress against our targets periodically to MBIE.

Do any industry-specific regulators have competition powers?

It is the Commission that exercises jurisdiction in relation to competition law across all industries. In addition to our competition powers we have a regulatory role in telecommunications, electricity lines, gas pipelines and airports. Our regulatory functions are intended to either promote competition (telecommunications) or outcomes consistent with competition (electricity lines, gas pipelines, airports).

Other industry-specific regulators also have the objective of promoting competition in their specific markets. This is typically through specific functions associated with the support of those particular markets. These include the Electricity Authority, the Gas Industry Company Ltd and the Financial Markets Authority.

Industry-specific regulators do not, however, have general competition law powers in these areas. For example, the objective of the Electricity Authority is to promote competition in, reliable supply by and the efficient operation of the electricity industry for the long-term benefit of consumers.

If so, how do these relate to your agency’s role?

The work of other agencies with regulatory functions does not routinely have any direct relationship to the enforcement role of the Commission.

May politicians overrule or disregard authority’s decisions? If they have ever exercised this right, describe the most recent example.

No. The Commission is an independent crown entity under section 7 and part 3 of Schedule 1 of the Crown Entities Act 2004. It is not subject to direction in its enforcement and regulatory control activities. The independence of the Commission reflects the nature of its enforcement and regulatory roles.

Section 26 of the Commerce Act 1986 (the Commerce Act) provides a formal and transparent mechanism for the minister of Commerce to communicate to the Commission the economic policies of the government:

In the exercise of its power under this Act, the Commission must have regard to the economic policies of the Government as transmitted in writing from time to time to the Commission by the Minister.

Any such notices must be published in the Official Gazette and laid before parliament as soon as practicable. In practice, notices under section 26 are rarely issued. Most recently in March 2020 the Minister issued a Government Policy Statement on Essential Goods and Services Such as Grocery Products in Response to Covid-19 under section 26.

Does the law allow non-competition aims to be considered when your agency takes decisions?

The central focus of the Commerce Act is to promote competition in markets. However, wider considerations may come into play in authorisations, where the Commission must assess the public benefit arising from the merger.

The Commerce Act recognises that, in some circumstances, an anticompetitive transaction may lead to sufficient public benefits that would outweigh the competitive harm. The Commission can authorise an anticompetitive transaction (a merger or a business agreement) where it is satisfied that it will likely benefit New Zealand. If a transaction is declined on the basis that it is likely to create a substantial lessening of competition, the merging firms can apply for an authorisation on public benefit grounds.

New Zealand’s courts have defined a public benefit as ‘anything of value to the community generally, any contribution to the aims pursued by society including as one of its principal elements (in the context of trade practices legislation) the achievement of economic goals of efficiency and progress’ (See Air New Zealand and Qantas Airways Limited v Commerce Commission as cited in Commerce Commission Authorisation Guidelines, July 2013, p 8).

Which body hears appeals against the agency’s decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this? Has any competition decision by the agency been overturned?

Following a restrictive trade practice or non-notified merger investigation, the Commission decides whether to take proceedings or resolve the matter in some other way, such as issuing a warning letter. Proceedings are heard in the High Court and it is the High Court that ultimately decides the matter and imposes any fines.

The Commission makes decisions in respect of merger and collaborative activity clearances and authorisations. The High Court of New Zealand, which may sit with expert lay members, hears appeals against these Commerce Commission’s decisions. Leave is required to appeal the High Court’s decision to the Court of Appeal. Leave is also required to appeal the Court of Appeal’s decision to the Supreme Court.

The High Court of New Zealand retains a judicial review jurisdiction. An appeal against the High Court’s decision may be brought to the Court of Appeal. Leave is then required to appeal the Court of Appeal’s decision to the Supreme Court.

Has the authority ever blocked a proposed merger? If yes, please provide the most recent instances.

Yes. The three most recent examples are:

  • in March 2018, the Commission declined an application from Trade Me Limited for clearance to merge with Limelight Software Limited;
  • In July 2017 the Commission declined an application from Vero Insurance New Zealand Limited for clearance to acquire Tower Limited; and
  • In May 2017 the Commission declined an application for authorisation to merge the New Zealand operations of NZME and Fairfax Media Limited. The Decision was appealed, and the Commission’s decision was upheld in both the High Court and Court of Appeal.

Has the authority ever imposed conditions on a proposed merger? If yes, please provide the most recent instances.

Yes. The Commission has the ability to impose structural – but not behavioural – conditions on proposed mergers. The three most recent instances are as follows:

  • In July 2020, the Commission cleared Elanco Animal Health Inc’s acquisition of Bayer AG’s animal health business subject to an undertaking to divest certain animal health brands.
  • In December 2018, the Commission cleared Thales SA to acquire Gemalto NV, subject to a divestment undertaking requiring Thales to divest its entire general-purpose hardware security module business.
  • In March 2018, the Commission granted clearance for Heinz Wattie’s to acquire the food and instant coffee business of Cerebos Gregg’s subject to an undertaking to divest licences to supply certain sauce brands in New Zealand.

Has the authority conducted a Phase II investigation in any of its merger filings? If yes, please provide the most recent instances.

The Commission does not distinguish between in-depth and non-in-depth reviews or Phase I or Phase II. All clearance applications require a significant level of review.

The New Zealand merger clearance regime is a voluntary regime. Parties decide whether or not their proposed transaction might result in a substantial lessening of competition and, if they believe it might, they can apply for a clearance. If parties do not apply for clearance, the Commission can still investigate their transaction and commence proceedings if it believes the transaction is likely to substantially lessen competition.

Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.

Yes. In April 2014, the Commission concluded the cartel investigation around air freight transportation. Swiss company Kuehne + Nagel International AG was the last of six international freight forwarding companies we prosecuted for colluding on their pricing structures.

Do you operate an immunity and leniency programme? Whom should potential applicants contact? What discounts are available to companies that cooperate with cartel investigations?

Yes, we operate an immunity and leniency (cooperation) programme for eligible businesses and individuals. Potential applicants should contact the general manager, Competition. Details can be found at www.comcom.govt.nz/business-competition/fact-sheets-3/leniency-policy-for-cartels

If immunity is not available, any party that cooperates with cartel investigations can receive more lenient treatment under our leniency programme. In exchange for their cooperation, the Commission may take a lower level of enforcement action or recommend a lower level of penalty to the Court. In exceptional cases we may decide not to prosecute a cooperating party at all. It is worth noting that from April 2021, criminal sanctions will be available for cartel offences against businesses and individuals. The Commission will continue to operate the immunity and leniency programme, but only the New Zealand Solicitor General can grant criminal immunity or cooperation, or both. The Commission will work closely with the Solicitor General, through Crown Law.

Is there a criminal enforcement track? If so, who is responsible for it? Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?

In April 2019, the Commerce Act was amended. It means that engaging in cartel conduct can now be a criminal offence with a maximum penalty of seven years imprisonment. The civil penalties contained within the Commerce Act continue to apply.

The Commission continues to be responsible for investigating cartels affecting New Zealand and make the decision to prosecute by applying the test for prosecution in the Solicitor-General’s Prosecution Guidelines. Cases will be approved by the Solicitor-General and prosecuted by a member of the appointed prosecution panel.

Are there any plans to reform the competition law?

The government has decided to change New Zealand’s law relating to the misuse of market power (section 36 of the Commerce Act), along with other minor changes to the treatment of intellectual property rights and covenants in the Commerce Act.

The government is going to strengthen the law to prohibit firms with market power from engaging in conduct that substantially lessens competition, regardless of whether they would have done the same thing if they didn’t have market power.

The changes will also remove provisions in the Commerce Act that shield some types of intellectual property-related conduct from being examined under competition law. The vast majority of intellectual property-related conduct is unlikely to raise competition concerns. However, the government believes that when such conduct does raise concerns, it should be able to be assessed under competition law like any other type of conduct.

A bill will be introduced early in 2021, as parliamentary scheduling allows.

When did the last review of the law occur?

The Commerce Act has been subject to ongoing review as set out above.

Do you have a separate economics team? If so please give details.

Yes. The Competition Branch has a stand-alone economics team embedded within the branch (as does the Regulation Branch).

Has the authority conducted a dawn raid?

Yes.

Has the authority imposed penalties on officers or directors of companies for offences committed by the company? If yes, please provide the most recent instances.

Only the High Court of New Zealand can impose penalties. Most recently the High Court ordered Prices Pharmacy 2011 Limited and a director of the company, Stuart Hebberd, to pay fines of US$344,000 and $50,000 respectively, after they admitted engaging in price-fixing in breach of the Commerce Act.

What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?

New Zealand does not have pre-merger notification thresholds and notification is voluntary.

Are there any restrictions on minority investments that involve less than a majority stake in the business?

No.


New Zealand: from the enforcer's competition economists

Address: Competition Branch, 44 The Terrace, PO Box 2351, Wellington 6140, New Zealand
Tel: +64 4 924 3600
Fax: +64 4 924 3700
Web: www.comcom.govt.nz

Questions and answers

How many economists do you employ?

There are eight full-time economists within the Economics Unit. There are other staff members within the Competition and Consumer Branch who have economics degrees (or some other economic training).

Do you have a separate economics unit?

Yes. The Competition Branch has an embedded economics team.

Do you have a chief economist?

Yes.

To whom does the chief economist report?

The general manager, Competition and Consumer Branch.

Does the chief economist have the power to hire his or her own staff?

Yes, but he or she must operate with regard to budget constraints.

How many of your economists have a PhD in industrial economics?

None.

Does the agency include a specialist economist on every case team? If not, why not?

Yes, with regard to cases that fall under the Commerce Act.

Is the economics unit a ‘second pair of eyes’ during cases – is it one of the agency’s checks and balances? If not, why not?

Senior staff, which includes the chief economist, act as a second pair of eyes. As noted, economists are regularly assigned to Commerce Act matters and work with an investigation team. Economists work on matters in this way to help assure that economic reasoning (including the collection of information) is applied throughout an investigation.

How much economics work is outsourced? What type of work is outsourced?

Very little economics work is outsourced. Work is most likely to be outsourced if the Commission believes that it will likely eventually require a testifying expert.

Organisation Chart:

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