New Zealand: NZCC

This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight

The Commerce Commission is an independent statutory body with responsibility for enforcing competition and consumer legislation. The Commission is also the industry-specific regulator for the electricity, gas, telecommunications, dairy and airport sectors.

The Commission enforces New Zealand’s competition law, the Commerce Act 1986. The Act prohibits anti-competitive behaviour and structures in markets. It applies broadly across the economy, including the public sector.

The Commission functions as both an enforcement agency with sanctions requiring decisions by New Zealand’s High Court and a quasi-judicial body, with power to give clearances and authorisations for business acquisitions as well as authorisations for certain mergers and restrictive trade practices.

Achieving a high impact cost-effectively is a key theme of the Commission’s competition work. In a time of fiscal constraint we continue to use the most effective ways to help businesses comply with competition laws. Prosecutions and penalties are only part of that picture. Choosing the right enforcement tools and approach is critical, as is measuring our effectiveness in a meaningful way.

We assess our effectiveness based on four central pillars:

  • the setting and achievement of objectives/goals;
  • the selection and flexible application of correct ‘tools’, such as advocacy, settlement or enforcement;
  • ex post assessment of performance, measured against the stated objectives/goals; and
  • capability and capability enhancement.

Our purpose is to achieve the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders. The outcomes that we seek, in order to achieve this goal, are that markets are more competitive and that consumers are better informed. How well we do depends in a large part on the enforcement tools we use.

In late 2012 we published our Enforcement Response Guidelines to clarify what enforcement responses we have available and what criteria and considerations we take into account when we decide which response to use. The Commission has a broad range of possible enforcement responses, including both low-level (for example, a compliance advice letter or warning) and high-level responses (for example, a court injunction or other court proceedings).

The Enforcement Response Guidelines form part of the Commission’s commitment to increased transparency.

We focus on areas where we can have the biggest impact through the most efficient use of taxpayer resources. Although litigation serves an important public function, we also actively encourage early resolution of matters by way of settlement, where appropriate, as a way to more quickly change behaviour or bring about some other remedy.

We have always used a wide range of tools to achieve our goals. Advocacy and education is an important part of our approach, as clearly those with a good understanding of the law have a better chance of complying with it. We target our advocacy and education efforts at industry sectors where we see emerging issues or have ongoing areas of concern.

In 2013, our advocacy focus will be on two areas: the rebuild of Christchurch following the earthquakes, and the health sector.

Christchurch will be the hub of economic activity and growth for the New Zealand economy for up to the next 10 years. Overseas experience tells us that post-disaster, there is considerable potential for fraud and collusion as money begins to flow in the reconstruction phase. Therefore we need to ensure we are doing all we can to improve markets’ understanding about the benefits of competition and anti-competitive practices that may be undermining that competition.

In the health area we are focusing on increasing understanding of, and compliance with, competition and consumer laws among health professionals. There is a shift in the health sector to more integrated models of care with better coordination and collaboration between different health professional groups. This can bring with it risks under the Commerce Act, and so it is important that we work with the sector to ensure health professionals are aware of their obligations under that Act.

2013 will also herald a period of significant law reform that will impact the Commission, including substantial amendments to the Commerce Act. These amendments include the introduction of a new price-fixing prohibition, new exemptions and, most importantly, criminal sanctions for cartel conduct.

One of those new exemptions is for collaborative activities. This is a novel exemption that is intended to capture joint ventures, but to be wider than the existing joint venture exemption. The collaborative activity exemption is designed to encourage and enable pro-competitive arrangements.

We expect the new laws to be in place early in 2013, with the criminal sanctions coming into force two years later.

We are also hoping for legislative reform to clarify uncertainty in how to practically apply section 36 of the Commerce Act, which deals with monopolistic conduct. The uncertainty has arisen following a decision by the New Zealand Supreme Court involving the Commission’s case against Telecom for alleged misuse of market power in the internet dial-up industry. As a result, we have completed only two unilateral conduct cases in the last year. Given the complexity and cost of these types of cases we are choosing to investigate only those involving clear harm.

Continued and enhanced cooperation with overseas regulators will be a priority in 2013. New legislation has recently been enacted to enhance cooperation between the Commission and overseas competition, consumer and telecommunications regulators. The Commerce Commission (International Co-operation, and Fees) Act reflects similar powers under Australian law, enabling us to provide compulsorily acquired information and investigative assistance to overseas regulators party to a cooperation arrangement with the New Zealand government or the Commission.

The Act, together with a new cooperation agreement, will strengthen our already-close relationship with the Australian Competition and Consumer Commission, allowing us to share information and resources more readily with each other to be more effective in our individual markets. The legislation also extends to all overseas competition, consumer and telecommunications regulators, providing the opportunity in 2013 and beyond to further develop relationships with our international counterparts and put in place more formal cooperation agreements.

Unlock unlimited access to all Global Competition Review content