New Zealand: NZCC

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. It has the 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.

Part of our role is to provide guidance about the work we do, and we have been updating and expanding our library of fact sheets and guidelines. In 2013 we updated both our Mergers and Acquisitions Guidelines and our Authorisation Guidelines. Our new Mergers and Acquisitions Guidelines are a ‘one-stop shop’ that cover our merger process, divestment and failing firms guidance. Both new guidelines incorporate relevant developments in case law.

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.

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 on-going areas of concern.

In 2014, our advocacy focus will continue in two areas: the rebuild of Canterbury following the earthquakes; and the health sector.

Canterbury will continue to be a hub of economic activity and growth in the New Zealand economy for many years to come. 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 are doing all we can to improve markets’ understanding of the benefits of competition and anti-competitive practices that may be undermining that competition.

In the health area we are continuing our focus on increasing understanding of, and compliance with, competition and consumer laws among health professionals. We have published a series of fact sheets for the health sector that cover the application of competition and consumer law to some activities commonly carried out in the sector.

The legislative reform that we had expected in 2013 did not occur, but we have prepared for its introduction. The reforms include 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, and replaces the existing joint venture exemption. The collaborative activity exemption is designed to encourage and enable pro-competitive arrangements. We have developed and consulted on draft guidelines that outline the Commission’s approach to assessing collaborations between competitors. The guidelines are designed to assist the business community with its preparation for the upcoming amendments.

Criminal sanctions will come into force two years after the law is passed.

We are still hoping for legislative reform to clarify uncertainty in how to practically apply section 36 of the Commerce Act, which deals with monopolistic conduct. Uncertainty remains around our application of section 36 of the Commerce Act, which deals with monopolistic conduct. The way in which section 36 has been interpreted by New Zealand’s courts has created difficulties in applying the law. Given the inherent complexity and cost of these types of cases, we choose which cases to investigate very carefully and will contribute to any consideration given by policymakers to reform in this important area.

Continued and enhanced cooperation with overseas regulators will continue to be a priority in 2014. In late 2012 amendments were made to the Commerce Act (and to the Fair Trading Act, Credit Contracts and Consumer Finance Act, and Telecommunications Act) to enhance cooperation between the Commission and overseas competition, consumer and telecommunications regulators. The new provisions reflect 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 new provisions, 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 so as to be more effective in our individual markets. The new provisions can also extend to other overseas competition, as well as consumer and telecommunications regulators, providing the opportunity in 2014 and beyond to further develop relationships with our international counterparts and put in place more formal cooperation agreements.