New Zealand: New Zealand Commerce Commission

The Commission achieved a number of major milestones as part of a significant workload during the 2013–2014 year, and we have delivered some significant achievements across the range of activities we perform. We have worked towards greater predictability through major regulatory milestones, advanced our advocacy and education roles, and delivered millions of dollars in compensation to wronged parties through our enforcement activities.

At the same time, we have been gearing up to meet the significant changes in consumer law, as well as legislative change in other areas. We are also continuing to adapt and respond to meet the changing needs of the markets, to ensure we make the very best use of our finite resourcing and remain well-placed to meet future demands.

As defenders of competition, we help improve the price and quality of goods and services for New Zealand consumers, and ensure a level playing field for businesses. Our work touches the lives of every New Zealander every day, whether monitoring aspects of the cost of electricity distribution and the price of milk, ensuring fair prices for mobile phones and internet fees, supporting a competitive construction and health sector, or stopping dishonest salespeople from misleading consumers.

Cartels

We have been working hard to increase market understanding about cartels and to prevent them from harming competition and consumers. Cartels can lead to higher prices, less choice, lower-quality products and lack of innovation by businesses.

Cartel behaviour remains a focus of our investigation work, coming to our attention either through our cartel leniency programme or through our own detection. We are still seeing an increase in domestic cartel investigations. This is likely due to several factors:

• our efforts in increasing awareness of cartels;
• publicity about successful court cases;
• intelligence-gathering efforts by the Commission; and
• publicity about the potential criminalisation of cartel behaviour.

We continue to cooperate closely with overseas competition agencies in relation to international cartels. We are increasingly using waivers to coordinate and exchange information about international investigations with other agencies.

A number of large cartel cases were concluded during the past year, achieving NZ$8.6 million in penalties in total. The Freight Forwarding case concluded in the High Court, imposing fines of NZ$3.1 million against Kuehne + Nagel International AG. Kuehne + Nagel were the last of six freight forwarding companies charged with breaches of the Commerce Act in 2007, with penalties totalling NZ$11.95 million over the life of the case. The trans-Tasman cardboard packaging proceedings involving a cartel between Visy Board Pty Ltd and Amcor Ltd were also completed, with Amcor being ordered to pay a penalty of NZ$60,000 and costs of NZ$38,352. Carter Holt Harvey was fined NZ$1.85 million for price fixing with Fletcher Distribution Limited in the Auckland commercial timber market. A former Carter Holt manager was fined NZ$5,000 for his involvement.

Cases like these are a reminder to companies that it is important to have effective compliance programmes in place to help identify and prevent anti-competitive behaviour. They also send a strong message that we will not hesitate to take action to protect the interests of New Zealand consumers.

Mergers and acquisitions

In the 2013–2014 year, we received 15 merger clearance applications. This is the highest number of applications we have received since 2007–2008, which may reflect increased confidence in the economy. We processed 13 applications, three of which concerned international mergers. We also started a programme to analyse cleared mergers to determine whether our assessment of the likely state of competition after the merger was correct. The purpose of this research is not to determine whether the merger clearance decision was correct –a challenging determination given the myriad of forces that can affect market outcomes – but rather to evaluate the strength and accuracy of the Commission’s factor-specific estimations.

We will carry out these evaluations every year to look at whether there are factors we systematically get wrong or right, and to ensure that we continue to improve. This programme does not replace the Commission’s more detailed case studies. Such detailed studies are still to be undertaken if suitable cases are identified and resourcing is available.

A new approach to targeting consumer harm

The Commission has launched a new approach to target conduct causing consumer harm, using a range of data to identify and then target high-risk sectors.

Our intelligence unit is collecting data from a wide range of sources and putting that together with the Commission’s information to identify the sectors, industries and traders causing the greatest levels of consumer harm. The approach is proactive, intelligence-led and evidence-based. It will allow us to focus our limited resources on the areas where we can have maximum impact.

Education and advocacy

We know that most businesses want to follow the law and that some of the legislation that we oversee can seem complicated. We continue to put a lot of effort into education and advocacy to help explain rights and obligations, and we are focusing on high-risk sectors to support their understanding of the law, such as the construction and health sectors. We see the need for user-friendly guidance to help businesses and workers understand and comply with the laws we enforce.

Construction sector microsite

Mid-way through 2014, the Commerce Commission launched a new website to help the construction industry better understand competition and consumer laws.

The Commission had been working with this sector for several years, and saw the need for a user-friendly guide to help businesses and workers understand and comply with the laws.

Overseas experience shows the construction sector is particularly susceptible to cartel, or price-fixing behaviour. It has also been shown internationally that natural disasters often bring a rise in cases of fraud, corruption and anti-competitive practices (eg, price fixing, bid rigging and market sharing). The rebuild of Canterbury after the earthquakes provided increased opportunity for anti-competitive behaviour.

With New Zealand’s construction sector booming as a result of both the Canterbury rebuild and the high levels of activity in Auckland, the Commission designed the website to help improve awareness and compliance.

Supporting legislative change

There has been some significant legislative change in the past year, with more expected in the near future. The Commission has been working hard to provide expert input to policy makers and the Select Committees, as well as developing guidance and information sheets for businesses and the public to ensure the new laws deliver maximum benefits.

Consumer law reform, which saw the majority of changes come into effect in June 2014, is the largest change to consumer law in over 20 years. In addition to introducing new provisions to protect consumers, it strengthens our powers to investigate and sanction breaches of the law. We have created comprehensive materials to inform consumers and stakeholders about the changes. This included our communications campaign ‘Know Your Rights’, which was translated into four languages, in addition to English.

We have also seen the Credit Contracts and Financial Services Law Reform Bill pass, which will take effect next year, and are working to prepare for and support reviews of the Commerce (Cartels and Other Matters) Amendment Bill and a review of the Telecommunications Act and the Telecommunications Services Obligations.

These changes are significant, and ensuring that consumers and businesses understand their new rights and obligations is a vital part of ensuring the desired outcomes from the changes.

International ranking

We were pleased to receive a fifth-equal ranking out of 70 countries in an international comparison of merger review systems, equal to the USA and well ahead of Australia, the UK, Canada, France and Germany. The Centre for European Law and Economics’ annual evaluation of merger review systems around the world looks at 16 aspects of performance including timeliness, transparency, precision, efficiency, resourcing and independence. Our results demonstrate that our merger clearance process compares very favourably on an international basis.

The timeliness of our investigations and processes are important to us. At the same time, we are receiving applications with increasingly complex issues or significant implications for parties and markets affected. It is important, therefore, that we get the right balance between timeliness and making the correct decision.

Looking forward to another five years

On a personal note, I am delighted to have had my term extended as chairman for another five years, and I am equally pleased that our deputy chair Sue Begg has also had her term extended. We are looking forward to using our next term to continue to build on the Commission’s capability and achievements.

We also welcome a new commissioner, Anna Rawlings, who joins us from Minter Ellison. She replaces Anita Mazzoleni, who left us in March, and whose hard work over her tenure we are grateful for.

Change, of course, is constant, and while much of our work is focused on delivering increasing transparency and certainty for consumers and markets, we are also committed to continuing to adapt to meet ever-changing demands. We have a great team, and our focus is to use our people and resources wisely for the greatest benefit of New Zealanders.

I am proud of what we have achieved in the last 12 months and in the past five years that I have been chairman. I am proud of the smart and dedicated people that I work with. And I look forward to the challenges of the next five years.