New Zealand: Commerce Commission

At the New Zealand Commerce Commission (NZCC), our aim is to achieve the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders. Our work includes:

• regulated industries (telecommunications, electricity, airports, gas and dairy);
• consumer protection (fair trading, consumer credit and some product safety); and
• business competition.

It has been another significant year of work at the NZCC, with a number of important projects and investigations completed in all areas. This article highlights some of our work in the competition area.

Cartels and other restrictive trade practices

The detection, investigation and prosecution of cartels continues to be a priority area for the NZCC. Our leniency programme is working well. We have seen an increase in businesses seeking immunity from prosecution for domestic cartel conduct over the last few years, which has fed into a rise in domestic cartel investigations.

In December 2015, the NZCC filed court proceedings against 13 national and regional real estate agencies. The proceedings relate to three separate alleged price-fixing and anticompetitive agreements in response to Trade Me – an online marketplace and classified advertising platform – changing its fees for listing properties for sale on its website. The NZCC alleged that the real estate agents had agreed to pass on to vendors the increase. In November 2016, Manawatu 1994 Limited, trading under the LJ Hooker banner, was ordered to pay a penalty of NZ$1.25 million following a hearing in the Auckland High Court. The Commission has agreed settlements with Unique Realty, Hamilton-based Success Realty and Bayleys at the national level. Court-imposed penalties currently total NZ$5.6 million.

In another case, Enviro Waste Services Limited was fined NZ$425,000 for the company and NZ$5,000 for the branch manager for attempted anticompetitive conduct in relation to the collection of waste oil in the upper South Island. Under the settlement Enviro Waste will also contribute a further NZ$25,000 towards our investigation costs.

In December 2016, four current or former employees of PGG Wrightson and one former employee of Elders Rural Holdings Limited were ordered to pay penalties totalling NZ$105,000 following an Auckland High Court penalty hearing for their respective roles in a price-fixing agreement in connection with the introduction of the National Animal Identification Tracing Act 2012. In December 2015, PGG Wrightson and Rural Livestock were fined NZ$2.7 million and NZ$475,000 respectively, after admitting their conduct in this case. Proceedings against the final defendant, Elders Rural Holdings Limited, remain before the Court.

Mergers and acquisitions

Clearance applications decided in the past three years have increased compared with the previous three years, but they are still down from pre-global financial crisis levels. Our merger work increasingly involves multiple markets and rapidly changing technologies. For example, the proposed Vodafone New Zealand and Sky Network Television merger raises issues concerning fast-moving technology markets. Likewise, the proposed Fairfax NZ and NZME merger focuses on the implications of content and advertising increasingly migrating from print to mobile formats.

One of the most complex mergers this year was our clearance of Z Energy to acquire Chevron New Zealand (owner of the Caltex and Challenge brands). To put this into context, it took 196 working days to complete our analysis of the competitive impact of this proposed merger on upstream and downstream markets. This includes the time taken for the applicant and other stakeholders to respond to our information requests. Our average clearance time frame, without Z Energy, was 47.2 working days.

Our decision to authorise Cavalier Wool Holdings Ltd, a provider of wool scouring services, to acquire the wool scouring business and assets of New Zealand Wool Services International Ltd was appealed to the Court of Appeal by Godfrey Hirst Ltd, a carpet manufacturer. The appeal was dismissed. The judgment of the Court provided useful clarification for the NZCC on quantification and its relation to the NZCC’s qualitative analysis.

Procurement outreach

We have an ongoing project involving procurement outreach to government agencies. We have engaged with procurement officials at central and local government agencies and presented to local government CEOs. The aim is to equip procurement staff with the tools to detect and deter bid rigging and other forms of price fixing in government tenders. We are now considering which other bodies we should present to and how we can develop a web resource for smaller organisations to use.

Looking to the future

This year we have been developing a refreshed strategy to ensure we are continuing to deliver the best value and outcomes for New Zealand. This is focused on where we want to be in five years’ time and the impact we want to have for New Zealanders. We believe that setting an integrated strategic plan for the NZCC will provide clear direction on where we are heading and how we plan to get there.

The development of this strategy follows an external performance improvement assessment completed at the end of 2015. This review concluded that the NZCC is performing well overall and identified a few key opportunities for us to improve the way we work. We are pleased with the results of this review and will continue to work on the areas of improvement over the next few years.

As always, the NZCC is continually adapting to its changing environment and it has been a demanding but fruitful year. I am pleased with the way staff rose to the challenge of an increased workload in terms of our consumer work and the complexity of some of the merger and regulatory decisions we have made. We have an excellent team of people who constantly strive to achieve the best outcomes for New Zealanders and I believe we are well placed for the future.