Competition & Consumer Law Update: What to expect in 2022

24/02/2022·4 mins to read

Competition & Consumer Law Update: What to expect in 2022

2022 is shaping up to be a busy year in the competition and consumer law space. The Commerce Commission (Commission) currently has nine merger clearance applications on the go, as well as two highly publicised market studies to complete this year.

Also on the horizon are important amendments to the Commerce Act, including an overhaul of the prohibition on taking advantage of market power.

In this FYI we provide an update on:

How 2021 panned out for the Commission;
An update on the Commission’s current caseload; and
A rundown of what to expect in 2022, including market studies, legislative developments and key decisions to watch out for.

Competition and consumer law update

How did 2021 pan out for the Commission?

2021 was another busy year for the Commission, which received nearly 10,000 consumer complaints between 1 July 2020 and 20 June 2021. Most of these complaints related to the Fair Trading Act. The most complained about businesses included:

appliance and electrical retailers (579 complaints)
motor vehicle retailers (564 complaints)
supermarkets (517 complaints)
telecommunications providers (490 complaints).

The Commission Chair, Anna Rawlings, has said that complaints help the Commission to understand where to focus its efforts, so these industries should be on notice that they may experience increased surveillance from the Commission in 2022.

The Commission also received a number of complaints relating to restrictive trade practices under the Commerce Act, including 80 complaints about restrictive contracts and 79 complaints about taking advantage of market power.

In terms of actions taken in this space, in 2021 the Commission obtained High Court-ordered penalties in two separate cartel proceedings and brought further proceedings in relation to conduct in the freight forwarding industry.

In the merger space under the Commerce Act, the Commission decided 10 clearance applications over the same period and concluded two section 47 investigations into non-notified mergers.

The Commission’s current caseload

The Commission has hit the ground running this year, with nine merger clearance applications currently on their books.

This follows on from a busy 2020/2021 period where, as noted above, 10 merger applications were decided, including six mergers given unconditional clearance, one merger cleared with a divestment undertaking and three applications which were withdrawn before a decision could be made. The Commission hasn’t declined a merger since March 2018^[1], although a number of applicants have chosen to withdrawn their applications prior to a final decision of the Commission.

In terms of how long applicants are having to wait for a decision on clearance, the average number of working days to a decision is currently 78, up from 69 last year. However, where no statement of issues or statement of unresolved issues is issued, the average working days to a decision drops to 31. That is slightly less than the statutory timeframe, which is 40 working days.

It is not just mergers keeping the Commission busy. There are currently three open applications for authorisations of anti-competitive agreements (one of which has been provisionally authorised under temporary amendments to the Commerce Act for Covid-19).

There are also 14 open investigations underway, including nine anti-competitive conduct investigations which are each at different stages. The Commission also has three open regulatory investigations and two open merger investigations.

In the consumer space, the Commission currently has nine open consumer investigations on its case register.

What to expect in 2022 - market studies, legislative developments and key decisions

Market studies

In terms of developments or decisions to watch out for in the coming year, it is likely that the Commission’s market studies into the grocery retail sector and residential building supplies will continue to make headlines.

The Commission published a draft report from its study into New Zealand’s retail grocery sector in July 2021. The draft report reached the preliminary conclusion that the retail grocery sector is not working well for consumers and recommended to increase the number of retailers directly competing against the two dominant retailers. The deadline for the final report is now 8 March 2022.

The grocery market study is overlapping with the market study into residential building supplies which commenced in November 2021. The Terms of Reference for this market study require the Commission to consider the industry structure and nature of competition for key building supplies, and impediments to the entry or expansion of new or innovative building supplies. The Commission’s draft report will be released for consultation around July 2022, with the final report due in December 2022.

Legislative developments

The Commerce Amendment Bill, which is set to be enacted later this year, will also bring about some key changes.

This Bill was introduced last year and is currently before the Committee of the Whole House. One of the key changes the Bill proposes is to strengthen the prohibition against taking advantage of market power in section 36 of the Act. The proposed changes are anticipated to capture a broader range of conduct than the current test, and will bring the New Zealand law here in line with the Australian approach.

Further changes proposed by the Bill are:

removal of the anti-competitive conduct exclusion of conduct involving certain intellectual property rights;
increasing the maximum penalty for anti-competitive mergers for companies from $5 million to the greater of $10 million, three times the value of any commercial gain resulting from the contravention, or (if the commercial gain cannot be ascertained), 10% of turnover in each accounting period that the contravention occurred; and
granting the Commission wide powers to share information with public agencies.

The new test for the prohibition against taking advantage of market power will come into force one year after the Act receives Royal assent, but it will apply to contracts or arrangements entered into before the Act comes into force. Businesses with a substantial degree of market power should begin considering the impacts of these amendments sooner rather than later.

The amendments to the IP provisions also come into force one year after the Act receives Royal assent. The new anti-competitive merger penalties and the broad information sharing powers both come into force one month after the Act receives Royal assent.

We previously discussed these proposed changes when the Bill was first introduced, this can be read here.

In the consumer space, changes to the Fair Trading Act will come into effect from 16 August 2022. These changes include:

A new prohibition on businesses engaging in “unconscionable conduct”;
An extension of the unfair contract terms regime to standard form “small trade” business-to-business contracts (previously this regime only applied to standard form consumer contracts); and
New restrictions on uninvited direct sales, which strengthen a consumer’s ability to prevent sellers from accessing their homes.

We discussed these changes further in our previous publication, which you can view here.

Prior to August, businesses should self-assess whether they are party to any contracts that may be qualifying “small trade” contracts and, if so, audit those agreements for terms that are potentially “unfair contract terms.” More broadly, businesses should consider how they engage with other businesses and customers (particularly where there is an imbalance in bargaining power) to ensure compliance with these new provisions.

Upcoming competition decisions by the Commission

The Commission is currently considering two matters which may have wide-reaching impacts.

Anytime NZ Limited’s application for clearance of a collaborative activity

Notably, Anytime NZ Limited, which is the master franchisee for global gym franchise Anytime Fitness has made the first ever clearance application to engage in cartel conduct through a collaborative activity. This clearance regime was introduced in 2017 alongside with changes to the cartel prohibitions in the Commerce Act, but businesses have as yet been reluctant to be the Commission’s first “test case.”

Anytime NZ Limited proposes to implement standardised pricing that allows it to impose lower and upper limits on its franchisees’ membership pricing. The Commission must give clearance if it is satisfied:

that the relevant parties are involved in a ‘collaborative activity’
the cartel provisions are reasonably necessary for the collaborative activity; and
the conduct will not have the likely effect of substantially lessening competition in the relevant market.

The Commission‘s Statement of Issues identified that its primary concern is whether every cartel provision in the proposed contract is reasonably necessary for the purposes of the collaborative activity.

The Commission’s final decision is due on 31 March 2022 - but this may be extended.

The final decision should give the wider business community a greater understanding of this process and how the Commission will assess what it considers to be “reasonably necessary.”

NZ media companies team up on authorisation application for collective bargaining

The Commission has received applications from the News Publishers’ Association of New Zealand Inc (NPA) for authorisation and provisional authorisation to engage in collective bargaining with Google and Facebook. Members of the NPA include NZME, Stuff, and Allied Press - although authorisation is sought on behalf of any current and future members and any independent NZ new media that chooses to participate.

NPA are applying to collectively bargain with Google and Facebook in relation to news and journalistic content which is displayed, featured, linked or summarised on the two platforms. In particular, NPA is looking to negotiate terms surrounding remuneration for display of content, access to user data generated from display content and other benefits to the creators of content (such as search rankings).