On Thursday 5 December, the Government announced that MBIE will be carrying out a review of the Commerce Act to ensure it remains fit for purpose. Submissions are now open until February 2025. We also set out the New Zealand Commerce Commission’s enforcement priorities for the next 12 months. 

Review of the Commerce Act

Background

The Government announced that it has asked MBIE to carry out a targeted review of the Commerce Act 1986 (the Act), New Zealand’s primary piece of competition legislation. The Act states that its purpose is to “promote competition in markets for the long-term benefit of consumers within New Zealand”. MBIE’s review aims to ensure that the Act remains fit for this purpose, and is keeping pace with market developments that may have an effect on the application of some of the key prohibitions. 

Alongside the announcement, MBIE has released a discussion document that sets out the workstreams it will focus on in its review. We discuss the four key workstreams in more detail below.^[1] It is worth noting that this review comes at a time when Australia is also reviewing its own competition legislation, with very similar areas of focus, particularly with regard to the merger control regime. MBIE has noted that consistency between Australian and New Zealand competition legislation is a desirable outcome, and this is reflected in several of its proposed amendments.

Merger control regime

The Act prohibits mergers and acquisitions which would be likely to have the effect of substantially lessening competition in any New Zealand market. Under the Act, merger parties have the ability to apply on a voluntary basis to the New Zealand Commerce Commission (the NZCC) for clearance (where a substantial lessening of competition is unlikely) or authorisation (where, even though there is a substantial lessening of competition, the resulting public benefits outweigh the substantial lessening of competition).

In its review, MBIE is considering whether the substantial lessening of competition test should be updated to prohibit certain mergers and acquisitions that would not constitute a breach of the Act in its current form, but may still have potential negative effects on competition in New Zealand markets. These include:

• Creeping acquisitions: a number of acquisitions of small competitors that may not result in a substantial lessening of competition in isolation, but do as a collective.
• Acquisitions of nascent competitors: the acquisition of small or recently established competitors that may pose a serious competitive threat in the long-term, but may not currently result in a substantial lessening of competition.

Proposed amendments to the Act would bring it in line with the proposed reforms in Australia, by making it explicit that a substantial lessening of competition includes “creating, strengthening, or entrenching a substantial degree of market power”, and providing that acquisitions of competitors in a three-year window may be combined when assessing the effect of a single acquisition.

As a separate issue, while MBIE considers the voluntary clearance/authorisation regime is currently working well, it is considering whether the NZCC should be given additional powers to avoid some of the issues it currently faces when investigating “non-notified mergers” (those that have not been submitted to the NZCC for clearance or authorisation). 

The majority of non-notified mergers are unlikely to raise any competition issues. However, given that the voluntary regime requires an element of self-assessment by the merger parties, there may be transactions that proceed without clearance or authorisation, and still raise significant competition issues. By the time these transactions come to the NZCC’s attention, they may have completed, or the NZCC may not have time to investigate sufficiently prior to completion.

Proposed amendments to the Act would give the NZCC one or more of the following powers:

• Stay and/or hold separate powers: removing the requirement for the NZCC to apply to the Courts for an interim injunction to suspend potentially anti-competitive mergers from completing.
• Call-in powers: requiring parties to apply for clearance if it becomes aware of a potentially anti-competitive merger (it currently can only recommend parties come in for clearance).
• Company-specific mandatory notification powers: requiring certain companies and/or companies over a certain size to notify the NZCC of any acquisitions, regardless of whether any competition issues are likely.

MBIE is also considering other amendments to the merger control regime, including:

• Allowing the NZCC to accept behavioural undertakings (a requirement to act in a certain way) to resolve potential competition concerns. Unlike most competition regulators overseas, the NZCC can only accept structural undertakings (ie the divestment of assets or shares of the acquirer or target business to a third party).
• Introducing explicit criteria for what constitutes a “substantial degree of influence”, with regard to partial acquisitions of shares or assets (ie acquiring a less than a 50% shareholding in a business). If partial control gives the acquirer a substantial degree of influence over the target’s business decisions, an acquisition is prohibited under the Act if it has the effect of substantially lessening competition in a market.
• Providing more clarity on what constitutes an acquisition of “assets of a business” that would fall under the merger control regime.

Collaborations

The Act currently allows for collaboration between parties that would otherwise constitute cartel conduct, where there is a collaborative activity that is not carried on for the dominant purpose of substantially lessening competition. Parties can also apply for authorisation of a collaborative activity, where the public benefits of the collaborative activity outweigh the competitive harm. 

While these frameworks exist, MBIE has observed that businesses are concerned about the uncertainty of the collaborative activities' exemption and authorisation process, and with the time and cost of engaging with the NZCC. MBIE considers that this has likely deterred businesses (particularly small businesses) from engaging in beneficial collaboration. 
 
Therefore, MBIE has considered the following options to better facilitate beneficial collaboration: 

• Make it explicit in the Act that the NZCC has a role in issuing guidance on interpretation of the Act's provisions, not just its enforcement approach;
• Empower the NZCC to create safe harbours from prohibitions;
• Introduce a statutory notification regime, that would operate alongside the authorisation regime, with the NZCC having the power to call in proposed arrangements that raise concerns;
• Empower the NZCC to make class exemptions to authorise classes of conduct that may be exempt from any or all prohibitions in the Act; and
• Exempt small businesses from paying filing fees for seeking NZCC authorisation. 

Concerted practices

MBIE also notes that New Zealand currently lacks a prohibition against anti-competitive concerted practices (i.e. intentional coordinated conduct without any agreement, commonly referred to as tacit collusion). The Act currently requires a contract, arrangement or understanding that parties will act in a particular way. While what constitutes an understanding is relatively broad, MBIE considers there is a gap in the Act that is seeing concerted practices go unpunished.

Proposed amendments to the Act include the following options:

• Bring New Zealand in line with the Australian regime, by adopting an explicit prohibition of anti-competitive concerted practices.
• Introduce a customised prohibition focused on conduct that facilitates coordination.

Introduction of new code or rule-making powers

Industry codes or rules have been used in other jurisdictions to require industry participants to act in a way that promotes fair competition. Australia, for example, has nine mandatory industry codes, and one voluntary industry code. 

The NZCC has been granted regulatory oversight of certain industries following market studies into those industries, and the Act itself also governs the conduct of certain regulated industries in New Zealand (such as airports, gas pipelines, and electricity lines). However, the NZCC does not have the power to prescribe industry codes under the Act. Proposed amendments to the Act would give the NZCC this power. 

What happens next

As noted above, MBIE is seeking feedback on its discussion document, and we expect that a range of businesses, consumer groups, and competition law practitioners (including ourselves) will be submitting on the proposed amendments. The due date for submissions is 5 February 2025 - please feel free to get in touch if you have any questions about the proposed amendments, or would like assistance in preparing a submission.

Alongside the review of the Act, the Government is carrying out a review of the NZCC’s performance and governance arrangements. This review is being led by Dame Paula Rebstock, a former Chair of the NZCC. Minister for Commerce and Consumer Affairs, Andrew Bayly, has said that “creating more accountability within the agency could improve its performance”. 

Commerce Commission’s enforcement priorities

Yesterday morning’s announcement coincided with the NZCC releasing its enforcement priorities for the next 12 months. These have been classified into two groups: enduring and specific priorities. 

Enduring priorities are general themes that form the basis for much of the NZCC’s enforcement work, and include: 

• Cartels;
• Anti-competitive conduct;
• Product safety;
• Vulnerable consumers; and
• Other actions that support market and economic regulation functions.

Specific priorities, on the other hand, have arisen as a result of current events, emerging investigative trends, market intelligence, and concerns shared by the public, and include:

• Bid rigging cartels, with a focus on infrastructure projects and those that rely on public money;
• Non-compete agreements;
• Illegal online sales conduct, such as fake reviews and subscription traps;
• The grocery sector;
• Unconscionable conduct;
• The telecommunications industry; and
• Motor vehicle financing, particularly with regard to vulnerable consumers.

We expect the NZCC to be looking to target potential enforcement cases that cover these priorities over the next 12 months.

Get in touch

Please contact one of our competition experts if you have any questions about the proposed amendments and enforcement priorities referred to above.

Special thanks to Henry King and Achi Simhony for their assistance in preparing this article.