Given that no single party had a majority of the votes in New Zealand’s recent election, it has been necessary for the National Party to enter into coalition arrangements with the ACT Party and the NZ First Party in order to govern. The coalition agreements have some interesting implications for competition law in New Zealand.

In this article, we look at the key points from the coalition agreements between each of National / Act and National / NZ First. We also briefly touch on the recent release of the Commerce Commission’s Collaboration and Sustainability Guidelines. Lastly, we cover the Commerce Commission’s announcement today that it has filed criminal charges against two construction companies and two directors for alleged bid rigging of publicly funded construction contracts, in the country’s first-ever criminal prosecution for cartel conduct.

National and ACT’s coalition agreement on reform of the Commerce Commission’s market studies process

Since October 2018, one of the Commerce Commission’s (Commission) functions has been to carry out independent market studies into the factors affecting competition for particular markets for goods or services, to find out how well competition is working and whether it could be improved.

Since then, the Commission has released reports into the retail fuel, retail grocery, and residential building supplies industries. There is currently an ongoing market study into personal banking.

The coalition agreement between National and ACT states that they intend to amend the Commerce Act 1986 to focus future market studies on “reducing regulatory barriers to new entrants to drive competition”.

Previous market studies conducted by the Commission provide a helpful indication of what regulatory barriers are likely to be the focus here. For instance, in the Commission’s market study into residential building supplies the Commission identified two ways in which the building regulatory system makes it difficult for competing suppliers of building supplies to enter the New Zealand market and grow their business.

The first reason is the way that the building regulatory system (comprising the Building Act, the Building Code, and other instruments and processes) is applied to building products, is complex to navigate, and is slow to respond to changing markets and innovations in building products.

The second reason they identified is that the behaviours and decisions that designers, builders, building consent authorities and government agencies make in response to and in applying the elements of the building regulatory system incentivises and favours building familiar products over new or competing products.

National and NZ First’s coalition agreement

The former government instructed the Commission to examine competition in the banking sector, as it was concerned with the profits of banks. The Commission’s study is looking into factors affecting competition for the supply or acquisition of personal banking services.

The Commission’s draft report on personal banking services is due in March 2024, with the final report to be published on 20 August 2024. Andrew Bayly, the new Minister of Commerce and Consumer Affairs, said that the new government will take “a good look” at the Commission’s draft report in March, before deciding whether to cut the Commission’s work on the market study short.

The National and NZ First coalition agreement commits to establishing a separate select committee inquiry into banks, which will focus on “competitiveness, customer service and profitability” and which will run in parallel to the market study.

Further, the National and NZ First coalition agreement proposes to explore options to strengthen the powers of the Grocery Commissioner to “improve competitiveness, and to address the lack of a third entrant to remove the market power of a duopoly”.

Commerce Commission’s Collaboration and Sustainability Guidelines report released 4 December 2023

The Commission recently released guidance for businesses who are considering collaborating with their competitors to pursue sustainability goals. Antonia Horrocks, the Commission’s Competition General Manager, underscored that “[i]t’s important that competition law isn’t a roadblock to genuine collective action on climate issues and that equally, businesses don’t lose sight of competition when they’re considering significant transitions in markets to achieve sustainability goals.”

The Guidelines set out factors that the Commission will consider when assessing collaboration between competing businesses for sustainability objectives.

They also explain when collaboration for sustainability objectives is more or less likely to harm competition, and how the clearance and authorisation processes can accommodate collaboration between businesses even when it may harm competition.

The full Guidelines can be found here.

Commerce Commission files criminal charges against construction companies and directors in first criminal cartel prosecution

The Commerce Commission has commenced New Zealand's first criminal cartel prosecution, filing charges in the Auckland District Court, after an investigation into allegations of bid rigging for Auckland infrastructure projects by two construction companies and two directors.

A cartel is where two or more competing businesses agree not to compete with one another by price fixing, allocating markets or customers, or restricting the output or acquisition of goods and services. The Commission describes bid rigging as a form of price fixing which can also involve allocating markets or customers, where there is an agreement among bidders about who should win a tender or have an unfair advantage in the tender.

Section 30 of the Commerce Act prohibits cartel conduct and, since 8 April 2021, cartel conduct has been punishable by a term of imprisonment of up to 7 years. Commission Chair John Small says criminal proceedings send a strong message to businesses that the Commission has no tolerance for cartel conduct and is prepared to lay criminal charges to enforce the law. 

Please get in touch with one of our experts to discuss any aspect of this article and its potential implication for your business.

Special thanks to Achi Simhony for her assistance in writing this article.