Major review of New Zealand's competition law regime announced

The Commerce and Consumer Affairs Minister, Hon Andrew Bayly, along with the Ministry of Business, Innovation, and Employment (MBIE) have today announced a significant and wide-ranging review of New Zealand's competition law regime.

The review spans the full gambit of New Zealand's competition regime, including: ^[1]

• the Commerce Commission's "board performance and governance arrangements to ensure the Commerce Commission has the right expertise and governance to make effective and timely decisions";

• the merger regime "to ensure the Commerce Commission has the tools required to prevent mergers that create competition concerns";

• the anti-competitive conduct regime "to keep pace with market developments and provide more certainty to firms on what constitutes anti-competitive collusion"; and

• consideration of whether the Commission should be given "an industry rule-making power as a tool to remedy a market failure".

The Minister announced a number of reasons for initiating the review including New Zealand's "long history of aligning business laws" with Australia, ^[2] the fact that "[m]uch of the Commerce Act has not been reviewed for over 20 years",^[3] concerns about New Zealand's "low productivity levels" and the role competition law can play in enhancing productivity, and ensuring "New Zealand has a world-class competition and consumer regulator that is well-positioned to make a real impact on markets for the benefit of New Zealander consumers".^[4]

The key aspects of New Zealand's competition regime that are under review include the following:

Mergers

The discussion document is considering a number of reforms to New Zealand's merger control regime – including:

• • "Creeping acquisitions": The discussion document seeks feedback on whether New Zealand's merger control regime should be amended to be able to together address a series of smaller acquisitions (called "creeping acquisitions"). The discussion document says that "like many overseas jurisdictions, New Zealand has also seen serial or roll-up strategies in some sectors, such as veterinary and funeral-related services. Such strategies can result in supply efficiencies and benefits for consumers, but there is a risk that over time an unchecked series of consolidation will harm competition." Accordingly, the reform process will consider whether the Commerce Act should be amended:
    
    
    • "To clarify and make explicit in the Commerce Act that the ‘substantial lessening of competition test’ includes ‘creating, strengthening, or entrenching a substantial degree of market power in a market’"; or
    • "To provide that acquisitions by the acquiring party in the past three years for target firms supplying or acquiring the same goods or services may be combined when assessing the competition impact of the current acquisition (ie creeping acquisitions)."

• • Partial acquisitions – extent of control obtained: The discussion document is exploring whether more clarity could be provided on when partial acquisitions could breach the merger control regime, for example by providing "bright lines for assessing the degrees of influence" that may breach the merger control regime, rather than the current regime that can consider a range of different factors in the round (such as the extent of the shareholding, the extent of any directorship rights, any other agreements between the parties).

• • Partial acquisitions – extent of assets purchased: The discussion document is exploring whether more clarity could be provided on when acquisitions of just certain assets of a business (rather than a business in its entirety) are sufficient to amount to an acquisition that is subject to the merger control regime.    

• • Requirements to notify the Commerce Commission of acquisitions: New Zealand currently has a "voluntary" merger control regime – which means it is not mandatory to notify the Commission of any given acquisition (but the Commission can always investigate and take proceedings if it considers that an acquisition substantially lessens competition in a market). In contrast to the recent views expressed in Australia, the discussion document says that "[w]e consider that a change to a mandatory and suspensory merger regime in New Zealand is not required as the current voluntary merger regime is working well" and "the Commission has an effective mergers intelligence function that detects the vast majority of non-notified mergers in its monitoring or through complaints." However, the discussion document is considering three potential amendments: 

• Stay and/or hold-separate powers: This would allow the Commission to suspend the completion of an acquisition without needing to apply to court for an interim injunction.

• Call-in powers: This would allow the Commission to require parties to apply for clearance if it becomes aware of a potentially anti-competitive acquisition.

• Company-specific mandatory notification power: This would allow the Commission to require certain companies with substantial market power or over a certain size to notify the Commission of any acquisitions. This mandatory notification power, by itself, would not have suspensory effect. 

• Behavioural undertakings: Unlike many other jurisdictions the Commerce Commission cannot accept "behavioural undertakings" to resolve potential concerns arising from an acquisition (only undertakings to make a structural divestment). The discussion document is considering whether the Commission should be allowed to accept behavioural undertakings, including to enable it to have similar powers to other overseas regulators when considering an international transaction.  

Anti-competitive conduct prohibitions

The discussion document is considering a number of reforms to New Zealand's anti-competitive conduct regime – including:

• Facilitating beneficial collaboration: The discussion document recognises that the current regime, and the Commission's approach, is often chilling businesses from engaging in beneficial collaboration (for example, sustainability collaboration) due to concerns that the Commerce Act will be applied in a technical way. Accordingly, to "facilitate beneficial collaboration under the Commerce Act", the discussion document explores whether:

• • The Commerce Act should make explicit "that the Commission has a role in issuing guidance on the interpretation of provisions of the Act, not just dissemination of information about its enforcement approach". 
  • The Commission should be empowered "on its own initiative, to issue binding rules that create a safe harbour from the prohibitions" or to issue "class exemptions" to "authorise classes of conduct that may be exempt from any or all prohibitions in the Act".
  • A statutory notification regime should be introduced "for specified classes of arrangements" to shift the burden of proof on to the Commission to object to an arrangement, and if does not then the arrangement would be exempt under the Commerce Act for a certain period of time.
  • Small businesses should be exempt from paying filing fees to apply for Commerce Commission authorisation. 
• Introducing a prohibition on concerted practices: The discussion document raises a concern that while anti-competitive "contracts, arrangements, or understandings" are prohibited by the Commerce Act, unlike Australia there is not currently a prohibition on "concerted practices" (i.e. tacit coordination). The concern is that this could leave a "‘gap’ in our competition law in dealing with tacit collusion in concentrated markets." Therefore, the discussion document is considering whether a concerted practices prohibition, similar to Australia's, should be introduced. 

• Updating injunction powers: The discussion document raises concerns that the courts' "injunction powers in the Commerce Act do not reflect modern practice" as they "only allow the court to stop the harmful conduct" but not require certain positive conduct (e.g. "performance injunctions").  Accordingly, the discussion document is exploring whether the Commerce Act should be amended to provide courts the power to order performance injunctions. 

Industry Codes

Unlike in Australia, industry codes cannot be prescribed under the Commerce Act to "remedy a range of market failures, including unfair business conduct, access to essential facilities and information asymmetry for consumers and businesses." Accordingly, the discussion document explores whether the Commerce Act should be amended to allow for industry codes or rules to be prescribed in the Commerce Act.

Governance and effectiveness review of the Commerce Commission

As part of the swathe of reforms, the Minister has also announced a broad-ranging review of the Commission's governance, structure and performance, stating that the "the purpose of the review is to lift the performance of the Commission to meet future challenges and deliver ongoing benefits for New Zealanders" and "^[5]ensuring the Commission’s governance arrangements are fit for purpose, with a focus on ensuring the Board promotes good commercial outcomes in its statutory decision making."^[6] Former Commission Chair, Paula Rebstock, will lead that review. 

Next steps

These reforms, if implemented, would represent the most significant changes to New Zealand's competition law regime in more than 20 years. It will be important for the quality of the reform process that those in the business community provide their perspectives on the proposals. Submissions close on 7 February 2025. If you would like to discuss how these reforms may impact you or your business, please get in touch with our experts.  

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