Changes to Commerce Act 1986 seek to enhance competition

Tom Pasley
05 July 2017

posted in Legislation | Consumer Law | Company Law | Contract Law



On 27 May 2017, the Hon Jacqui Dean, Minister of Commerce and Consumer Affairs, announced proposed amendments to the Commerce Act 1986 (Act) (see press release here).

The Act

The Act is designed to promote competition in the New Zealand markets for the long-term benefit of consumers within New Zealand, and is enforced by the Commerce Commission (Commission). The Act seeks to prevent business which substantially lessens competition, prevent firms possessing substantial market power from abusing that power, and provide for scrutiny of the competitive effects of mergers or takeovers to prevent the accumulation of market power. The Act also allows price controls where there is not enough competition to protect the interests of consumers.

Proposed amendments

The proposed amendments to the Act follow public recommendations from both the Commission and the Productivity Commission in 2013 and 2014.

Following the Government’s review of the Act, it proposes three amendments:

  • the Commission be given powers to undertake market studies;
  • the cease and desist regime be repealed; and
  • the registration of settlement agreements as court-enforceable undertakings.
These amendments will give the Commission further powers to proactively examine markets where there are potential issues rather than waiting for breaches of the Act to occur and improve its enforcement actions without having to seek Court approval.

Market studies

The recommended amendment that the Commission be given powers to undertake proactive market studies is significant. A market study is detailed research by an institution into a particular market, or markets, where there are concerns that the market could be functioning sub-optimally. This amendment will bring the Commission’s powers in line with competition authorities in other overseas jurisdictions. The Commission will be able to make wide-ranging and lengthy inquiries. This is likely to be a time-consuming and costly experience for businesses operating within market areas of interest.

Repeal of the cease and desist regime

The cease and desist regime was introduced to the Act in 2001 as an alternative to the Commission seeking interim injunctions from the High Court to prevent behaviour the Commission considered to be in breach of the Act. The regime enables the Commission to order a company to stop engaging in activity suspected of being anti-competitive in breach of the Act. The regime is cumbersome, however, and has been used only once since its enactment in 2001, which has led to the Government’s recommendation that it be repealed.

An enforceable undertakings regime

The Government also recommends that in appropriate cases, terms of any settlement reached between the Commission and parties under investigation are able to be registered as enforceable undertakings with the New Zealand Courts. This will allow the New Zealand Courts to penalise any breaches, thereby increasing the Commission’s general powers to ensure settlement agreements are complied with.

Recommended changes to market abuse test delayed

The Government has also considered whether to amend s 36 of the Act (“Taking advantage of market power”) Productivity Commission stated in 2014 that the application of the s 36 test in New Zealand had become idiosyncratic and out of step with the analogous statutory test in Australia. However, the Government has deferred announcing any potential changes to s 36 at this stage, stating that it will continue to consider a suitable alternative test that would better fulfill the purpose of the Act and provision, with officials and report back in mid-2018. The Australian Federal Government is currently considering changes to the equivalent provision in the Competition and Consumer Act 2010 (Cth), which may explain why the Government has deferred making any changes until next year.

Tom Pasley

Timothy Lindsay

Tom Pasley
05 July 2017

posted in LegislationConsumer LawCompany LawContract Law



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