OECD kpcdb

1. Competition Law

 

The Commerce Act (the Act) took effect on 28 April 1986. 

 

The purpose of this Act is to promote competition in markets for the long-term benefit of consumers within New Zealand.

 

Part 2 of the Act prohibits restrictive trade practices, including anti-competitive agreements and taking advantage of substantial market power for an anti-competitive purpose. Part 3 of the Act prohibits the acquisition of assets of a business or shares if the acquisition would have, or would be likely to have, the effect of a substantially lessening competition in a market. 

 

The Act also includes regulatory provisions in Part 4 relating to airport services, gas pipelines and electricity lines services. It also provides for the regulation of other goods or services following an inquiry and recommendation from the Commission that the goods or services are supplied in a market where there is both little or no competition and little or no likelihood of a substantial increase in competition, there is scope for the exercise of substantial market power and the benefits of regulation materially exceed the costs.

 

New Zealand follows the common law tradition. 

 

General exclusion: The Act applies to state-owned enterprises when conducting commercial activities in competition with private firms. Civil aviation and international shipping are exempted sectors from the application of the Act. The international shipping exemption will be repealed after a two year transition period, after which time a new targeted exception for liner shipping in relation to vessel sharing and vessel pooling will be introduced.

 

Extra-territorial application: According to Section 4, the Act applies to conduct outside New Zealand by any person residing or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand. Conduct that occurs partly in NZ is regarded to have occurred in NZ, and there is no requirement to apply section 4.

 

The Commerce (Cartels and Other Matters) Amendment Act 2017 provides new powers for the High Court, on an application by the Commerce Commission, to make orders against overseas persons, including an order to cease trading or divest shares or assets. These orders can be made where an overseas person has acquired a controlling interest in the New Zealand entity and that acquisition is likely to substantially lessen competition in a market in New Zealand.

 

2. The Commerce Commission

 

The Commerce Commission (“the Commission”) is an independent crown entity. It is New Zealand’s primary competition enforcement and regulatory authority and is responsible for the enforcement of the Commerce Act 1986.

 

Whilst it is primarily accountable to the Ministry of Business, Innovation and Employment for its performance and outputs (see below, following sub-section), it is not subject to direction from the government in carrying out its enforcement, adjudication and regulatory control activities. The Commission is, however, required to have regard to statements of government economic policy communicated by Ministers under the Commerce Act or the Telecommunications Act. The Commission’s independence requires it to be an impartial promoter and enforcer of the law.

 

The Commission functions as an enforcement agency with sanctions requiring decisions by New Zealand’s High Court. It is also a quasi-judicial body, with power to give clearances and authorisations for business acquisitions or collaborative activities, and authorisations for certain restrictive trade practices which would ultimately benefit New Zealand.

 

Other than its competition powers, the Commission acts also as the regulator for the telecommunications, electricity, airports, gas and dairy markets, as well as being responsible for consumer protection. 

Organisational structure of the Commerce Commission: The Commission, whose headquarters are located in Wellington, has 94 FTE (Full Time Equivalent) employees in the Competition and Consumer Branch only, as of 31 December 2016. There are three branches, namely the Competition and Consumer Branch, Regulation Branch, and Organisation Performance Branch. 

 

The Commerce Commission has an annual budget of NZD27.7 million (approximately USD 19.68 million) for its competition and consumer protection activity. This amount includes major litigation expenditure.

 

The Commission’s government funding is appropriated through Vote Business, Science and Innovation. 

 

Section 9 stipulates that the Commission must have no less than 4, and no more than 6, members appointed in accordance with this section, and may also have associate members appointed under section 11(1). 

 

The Commission comprises a Chair, Deputy Chair, Telecommunications Commissioner, Commissioners, Associate Commissioners and Cease and Desist Commissioners (whose function is to hear cease and desist applications in accordance with Sections 74A to 74C). The Commission members are appointed by the Governor-General, upon the recommendation of the Ministry of Business, Innovation and Employment and for the Telecommunications Commissioner the Minister for Communications and Information Technology. Commissioners can be removed by the Governor General under s 39 of the Crown Entities Act 2004, with just cause on the advice of the responsible Minister, by written notice and providing reasons for the removal. Associate Commissioners can be removed by the responsible Minister on the same grounds and in the same manner.

 

The Commission produces a statement of intent (SOI) at least every 3 years setting out its work programme for the following four financial years. The Commission also produces a statement of performance expectations (SPE) annually outlining priorities, forecast financial statements, and performance measures for the next financial year. The Commission then reports against the SOI and SPE triennially to the government via Ministry of Business, Innovation and Employment, and annually to the government and taxpayers of New Zealand via the Annual Report. The Commission also has a five year vision and strategy document.

 

Competition advocacy: The Ministry of Business, Innovation and Employment conducts competition assessments for new public policies that may have implications for competition. The Commission may provide advice on, or information relevant to, policy developments or legislative change when it has relevant expertise or it considers the situation warrants public comment. The Commission does not have powers to undertake market studies but the Government has approved the provision of a market studies power for the Commerce Commission. Legislation enabling the Commission to carry out market studies is expected to come into force in mid-2019

 

International co operation: New Zealand has international co operation agreements regarding competition policy with Australia, Canada and Chinese Taipei. More info available at: http://www.comcom.govt.nz/the-commission/about-us/international-relations/

 

Sections 99C to 99P provide for the provision of compulsorily acquired information and investigative assistance to recognised overseas regulators subject to an appropriate agreement between the Commerce Commission and an overseas regulator or the New Zealand Government and another government. 

 

3. Investigation

 

Initiation of investigation The Commission can investigate conduct that it considers may risk breaching a relevant provision of the Commerce Act 1986. An investigation can be initiated on the basis of information we receive from a complaint, a leniency application or on the basis of information we hold from undertaking other functions at the Commission, as well as information from general market intelligence and surveillance, e.g. the media. 

 

Powers of investigation: Under Section 98, the Commission can compel any person or company to supply information by serving on them a formal notice, signed by a Commission member. The Commission also has the power to require a person to attend a compulsory interview (Section 98(1)(c). 

 

The Commission does not have unlimited power to request information. The information must be necessary or desirable for the purpose of carrying out the Commission’s functions and exercising its powers under the Act. 

Under Section 98A The Commission may authorise an employee of the Commission to search under a warrant any place (business or non-business premises) named in the warrant for the purpose of ascertaining whether a person has engaged in or is engaging in conduct that constitutes or may constitute a contravention of this Act. 

 

This warrant is granted by a District Court Judge, or Justice, or a Court Registrar (not being a constable) who is satisfied on application made on oath by a person who is authorised by the Commission that there are reasonable grounds to believe that it is necessary for the purpose of ascertaining whether or not a person has engaged in or is engaging in conduct that constitutes or may constitute a contravention of this Act. This warrant may be subject to an appeal process separately or in the context of the final decision.

 

The Commission has the power to take digital copies/forensic images of the evidence found at the premises investigated. The Commission does not have the power to seal premises.

 

The Commission published Competition and Consumer Investigation Guidelines in 2015. The guidelines cover a wide range of topics, such as: how the Commission goes about getting evidence and information; what compulsory powers it has and how it decides to use them; and whether and when the Commission will do media statements or provide public information about an investigation.

 

Failure to comply with an investigation: It is a criminal offence to refuse or fail to comply with a statutory notice, or to otherwise not comply with an investigation without a reasonable excuse, or to knowingly submit false or misleading information or documents. 

Under Section 103, a person that refuses or fails to comply with a request of the Commission commits an offence and may be subject to a fine not exceeding NZD 100,000 (approximately USD 71,090) in the case of an individual, or NZD 300,000 (approximately USD 213,270) in the case of a body corporate. These are imposed by the courts. 

 

Procedural fairness: The Commission provides investigated parties with a chance to comment on or provide evidence about the complaints or concerns that the Commission is investigating (Investigation Guidelines 79). During the investigation, the Commission provides an investigated party with regular progress updates. At the end of an investigation, the Commission will notify investigated parties of the fact and of any outcome such as the enforcement response that has been selected (Investigation Guidelines 93).

 

4. Remedies and sanctions

 

Where the Commission considers that there has been an infringement of the Act, it may bring claims for injunctions (see section I.6 below), civil pecuniary penalties (for companies and/or individuals), criminal penalties (for failure to comply with a request for information during an investigation) and other remedies before the High Court. 

 

Sections 74A to 74D of the Act provide specific powers for the Commission to obtain orders against anti-competitive behaviour. Cease and Desist Commissioners are able to make orders to restrain anti-competitive conduct or to require a person to do something to restore competition or the potential for competition in a market.

 

A cease and desist order may be made where a Cease and Desist Commissioner is satisfied that at first sight, on the face of the evidence, there is (i) anti-competitive conduct that contravenes the Commerce Act; and (ii) it is necessary to act urgently, to prevent a particular person or consumers suffering serious loss or damage; and (iii) in the interests of the public.

 

Under Section 80, the Court may order a person who has contravened Part II (Restrictive Trade Practices – which includes anti-competitive agreements and unilateral conduct) of the Act to pay a pecuniary penalty as follows: for corporations: NZD 10 Million (approximately USD 7.11M) or (10% of turnover or three times the gain for body corporate, whichever is greater). For Individuals the fine is NZD 0.5 Million (approximately USD 355,450).

The Court may grant orders excluding a person from management of a body corporate.

 

The Commission has issued Enforcement Response Guidelines, which explain the enforcement responses available to the Commission and what factors are taken into account when deciding which response to use. Where the Commission considers that a person or business may have breached the law, the Commission will take into account the extent of the harm, the seriousness of the conduct and the public interest when determining the most efficient use of taxpayer resources.

 

5. Appeal

 

A decision of the High Court may be appealed before the Court of Appeal and the Supreme Court.

 

6. Private enforcement

 

Private parties may initiate enforcement proceedings, regardless of a Commission decision, with such proceedings being heard by the High Court. 

Damage claims: Sections 82 and 84A allow an action for damages resulting from loss caused by an infringement of the restrictive trade practices or prohibited business acquisitions provisions. 

 

Injunction claims: According to sections 81 and 84, the Court may, on the application of the Commission or any other person, grant an injunction in order to prevent a person from undertaking the conduct which constitutes or would constitute a contravention to the restrictive trade practices or prohibited business acquisitions.