On 30 March 2022 the Commerce Amendment Bill (Bill) passed its third reading and should receive royal assent soon.
The Bill will:
- replace the test for misuse of market power
- extend the prohibition on cartel conduct to cartel provisions in covenants
- remove intellectual property exceptions
- empower the New Zealand Commerce Commission (NZCC) to grant interim authorisations for restrictive trade practices
- increase maximum pecuniary penalties for breach of merger control laws
- expand the NZCC’s (domestic) information sharing powers
Misuse of market power reform
The new law on misuse of market power will prohibit persons with a substantial degree of power in a market from engaging in conduct that has the purpose, effect, or likely effect of substantially lessening competition in that market or any other market in which they, or an interconnected person, supplies or acquires goods or services or is likely to, including if indirectly through other persons.
This will realign New Zealand’s prohibition with the equivalent in Australia. The NZCC is expected to publish detailed guidelines on the new test within 12 months of the Bill becoming law.
The new test is intended to remove the need to establish a causal link between a firm’s conduct and its market power. However, that may mean the well-established case law on access pricing methodology – known as the Efficient Component Pricing Rule or Baumol-Willig pricing, which compensates the access provider for the “opportunity cost” of giving a third party access – will no longer apply under the new test, leaving no de facto access pricing methodology to guide businesses.
Extend cartel conduct to capture covenants
The prohibition of entering into or giving effect to cartel provisions will be extended to prohibit giving or requiring the giving of a covenant that contains a cartel provision. The collaborative activity exception will be available to cartel provisions in covenants.
Removal of IP exceptions
Provisions in the Commerce Act which create exceptions in relation to intellectual property rights will be repealed, meaning use of intellectual property rights will need to be analysed like any other conduct.
Interim authorisations
The NZCC will gain the power to grant interim authorisations for restrictive trade practices. Authorisation allows parties to engage in otherwise prohibited conduct because it is likely to result in a net public benefit. Interim authorisation will allow parties to engage in that conduct while the authorisation application is being determined.
This will effectively make permanent the NZCC’s currently temporary power to grant provisional authorisations. The NZCC has currently only granted provisional authorisation to The New Zealand Tegel Growers Association Incorporated to collectively bargain with Tegel Foods Limited. The NZCC is also currently considering another collective bargaining provisional authorisation and authorisation application.
Increase maximum pecuniary penalties for breach of merger control laws
The current maximum pecuniary penalty for breaching merger control laws is $500K for individuals and $5M for non-individuals. The maximum pecuniary penalty for non-individuals will increase to the greater of $10M, (if commercial gain can be readily ascertained) 3x the value of any commercial gain or (if commercial gain cannot be readily ascertained) 10% of turnover. This will make the penalties for breach of merger control laws at the same level as those for restrictive trade practices.
Domestic information sharing powers
The NZCC will be empowered to provide information and documents to public service agencies, statutory entities, the Reserve Bank of New Zealand and the New Zealand Police which it considers may assist those bodies in their legislative functions, powers or duties. The NZCC will need to be satisfied appropriate protections are or will be in place for the purpose of maintaining the confidentiality of anything provided.
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