2020: Competition & consumer laws box on in the face of pandemic
Competition
Price fixing…
– comes in all shapes and sizes, and does not discriminate!
- The Supreme Court ruled in favour of the Commerce Commission (Commission) in the first defended price fixing case in a decade. Ultimately Lodge was ordered to pay $2.1M and Monarch $1.9M in pecuniary penalties. This brings the final total of pecuniary penalties for all the Trade Me real estate cartels to just shy of $23M – the second largest in New Zealand history.
– comes with a hefty price tag, even for individuals!
- The High Court imposed a $344K pecuniary penalty on Prices Pharmacy 2011 and a $50K pecuniary penalty on its director after they admitted to engaging in price fixing resulting in consumers paying $6, instead of $5, for their prescription items.
Mergers
No declines – two years running!
- The Commission cleared 10 mergers and declined none. 2020 is on track to be the second year in a row in which no clearance applications were declined (albeit 3 involved divestments).
Done & dusted or still in the pipeline…?
- The Commission received 10 clearance applications, 3 of which are still being determined:
- Aon’s proposed acquisition Willis Towers Watson, for which the Commission published a statement of issues on 21 December 2020
- NEP Broadcast Services’ proposed acquisition of Sky Network Television assets, for which the Commission published a statement of issues on 30 November 2020
- Can Plan Nelson’s proposed acquisition of certain assets from Nelmac’s waste collection business, Betta Bins
Alert! Mergers being policed!
- The Commission opened 3 investigations, all of which are still open:
- Beijer’s 2018 acquisition of Heatcraft New Zealand and its 2019 acquisition through its subsidiary of a right to import hydrofluorocarbons into New Zealand Update: The Commission closed its investigation on 22 December 2020 with no further action, noting that another party is pursuing its own legal action against Beijer
- Objective Corporation’s acquisition of Master Business Systems
- Glenninburg’s acquisition of the North Island animal rendering assets of Wallace Group through interests associated with Glenninburg
- The Commission settled with Wilson Parking after filing proceedings in the High Court (back in 2018) against its acquisition of the rights to operate the Capital car park. Wilson Parking agreed to divest leases of 3 car parking facilities (including Capital car park) and pay $500K towards the CC’s costs.
Consumer
Record fine reduced!
- Steel & Tube Holdings won its appeal against the Commission in the Court of Appeal on the level of fines imposed under the Fair Trading Act (FTA). This was the first time in the FTA’s 34-year history that a sentence appeal had reached the Court of Appeal.
Beware of what you say!
- The Commission closed 25 FTA cases, all of which the Commission either succeeded in legal proceedings or issued a warning letter to the parties under investigation.
Regulation
Cheaper fuel for all?
- The Fuel Industry Act 2020 was passed, implementing some of the Commission’s recommendations from its first market study into the retail fuel market.
Privacy
Freshly inked!
- The Privacy Act 2020 was passed and came into force on 1 December.
- MBIE consulted on options for establishing a consumer data right.
Covid
Amidst the pandemic…
- The Government issued a policy statement asking the CC to have regard to the effect of COVID-19 on the New Zealand economy and the Government’s objective of maintaining confidence in the market for essential goods and services.
- Legislation was passed to temporarily streamline the authorisation process for anticompetitive agreements and cartels for the purpose of facilitating pro-competitive collaboration in the covid era. Still, no authorisation applications have been published since the change.
- The Commission issued Covid-19 related guidance and authorisation guidelines.
- The number of consumer complaints to the Commission rose by ~10% but ~20% of those related to COVID-19. Travel-related complaints topping the list (knocking retail telecommunications down to #2). The vast majority (94.1%) of complaints were made under the FTA, with the remainder under the CCCFA (3.3%) and Commerce Act (2.6%).
Commerce Commission
Keeping an eye out…
- The Commission signed a multilateral mutual assistance and cooperation framework with competition authorities in Australia, Canada, the United Kingdom and United States – the other four countries in the “five eyes” intelligence alliance. The framework is intended to enhance international cooperation on competition enforcement.
Achievements
Hoorah!
- Matthews Law and its senior lawyers continue to be recognised in the world’s leading legal directories, including:
- Best Lawyers: Andy is recognised for his work in Competition and Consumer Law and Regulatory Practice. Gus is recognised for his work in Competition and Consumer Law (the only non-partner to make the cut).
- Chambers Asia Pacific (competition/antitrust): Matthews Law is ranked as a Band 2 firm, Andy as a Band 1 practitioner (a ranking he has held since 2006), and Gus as an “Up and Coming” practitioner.
- GCR 100 2021: Matthews Law is ranked as “highly recommended”.
- Who’s Who Legal Thought Leaders – Competition 2020: Andy is one of only two New Zealand lawyers recommended as a “Thought Leader”.
- Legal 500 (competition law): Matthews Law is ranked as a tier 2 firm, Andy as a “Leading Individual” and Gus as a “Next Generation Partner”.
2021: What to expect?
Be careful not to land on the “Go to Jail” tile…
- Cartel conduct will be criminalised from 8 April 2021.
- It will be an offence to enter into or give effect to a contract, arrangement or understanding that contains a cartel provision and intend at the time to engage in price fixing, restricting output or market allocating.
- It will be a defence if the Defendant believed on reasonable grounds at the time of offending that an exception applied. The belief cannot be based on ignorance or mistake of any matter of law.
- The maximum penalty is:
- for individuals, $500K fine and/or 7 years imprisonment
- for non-individuals (eg bodies corporate), a fine which is the greater of $10M / 3x commercial gain / (if commercial gain cannot be readily ascertained) 10% of turnover
- To accommodate the criminalisation regime, the Commission is updating their cartel leniency and immunity policy and is currently seeking feedback on its draft revision. Submissions will close on 10 February 2021. The Commission intends to publish an updated policy in April 2021 along with updated FAQs and factsheets, and will hold a livestreamed seminar on 27 January 2021 to talk through the key changes.
- Crown Law has also published draft guidelines to be applied by the Solicitor-General in considering an application for immunity from prosecution for a cartel offence.
Cracking down on high prices
- A market study will be undertaken into one of the most concentrated grocery retail sectors in the world. The Commission is already underway and released a Preliminary Issues paper on 10 December 2020. Principal Andy Matthews was interviewed by Stuff for his take on the study.
- The grocery market study is planned to be followed by a market study into building supplies.
In all fairness…
- Fair Trading Act amendments which propose to prohibit unconscionable conduct in trade and extend the existing prohibition against unfair contract terms to small businesses will continue their journey through Parliament.
Monopolisation law reform to match our Trans-Tasman neighbour
- Monopolisation law reform is anticipated to replace the current purpose based test for the abuse of market power with an effects test and remove intellectual property exceptions.
What’s on ComCom’s watchlist
- The Commission’s priority focus areas will be:
- cartel and anti-competitive conduct (in line with the start of the cartel criminalisation regime)
- mergers (including those that are notified)
- for consumer law: product safety and construction cases
- for the CCCFA: credit issues
For further information on competition, regulatory, consumer law and compliance, please get in touch with one of the team at Matthews Law.