New Zealand’s test for anticompetitive unilateral conduct will change from 5 April 2023. Persons with substantial market power will be prohibited from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in a relevant market. The NZCC is expected to publish guidelines on the application of the new law.
In the meantime, we can look to Australia for guidance. Our new test follows earlier law reform in Australia which enacted the same change.
Australian cases
The first finding of a contravention of the Australian prohibition since it was amended in 2017 was TasPorts in May 2021. TasPorts was the sole supplier of pilotage and towage services at all major ports in Tasmania. It imposed a new port access charge on one of its customers after it notified TasPorts it was going to switch to a new provider of towage and pilotage services. The Chair of the Australian Competition and Consumer Commission (ACCC) at the time commented:
Businesses with substantial market power have a special responsibility when deciding how to respond to competitive threats. If they respond in a competitive way, for example by offering customers better products at better prices, they will not face the risk of enforcement action. However, when they hinder a competitor from competing on its merits, the ACCC will not hesitate to take enforcement action,
The ACCC also commenced proceedings against Mastercard in May 2022 for allegedly offering more than 20 major retail businesses discounted rates for processing Mastercard credit card payments if they committed to processing all or most of their Mastercard-eftpos debit card transactions through Mastercard rather than the eftpos network. This would mean significant debit card volumes would not be processed through the eftpos network even though eftpos was often the lowest cost provider. Visa had also been investigated for similar conduct but had instead addressed the ACCC’s concerns with court-enforceable undertakings not to offer strategic merchant rates for credit card payments on condition that the merchant processes debit card payments through the Visa network.
Australian guidelines
The ACCC has guidelines on misuse of market power. The guidelines cover conduct like refusals to deal, restricting access to an essential input, predatory pricing, loyalty rebates, margin/price squeezing, tying and bundling. They also state:
Businesses that compete by undertaking a successful promotional campaign, undertaking research and development which results in better products or more efficient processes, or passing savings through to consumers will be enhancing competition, not lessening it.
One example the guidelines provide of conduct that would not be in breach is a firm that develops a new, innovative product which it charges a substantial premium on. This is because this conduct is not deterring competition on its merits, rather the higher profits should incentivise competitors to also seek to develop competing products.
While we expect the NZCC will take a similar position to ACCC, we will need to wait for the NZCC’s guidelines.