This week the Ministry of Business, Innovation and Employment (MBIE) published an issues paper, “Targeted Review of the Commerce Act 1986” (Issues Paper). The Issues Paper essentially focuses on whether NZ’s misuse of market power test and alternative enforcement mechanisms work, and whether NZ needs formal powers specifically aimed at analysing competition across markets.
Legal tests intended to determine whether or not firms with substantial market power are misusing that market power or competing aggressively have caused more debate and contention in most jurisdictions than any other competition law prohibition. NZ is no exception.
Submissions on the Issues Paper are due by 5:00pm on 9 February 2016.
Misuse of market power – exclusionary conduct (s36 of the Commerce Act)
According to MBIE the Issues Paper “seeks to assess the functioning of section 36, as applied by the courts”. In this respect the Issues Paper seeks feedback on what the appropriate criteria for assessment are. MBIE states that it has chosen, on a preliminary basis, the following criteria which it seeks feedback on:
- whether s36 is assuring the long-term benefit of consumers; and
- whether the application of s36 is sufficiently simple.
The Issues Paper also seeks feedback on the following other potential criteria:
- whether s36 should be aligned with other prohibitions in the Commerce Act, and equivalent prohibitions in overseas jurisdictions; and
- implications of the small size and remoteness of the NZ economy in the context of s36.
Alternative enforcement mechanisms
The Issues Paper notes the high cost and delay associated with standard competition law enforcement processes. This is an issue which many jurisdictions face around the world. The two key alternative enforcement mechanisms currently available to the Commerce Commission are administrative settlements and the “cease and desist” regime (the latter having been used only once in 14 years).
To assess NZ’s alternative enforcement mechanisms regime, the Issues Paper seeks feedback on criteria including whether these mechanisms are assuring the long-term benefit of consumers and whether these mechanisms are sufficiently simple.
Market studies
The Issues Paper notes that there has been a “growing trend for the use of market studies by competition agencies”. While particular NZ authorities have varying powers to undertake research, there is no formal power specifically directed at analysing competition across any market. According to MBIE this has been identified by the OECD as a “significant gap in New Zealand’s competition framework.” The Issues Paper identifies various international approaches to market studies, and concludes that whether NZ “needs a formal market studies power is dependent on whether there is a definable gap in its competition framework that aligns with one or more of these approaches”.
A copy of the Issues Paper can be downloaded from MBIE’s website.