Bell Gully responds to MED's review of the clearance and authorisation provisions under the Commerce Act 1986

Bell Gully has responded to the Ministry of Economic Development's (MED) discussion document "Review of the Clearance and Authorisation Provisions under the Commerce Act 1986".

The discussion document called for submissions on the authorisation and clearance provisions in Part 5 of the Commerce Act to assist MED determine whether some possible changes could improve the effectiveness and efficiency of these provisions. Part 5 allows the Commerce Commission to clear a merger if it considers that a merger is not anti-competitive, or authorise a merger or trade practice on the grounds that it is of benefit to the public.

Bell Gully made four key submissions on the current merger regime:

• Merger: onus
  Bell Gully considers that the MED should give detailed consideration to amending the Commerce Act to ensure that clearances are only declined where the Commission is satisfied, on the balance of probabilities, that the proposed merger will have the effect of substantially lessening competition in a market. In Bell Gully's experience, the current provisions - whereby the applicant has the onus of satisfying the Commission that a merger will not have, or would not be likely to have the effect of substantially lessening competition - encourages an overly conservative approach and places the barrier too high for some potentially wealth creating mergers to proceed. Bell Gully believes that the current approach has led to the Commission declining some applications simply because "it cannot be sure". In Bell Gully's view, the current onus encourages the Commission to respond conservatively and, when in doubt, to say no rather than making a decision based on the balance of probabilities of what is really likely to occur. It does not encourage a rigorous analysis of the future, whether with or without the merger in place.

• Default number of working days for clearance time frames
  A best practice merger regime should seek to provide certainty to businesses. Uncertainty can have a significant effect on investment decisions and, in the case of publicly listed companies, a significant impact on a company's valuation. Bell Gully therefore supports increasing the statutory default number of days in which the Commission is expected to provide a clearance decision. To provide the required certainty, Bell Gully considers it would be preferable to provide an even more realistic timeframe, for example 40 working days, in the Act but to limit the circumstances in which extensions to that timeframe can be made. Similarly, Bell Gully considers that encouraging certainty also requires that the Commission be statutorily obliged to provide written reasons for its decisions within a settled timeframe.

• Publication of written merger clearance decisions
  Bell Gully considers that the Commerce Act should be amended to require the Commission to publish full reasons for its decisions within 15 working days after the date of the Commission's decision, with the reasons being in the same form as is presently the case. Making this a statutory requirement would again add more certainty to New Zealand's merger process. It would avoid the unsatisfactory position whereby parties considering an appeal of a Commission decision are reliant on the Commission and third parties not opposing an appeal lodged outside the statutory 20 working days.

• Acceptance of behavioural undertakings
  Bell Gully considers that the Commission should have the flexibility to accept behavioural undertakings as part of a divestment package proposed by the applicant. However, the Commission should not be obliged to accept such undertakings. As noted in the discussion document, the flexibility and use of behavioural undertakings is recognised by other jurisdictions, including Australia and the United Kingdom. Bell Gully considers that New Zealand's merger regime would be enhanced by having this option also available here.

Bell Gully also submitted that a clearance process should be available for arrangements as well as for mergers.

Bell Gully's submission reflects the views of our competition law team who are well placed to comment on the procedural issues raised in the discussion document, given their regular dealings with the Commission on merger (and other) matters.

For further information, please contact:

Phil Taylor
Partner

Torrin Crowther
Senior Associate

David Blacktop
Senior Associate

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