The Bell Gully Regulator Report lists recent changes, decisions and developments at the main New Zealand and Australian corporate, commercial and competition regulatory bodies. This edition covers the period from 24 October to 13 November 2007. For further details on any matter in this report, just click on the hyperlink below each item.

Ministry of Economic Development

Consultation on Telecom's Draft Separation Plan
On 26 October 2007, the Minister of Communications invited comment on Telecom's draft Separation Plan. Telecom's draft plan was submitted following the issuing of the Minister's determination on 26 September 2007. In accordance with the Telecommunications Act, operational separation requires Telecom to:

• separate at least three key business units within Telecom - a stand-alone, arms-length fixed network business network (referred to as the Access Network Services (ANS) Unit), one or more arms-length wholesale units, and one or more arms-length business units that provide one or more other functions;
• establish an Independent Oversight Group; and
• implement the principle of equivalence of supply of relevant telecommunications services.

After the public consultation period has been completed on 23 November 2007, Telecom must, in consultation with the Minister of Communications, amend the separation plan in light of public comments, and submit the amended separation plan within 15 working days from the end of the consultation period. If the Minister declines to approve the amended separation plan, Telecom will be given a further opportunity to make changes and resubmit a revised separation plan. If the Minister still declines to approve the revised separation plan, he can take steps under the Telecommunications Act to have the plan finalised to his satisfaction
Click here to access Telecom's Draft Separation Plan

Securities Commission

Securities Commission review of class exemption notices - update of project report
The Securities Commission has released a report updating the project report of 13 August 2007 which outlined the Commission's decisions on a number of class exemption notices. This update report provides details of exemption notices reported in the Gazette and updates progress in respect of amendments to three remaining exemption notices which are currently in the final stages of drafting.
Click here to read the update report

Review of financial reporting by issuers - Cycle 5
In Cycle 5 of the Securities Commission's review of the financial reporting practice of issuers, the Commission reviewed the financial reports of 40 issuers with balance dates from 31 March 2006 to 30 September 2006. The overall findings of Cycle 5 were similar to the results of earlier cycles with slightly fewer significant matters in this cycle compared with earlier cycles. No occurrences of statutory non-disclosures were found in the Cycle 5 review. Key issues identified in the application of NZ IFRS included presenting the correction of prior period errors as transition adjustments, the incorrect labelling of comparatives and the treatment of GST in the preparation of the cash flow statement.
Click here to read Cycle 5

The Bulletin
The Securities Commission has released the October 2007 edition of the quarterly Bulletin.
Click here to read the Bulletin

Look Learn Invest - new website to help investors
On 6 November, the Securities Commission launched a campaign aimed at helping people make better investment decisions. The campaign is centred around a website www.looklearninvest.org.nz and provides information so people are able to choose investments that suit their needs and meet their goals. The website provides advice ranging from what kinds of investments are available, to the assistance the law provides to investors in New Zealand.

Securities Act Exemption Notices

The following Securities Act Exemption Notice has been published:

• Securities Act (Overseas Companies) Exemption Amendment Notice 2007/326
  This notice amends the Securities Act (Overseas Companies) Exemption Notice 2002 by extending the exemptions granted under clause 6 of the principal notice to securities that are offered to holders of securities in another overseas company under an arrangement that results in a capital reduction of that overseas company.

To view a list of all of the Securities Act Exemption Notices currently in force click here

Takeovers Panel

Takeovers Panel finds Kerifresh parties have not complied with the Code
Over the last month, the Takeovers Panel has held several meetings pursuant to section 32 of the Takeovers Act 1993, with the most recent on 7 November, to consider a number of matters relating to Kerifresh Limited.

The Panel originally elected to hold a meeting on 16 October when faced with a complaint from Turners and Growers Limited concerning certain actions of a number of shareholders of Kerifresh since July 2001. The Panel's determination at this meeting was that the Takeovers Code (the Code) had not been complied with in respect of various acquisitions of Kerifresh shares between 2002 and 2005.

The second meeting was held on 30 October, upon the Panel becoming aware of an offer made by Lawrence Bruce Fletcher to purchase up to 335,000 shares in Kerifresh Limited. The Panel was conscious the Code may not have been complied with in the making of the offer of shares to Mr Fletcher. However, the meeting was convened with the Panel taking the view to hold a third meeting in order to make an informed decision as to whether to exercise their powers under section 32(2) of the Takeovers Act. In the interim, the Panel issued three temporary restraining orders, all which expired at the close of business on Friday, 9 November 2007. The first restraining order was to Kerifresh Limited, ordering the company not to register the transfer or allot securities to GDP Trustees Limited or Lawrence Bruce Fletcher. The second and third were to GDP Trustee Limited and Lawrence Bruce Fletcher, restraining both parties from acquiring or disposing of securities in Kerifresh Limited and from exercising the right to vote attaching to securities in Kerifresh Limited.

The most recent meeting occurred on 7 November, where the Panel determined, for the purposes of section 32(3) of the Takeovers Act:

• that it was not satisfied that Jonathan McHardy complied with rule 6 of the Takeovers Code when he with Hamish McHardy, as trustees of the Murrayfield Trust, acquired 597,316 shares of Kerifresh on 29 May 2002;

• that it was not satisfied that Lawrence Fletcher complied with, is complying with, or intends to comply with, rule 6 of the Code, in relation to his offer to acquire up to 500,000 voting rights in Kerifresh (of which 181,000 have already been acquired or have been contracted to be acquired);

• that it considered that Jonathan McHardy and Hamish McHardy have contravened the Code by being directly, and knowingly concerned in, or a party to, the contravention of the Code by Lawrence Fletcher detailed above.

The Panel made a number of additional restraining orders which will expire on 30 November 2007 and will proceed to publish its statement of reasons.

Click here to read the announcement in relation to the decision to hold a second meeting
Click here to read the notice of meeting pursuant to section 32 of the Takeovers Act 1993
Click here to read the Panel's determination at the third meeting

Takeovers Code Exemption Notices

The following Takeovers Code Exemption Notices have been published for this period:

• Takeovers Code (Metlifecare Limited) Exemption Notice 2007/319
  This notice applies to acts or omissions occurring on or after 25 October 2007 and expires on the close of 30 June 2008. The Takeovers Panel has granted an exemption from rule 6(1) of the Takeovers Code to a number of Macquarie entities in respect of any increase in the percentage of voting rights in Metlifecare Limited controlled by them as a result of the merger of Macquarie Bank Limited and Macquarie Group Limited under the Corporations Act 2001 (Commonwealth of Australia).
  Click here for more

• Takeovers Code (Fulton Hogan Limited) Exemption Notice 2007/327
  This notice applies to acts or omissions on or after 4 September 2001 and expires on 30 November 2007, exempting Shell New Zealand Holding Company Limited, each of the shareholders in Fulton Hogan Limited that represent interests of the Fulton family, and Trustees Executors Limited and Catherine Valpy Dunn as trustees of the Catherine Valpy Dunn Family Trust from rule 6(1) of the Takeovers Code. The exemption is granted in relation to certain increases in their voting control that resulted from a number of transactions occurring between September 2001 and July 2007.
  Click here for more

• Takeovers Code (Fulton Hogan Limited) Exemption Notice (No.2) 2007/328
  This notice applies to acts or omissions occurring on or after 27 October 2007 and expires on 31 October 2009. The Takeovers Panel has granted exemptions to:

• Shell New Zealand Holding Company Limited from rule 6(1) of the Code, subject to conditions, in relation to any increase in the percentage of voting securities which are held or controlled by Shell that results from Fulton Hogan Limited acquiring its own voting securities; and

• Any person who is a Fulton family shareholder from rule 6(1) of the Code, subject to conditions, in relation to any increase in that person's voting control that results from:

• Fulton Hogan acquiring its own voting securities;

• Allotments of voting securities under Fulton Hogan's employee share scheme;

• Allotments of voting securities under Fulton Hogan's share bonus scheme; and

• Transfers of voting securities between persons who are Fulton family shareholders.
Click here for more

Reserve Bank of New Zealand

Release of new statistics on non-bank financial institutions
Since December 2004, the RBNZ has conducted a quarterly survey of non-bank financial institutions, namely financial institutions with total assets of $100m or more at the consolidated group level. This new data will be released in conjunction with the regular survey outputs for both registered banks and total non-bank financial institutions, and can be found on the total non-bank financial institutions webpage.
Click here to read more

Reserve Bank restructures Financial Stability Department
On 1 November, the Reserve Bank announced changes to its Financial Stability Department to enhance management of the Bank's expanding role in maintaining the stability of New Zealand 's financial system. These changes follow the Government's recent decision that the Bank will become responsible for regulation of non-bank deposit taking institutions and insurance companies. In preparation for the new role, the Financial Stability Department has been replaced by two new departments - the Prudential Supervision Department (responsible for bank supervision and regulation of non-bank deposit-takers and insurance companies) and the Financial Markets Department (responsible for the Bank's domestic and foreign exchange markets activity, and for research and analysis on macro-financial stability).
Click here to read more

New Zealand's financial system resilient
On 7 November, the Reserve Bank released its Financial Stability Report, a twice-yearly report assessing the health of the New Zealand financial system.
Click here to access the report

The Treasury

Two Treasury policy perspectives papers released
On 31 October, the Treasury released two policy perspective papers in the October round of its working papers series. Its paper entitled "Investor Protection and the New Zealand Stock Market" examines whether investor protection issues and concentration of ownership have contributed to the underdevelopment of the New Zealand stock market. The paper suggests that it is more likely that other factors, such as low savings in the form of financial assets, the tax treatment of savings and trans-Tasman integration of capital markets have contributed to the underdevelopment of the New Zealand stock market. It notes that further regulatory reforms are unlikely to have a significant impact on the development of the New Zealand stock market.
Click here to read more

New Zealand Commerce Commission (NZCC)

Speeches

Commerce Commission: Regulation and enforcement in the Finance Sector
On 25 October, Commerce Commission Chair Paula Rebstock gave a speech to the New Zealand Credit and Finance Institute National Conference providing an overview of the Commission's role in promoting compliance with the Credit Contracts and Consumer Finance Act (CCCF Act) in the finance sector. In it she discussed:

• what the CCCF Act sets out to achieve and its relationship with the Fair Trading Act;

• what the NZCC has been doing to enforce the Act since its introduction in 2003. She notes that the NZCC initially concentrated on buy-back transactions, but since 2006 the NZCC has also focused on the other types of transactions covered by the Act. Enforcement actions have been targeted against credit providers who have failed to meet the disclosure requirements of the Act and also against credit providers charging more than they should for prepayments; and

• the NZCC's priority areas for 2008, which include establishing precedents for default and early repayment fees.

Click here for a transcript of the speech

The Future Landscape of Telecommunications
On 24 October, Telecommunications Commissioner, Dr Ross Patterson gave the final address of the Vector Winter Lecture Series in which he discussed the telecommunications landscape following the 2006 amendment of the Telecommunications Act. The speech covers the unbundling of the copper local loop and the introduction of a new regulated bitstream service as well as the NZCC's work in the mobile market and the role it has been given as a sector monitor. Dr Patterson also briefly touches on the next phase of telecommunications development, namely Next Generation Networks.
Click here for a transcript of the speech

Media releases

The NZCC has issued the following media releases:

Industry Regulation and Regulatory Control

• Commission receives application for EIR Act exemption from Babcock & Brown International Limited
  The NZCC has received an application from Babcock & Brown International Pty Limited seeking exemption from section 17 of the Electricity Industry Reform Act 1998 (the EIR Act) in relation to Powerco, Glenbrook Power Station and Te Rere Hau wind farm. Section 17 of the EIR Act prohibits the cross-involvement of electricity lines and supply businesses.
  Click here for more

• Commission receives application for EIR Act exemption from Lloyd Morrison
  The NZCC has received an application from Lloyd Morrison seeking exemption from section 17 of the EIR Act in relation to his nomination for a position of director of Auckland International Airport by Infratil. Currently, Lloyd Morrison is an Infratil appointed director of Wellington International Airport Limited, TrustPower Limited and several other companies.
  Click here for more

• Electricity Industry Reform Act: Commission grants exemption to the Lines Company
  The NZCC has granted The Lines Company Limited (TLC) a limited exemption under the EIR Act in relation to its proposed involvement in the development of a hydro-generation plant, located on the Waikohu Stream near Gisborne. The limited exemption to TLC was granted in respect of section 17 of the EIR Act in relation to the appointment of managers to the board of TLC's wholly owned subsidiary Matawai Hydro Limited through which the hydro-generation plant will be developed.
  Click here for more

Mergers and Acquisitions

• Transpacific Industries cleared to acquire parts of EnviroWaste Services provided assets are divested
  The NZCC has cleared Transpacific Industries to acquire the following business and assets of EnviroWaste Services:

• solid waste collection businesses in Blenheim and Nelson;
• solid waste collection business in Christchurch;
• solid waste businesses in Timaru and Oamaru; and
• solid waste collection business in Dunedin.



The clearance is given on the undertaking Transpacific Industries will divest:

• the front-end-load bin solid waste collection businesses and assets in Nelson, Christchurch, Timaru and Dunedin; and
• the privately contracted wheelie bin solid waste collection business in Dunedin.
Click here for more

Telecommunications

• Final determinations for unbundled local loop
  The NZCC has issued its final determinations on the price and non-price terms on which Telecom must make unbundled copper local loop (UCLL) and co-location regulated services available to other telecommunications providers. The local loop is the wire running from your house or business to Telecom's local exchange often referred to as the "last mile". Unbundling of the local loop will allow other telecommunications providers to use Telecom's last mile network to deliver services to their own customers. The associated co-location service allows other providers to put their local loop equipment in Telecom's exchange buildings.
  The final determinations set monthly rental charges for access to the local loop service at $19.84 per month for urban areas and $36.63 per month for non-urban areas. The charge for the transfer of a customer to the UCLL service is set at $74.83.
  Click here for more

• Draft Determinations released
  The NZCC has released its 2006/07 draft determinations on:

• the cost of the Telecommunications Relay Service (TRS) for the hearing impaired; and
• the allocation of the cost of Telecommunications Service Obligations (TSO) for local residential telephone service and for the TRS.

Under Part 3 of the Telecommunications Act 2001, TSO are entered into in order to facilitate the supply of certain telecommunications services that may not otherwise be supplied on a commercial basis, or at a price that is considered by the Minister of Communications to be affordable to the affected end-users.
Click here for more

Consumer issues

• Geneva Finance refunds customers after Commerce Commission investigation
  Geneva Finance Limited has refunded $588,114 to over 900 customers, following an out-of-court settlement with the NZCC. Under the settlement, Geneva Finance admitted that it breached the Fair Trading Act by representing when it sent statements and or reminder letters to those customers affected by the breach that it had the right to charge customers additional interest and fees on their loans after security items were repossessed and sold.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

The ACCC has issued the following media releases:

Mergers and Acquisitions

• ACCC not to oppose BUPA/MBF health insurance merger
  The ACCC will not intervene in the proposed merger of BUPA Australia Pty Ltd and MBF Australia Limited. BUPA and MBF are both registered providers of private health insurance which have a presence in every Australian state and territory.
  Click here for more

• ACCC to oppose Pact Group proposed acquisition of Brickwood Holdings
  The ACCC has stated it will oppose Pact Group's proposed acquisition of Brickwood as the proposed acquisition is likely to substantially lessen competition for the manufacture and supply of PET bottles in Queensland, New South Wales and Victoria. Pact Group requested informal merger clearance in relation to the proposed acquisition of the packaging business of Brickwood Holdings Pty Ltd, Logan Moulders Pty Ltd, Full View Plastics Pty Ltd and the units in the Full View Plastics Unit Trust (together Brickwood).
  Click here for more

• ACCC not to intervene in Google's acquisition of DoubleClick
  The ACCC will not intervene in Google Inc's proposed acquisition of DoubleClick Inc.
  Google sells advertising space on its own websites as well as on third party websites and owns the leading internet search engine in Australia. DoubleClick develops software that allows publishers and advertisers to display, or "serve", graphical advertisements onto websites.
  Click here for more

Market Behaviour

• ACCC welcomes record penalties against Visy: Calls for stronger cartel law
  The Federal Court has ordered a record penalty of $36 million against Visy Board Pty Ltd and its director and owner, Mr Richard Pratt, following Justice Peter Heerey's findings that Visy Board had engaged in price-fixing and market-sharing contraventions of the Trade Practices Act 1974 with its rival, Amcor Limited.
  This penalty incorporated a penalty against Mr Pratt for his role in approving the overarching understanding between Visy and Amcor. The court also ordered separate penalties of $1.5 million on Visy Board's former CEO, Mr Harry Debney, and $500,000 on former Visy Board General Manager, Mr Rod Carroll, for their respective conduct in the contraventions by Visy Board.
  Click here for more

• ACCC allows Victorian Football Federation uniform arrangements
  The ACCC has issued a decision in relation to the exclusive dealing notification lodged by the Football Federation Victoria (FFV), deciding not to take further action in relation to the conduct associated with the FFV's apparel licensing program.
  The FFV, which governs, administers and regulates football in Victoria, lodged the notification in respect of its requirement that the 450-plus football clubs competing in its various competitions only use uniforms manufactured by a restricted list of third party suppliers licensed by the FFV.
  Click here for more

• $121,250 penalties against Netti Atom, National Sales Manager for resale price maintenance
  Penalties totalling $121,250 have been imposed on Netti Atom Pty Ltd and its National Sales Manager for resale price maintenance under section 48 of the Trade Practices Act 1974 following ACCC court action.
  Click here for more

Telecommunications

• ACCC begins public consultations on Telstra's exemption applications for fixed line services
  The ACCC has issued two discussion papers in relation to fixed line service exemption applications from Telstra. The first discussion paper relates to Telstra's applications for exemption from the standard access obligations for the public switched telephone network originating service. Telstra has sought exemption in a total of 404 exchange service areas. The second discussion paper relates to Telstra's applications for exemption from the standard access obligations for the local carriage service and wholesale line rental service in 16 exchange service areas in metropolitan Australia.
  Click here for more

• Interim determinations in telecommunications access disputes
  The ACCC has published interim determinations in four telecommunications access disputes regarding the supply of the PSTN Originating and Terminating Access services from Telstra Corporation Ltd to Optus Networks Pty Limited and Optus Mobile Pty Limited. The interim determinations provide that the charges payable by Optus to Telstra for the period up to 31 December 2007 are as set out in the pricing principles and indicative prices for the PSTN Originating and Terminating Access services.
  Click here for more

• ACCC issues final decision on regulation of the Line Sharing Service
  The ACCC has released its final declaration decision for the Line Sharing Service (LSS) deciding to regulate the LSS on a national basis until 31 July 2009 in the long-term interests of end users. ACCC Chairman, Mr Graeme Samuel, said the ACCC's final view was that regulation of the LSS will promote competition in broadband markets, which will allow consumers to choose from a wider range of broadband service providers, increasing their opportunity to gain a more competitive service-price offering.
  Click here for more

Consumer issues

• ACCC accepts court enforceable undertakings from iSelect over potentially misleading advertising
  The ACCC has accepted court-enforceable undertakings from iSelect Health Pty Ltd following concerns in relation to certain representations that it made in the promotion of its service. iSelect recommends health insurance policies to the Australian public via an online search engine on its website as well as through its call centre. After the ACCC raised its concerns with the company, iSelect ceased making the alleged misrepresentations and took steps to implement a trade practices compliance program.
  Click here for more

• ACCC scrutinises "green" marketing
  Mr John Martin, addressing the ACCORD Conference 2007, said there has been a steadily increasing number of inquiries and complaints around "green" marketing.
  In light of the growing number of complaints, the ACCC is taking a closer look at a number of the green claims that are being made at the moment, and all businesses must ensure they are not misleading their customers with such claims. The ACCC intends to ramp-up its green compliance activities with a combination of business and consumer educative initiatives and targeted enforcement action.
  Click here for more

• Federal Court orders StoresOnline to amend workshop presentations
  The Federal Court has granted the ACCC a number of interlocutory court orders against StoresOnline International Inc and StoresOnline Inc, to discourage StoresOnline, with the sanction of contempt, from giving presentations in a way that breaches a section 87B undertaking given to the ACCC in 2006 to settle earlier legal proceedings. The ACCC sought the interlocutory injunction to prevent the StoresOnline workshops from being conducted because of its concern that StoresOnline had breached and would continue at its upcoming workshops to breach the obligations in its s.87B undertaking. The matter will now proceed to final hearing.
  Click here for more

• B33hive addresses ACCC concerns over advertising
  Premium SMS service provider B33hive Pty Ltd has amended its radio advertising and internet pages so that the conditions of entering Lowball (a reverse auction SMS competition advertised across regional Queensland and New South Wales) were clear to consumers from the outset. The ACCC was concerned that the radio advertisements failed to adequately refer the consumer to the terms and conditions of the competition, available on the internet. Further, it was not made clear that by entering the competition the consumer was accepting an ongoing SMS subscription for which they would be charged.
  Click here for more

• ACCC grants authorisation to Retailer Alert Scheme
  The ACCC has issued a final determination granting conditional authorisation to a national Retailer Alert Scheme, which is designed to deal with inappropriately named or packaged alcohol products. If a complaint about the name or packaging of an alcohol beverage is made, and the product is found not to comply with the Alcohol Beverages Advertising (and Packaging) Code, then a Retailer Alert will be issued. Retailers who are signatories to the code have agreed not to place further orders for stock that is the subject of a Retailer Alert. Suppliers who are signatories to the code, and whose products are the subject of a Retailer Alert, have agreed to cease supplying non-compliant stock to the market, and to reimburse retailers for non-compliant stock returned to the supplier.
  Click here for more