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 2 to 23 October 2007. For further details on any matter in this report, just click on the hyperlink below each item.

Ministry of Economic Development (MED)

Final New Zealand Energy Strategy to 2050 launched
The New Zealand Energy Strategy, launched on 11 October, sets out the Government's strategic direction for New Zealand's energy sector until 2050 in response to two major challenges: fighting climate change by reducing emissions, and ensuring New Zealand has secure, clean energy at an affordable price. The final strategy (which follows the Draft Strategy released in December 2006) confirms the Government's view that all new generation should be renewable, except to the extent needed to ensure security of supply. Key aspects of the strategy include:

• providing clear direction on the future of New Zealand's energy system;
• utilising markets and focused regulation to securely deliver energy services at competitive prices;
• reducing greenhouse gas emissions, including through an emissions trading scheme;
• maximising the contribution of cost-effective energy efficiency and conservation of energy;
• maximising the contribution of cost-effective renewable energy resources while safeguarding New Zealand's environment;
• promoting early adoption of environmentally sustainable energy technologies; and
• supporting consumers through the transition.

The New Zealand Energy Efficiency and Conservation Strategy, which was developed alongside the Energy Strategy, was also released on 11 October. It is an action plan for many of the programmes in the New Zealand Energy Strategy and its programmes are complementary to the emissions trading scheme in achieving emissions reductions.
Click here to access the Energy Strategy
Click here to access the Energy Efficiency and Conservation Strategy
Click here to access the media statements

Limited Partnerships Bill: safe harbour and fees regulations
The MED has released a discussion paper outlining proposed regulations to be made under the Limited Partnerships Bill, currently before the Commerce Select Committee. The Bill creates a new form of legal structure called the limited partnership which is a preferred structure internationally for investing in venture capital. It provides for regulations to be enacted dealing with matters including safe harbours (to provide clarity and certainty to limited partners about what activities do not amount to participating in the management of limited partnerships) and fees payable to the Registrar of Limited Partnerships. MED's proposal is that the safe harbours for New Zealand limited partnerships would be a non-exhaustive list of permitted activities set out in regulations. The list would be based on that set out in the report Partnership Law prepared in 2003 by the English and Welsh, and Scottish Law Commissions. The closing date for submissions on the discussion paper is 29 October 2007.
Click here to access the discussion paper

Securities Commission

Securities Commission issues report on Feltex inquiry
The Securities Commission has released its report on its inquiry into the IPO prospectus of Feltex Carpets Limited and the company's compliance with financial reporting and continuous disclosure obligations in the period between its listing in 2004 and the appointment of liquidators to Feltex in late-2006. The report confirms that the prospectus did not breach securities law and was not misleading in any material particulars. It also states that the Commission will not be taking any further action with regard to the prospectus.

In respect of Feltex's compliance with its financial reporting and continuous disclosure requirements the report concludes that:

• Feltex failed to disclose certain material information to the market concerning changes to its banking facility agreement with ANZ in October 2005; and

• Feltex failed to disclose the breach of its banking covenants and did not properly classify its debt in its 31 December 2005 half-year financial statements.

Since Feltex is in liquidation the Commission will not pursue any enforcement action; however it has referred its report to the Registrar of Companies to consider whether any action should be taken against Feltex's directors under the Financial Reporting Act 1993. The Commission's report also noted defences that are potentially available to the directors, including that they relied on the professional advice provided by the company's auditors.

The report further concludes that the work undertaken by Ernst & Young New Zealand in its review of Feltex's 31 December 2005 half-year financial statements failed to meet the required standards. The Commission has referred its report to the Institute of Chartered Accountants of New Zealand (NZICA) to consider whether any action should be taken against Ernst & Young New Zealand and the responsible partner, Gordon Fulton. The NZICA has also been asked to consider whether New Zealand Auditing Standards should be reviewed to ensure that an auditor of a New Zealand issuer is required to retain full control of the full records of its audit or review.

The Commission has asked the ASRB to consider whether any guidance or other action is necessary for the classification of debt in interim financial statements.
Click here to access the complete report

Securities Act Exemption Notices

The following Securities Act Exemption Notice has been published for this period:

• Securities Act (Independent News & Media PLC) Exemption Amendment Notice 2007/303
  This notice, amends clause 8 of the Securities Act (Independent News & Media PLC) Exemption Notice 2003 which sets out the conditions of an exemption from section 37 of the Securities Act 1978.

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

Takeovers Panel

Notice of Meeting Pursuant to Section 32 Takeovers Act 1993
The Takeovers Panel gave notice that on 10 October 2007 it met to consider a complaint from Turners and Growers Limited about the actions of a number of shareholders of Kerifresh Limited since 1 July 2001. On 1 October 2007, Turners gave notice of its intention to make a full takeover offer for Kerifresh (which is a "code company" for the purposes of the Takeovers Code because of its number of shareholders and size of assets). The Panel considered that certain named shareholders may not have acted, or may not be acting, or may intend not to act, in compliance with the Takeovers Code in relation to the acquisition of Kerifresh shares. The Panel made interim restraining orders under section 32(2) of the Takeovers Act 1993, preventing certain shareholders from acquiring or disposing of securities in Kerifresh, and from exercising the right to vote attaching to any shares held or controlled by them. Kerifresh is also restrained from registering any transfers or transmission of Kerifresh securities to or from any of these parties.
Click here for more

Takeovers Panel finds Kerifresh shareholders contravened the Takeovers Code
On 18 October, the Takeovers Panel announced it was not satisfied that certain acquisitions of shares in Kerifresh Limited since 2002 complied with the Takeovers Code. The interim restraining orders made by the Panel on 10 October have been continued until 8 November 2007.
Click here for more
Click here to access the Panel's determination

Takeovers Code Exemption Notices

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

• Takeovers Code (Eastern Bay Energy Trust) Exemption Notice 2007/304
  This notice applies to acts or omissions occurring on or after 1 October 2007 until 30 September 2012, and effectively replaces the Takeovers Code (Eastern Bay Energy Trust) Exemption Notice 2002. The Takeovers Panel has granted an exemption from rule 6(1) of the Takeovers Code to a person who is appointed as a trustee of the Eastern Bay Energy Trust, if the appointment will result in the person being deemed to hold or control an increased percentage in voting rights in Horizon Energy Distribution limited. Eastern Bay is a shareholder of Horizon.
  Click here for more

• Takeovers Code (ICP Biotechnology Limited) Exemption Notice 2007
  This notice applies to acts or omissions occurring on or after 13 September 2007 until 1 March 2009. The Takeovers Panel has granted exemptions to Viking Capital Limited in respect of rule 7(d) of the Code, and ICP Biotechnology Limited in respect of rule 16(b) of the Code. The exemptions have been granted in relation to a proposal for Viking to participate in the shortfall of a renounceable rights issue ICP Biotechnology has made to its existing shareholders.
  Click here for more

Ministry for the Environment

New electricity transmission standards proposed
The consultation process has opened on two proposed national environmental standards for electricity transmission. The proposed standards are solely in relation to the maintenance and protection of electricity transmission structures and do not relate to the building of new transmission lines.
Click here for more

Call-in of Transpower's North Island Grip Upgrade Project
The Minister for the Environment has received 1168 submissions on Transpower's proposed transmission line (200km in length) from Whakamaru to Otahuhu and Pakuranga to supply power to the Auckland and Northland regions with over 1000 submissions opposing the proposal. The submissions will go to the Board of Inquiry for consideration.
Click here for more information on the upgrade and the inquiry process

Reserve Bank of New Zealand

New bank registered
The RBNZ announced on 1 October 2007 that JPMorgan Chase Bank NA has been registered as a bank in New Zealand. JPMorgan is incorporated in New York and will operate as a branch in New Zealand's wholesale markets. JPMorgan will not be a provider of retail banking services.
Click here for more

Reserve Bank releases annual report
On 2 October 2007, the RBNZ released its 2006-2007 annual report for the year ended 30 June 2007.
Click here to access the annual report

New Zealand Commerce Commission (NZCC)

Speeches

The role of the Commission in regulation
On 12 October, the NZCC's Director of Networks branch, Michael Clark, gave a speech to the Electricity Networks Association, providing a brief overview of the NZCC's regulatory role in the context of competition policy and the targeted control (price and quality thresholds) and complementary information disclosure regimes for electricity lines businesses. Mr Clark also discussed the following recent decisions:

• the Unison Networks Supreme Court decision on the initial and revised price path thresholds set by the NZCC;

• the Transpower draft decision not to declare control and to accept new thresholds; and

• the draft decision for the control of gas pipeline services and its relevance to electricity lines businesses (in which he outlines some of the key findings and principles that have been applied to underpin the draft decisions made to date).

He concluded with a discussion on the proposed change to ODV disclosures for information purposes, the reasons and the implications and the immediate priority steps for the Threshold Reset and Information Disclosure work programmes on the NZCC's agenda for 2007-08. A discussion paper is expected to be released on this in late November.

Mr Clark noted that lines businesses can expect more pressure over time to improve efficiency, in terms of quality of service and pricing, and that this is likely to be achieved by merging businesses or even acquiring or selling businesses.
Click here to access a transcript of the speech

Competition and the role of the Commerce Commission
On 9 October, Commerce Commission Chair Paula Rebstock gave a speech to an Aon lunch at the Wellington Chamber of Commerce, providing an overview of the benefits of competition and the role of competition policy. In it she discussed:

• the importance of consumer and competition legislation to facilitate, and regulate competition in the New Zealand as well as the key issues facing telecommunications and electricity regulation;

• some of the threats to competition including cartels, anti-competitive strategic alliances (using the proposed Qantas and Air New Zealand alliance as an example), national champions (i.e., firms that receive extra support to become the dominant or only player in a market) and misleading behaviour; and

• the achievement of competitive outcomes through the NZCC's actions which have a deterrent effect.

Click here to access a transcript of the speech

Media releases

The NZCC has issued the following media releases:

Mergers and Acquisitions

• Pacific Radiology applies for clearance to acquire Wellington Radiology
  The NZCC has received an application from Pacific Radiology Limited seeking clearance to acquire all the assets of Wellington Radiology Limited.
  Pacific Radiology provides both low tech radiology services, such as x-rays and mammograms, and high tech radiology services, such as CT scans and MRI scans, from practice locations in the greater Wellington region. Wellington Radiology provides low tech radiology services from its practice locations in Central Wellington, the Bowen Hospital and in Porirua.
  Click here for more

• Schering-Plough cleared to acquire Organon BioSciences
  The NZCC has cleared Schering-Plough Corporation to acquire 100% of the shares in, or assets of, Organon Biosciences N.V, subject to the divestment undertaking provided by Schering-Plough Corporation to the NZCC under section 69A of the Commerce Act 1986. Schering-Plough is a global science-based healthcare corporation with activities in the prescription and over-the-counter pharmaceutical, consumer and animal health sectors. In New Zealand, Schering-Plough's animal health business operates as Schering-Plough Coopers. Organon Bioscience (incorporated in the Netherlands) is the holding company for the human and animal health activities of Akzo Nobel N.V. Organon BS operates in New Zealand as Organon, the human pharmaceutical business, and Intervet, the animal remedies business.
  Click here for more

• Cavalier and Norman Ellison apply for clearance to form a joint venture
  The NZCC has received an application from Cavalier Corporation Limited and Norman Ellison Holdings Limited seeking clearance to form a new joint venture company (owned by the parties) which will acquire the carpet business of Norman Ellison Holdings and its subsidiaries, and Norman Ellison shareholders will acquire shares in Cavalier. Cavalier, listed on the NZSX, manufactures and distributes broadloom carpets to domestic and export markets. Norman Ellison is a privately owned and operated yarn and carpet manufacturer.
  Click here for more

Industry Regulation and Regulatory Control

• Commerce Commission proposes further price reductions for controlled gas distribution businesses
  The NZCC has released its Authorisation for the Control of Supply of Natural Gas Distribution Services by Powerco and Vector Limited - Draft Decisions Paper setting out its proposal to authorise prices for the supply of Powerco Limited and Vector Limited's gas distribution services which would represent reductions of 42% and 15%, respectively, if implemented. These are further to preliminary price reductions of 9% and 9.5 % respectively, under a Provisional Authorisation issued in 2005. The NZCC is seeking submissions on its paper by 12 November 2007 and anticipates that its final decisions will be presented in February 2008 with a view to the authorisations being implemented by 1 April 2008.
  Click here for more

• Commerce Commission consults on its draft decision to accept an administrative settlement offer from Transpower
  The NZCC is proposing to accept an administrative settlement offer from Transpower, instead of placing Transpower's transmission services under regulatory control (in response to the breach of its price path thresholds in 2003 and 2004 and to Transpower's decision to increase its prices in 2006). On 5 October, the NZCC released for consultation its draft decision paper which seeks feedback on its reasons for the draft decision and provides the NZCC's draft decision to reset Transpower's threshold in such a manner as to give effect to Transpower's settlement offer. Submissions on the proposed settlement must be made by 9 November 2007. Cross submissions are due on 30 November 2007. At this stage, the Commission anticipates its final decision will be released before Christmas.
  Click here to access the press release
  Click here to access the draft decision paper

Telecommunications

• Commission reports to Minister on Sprint's compliance with Service Quality Measures for Relay Service
  The NZCC reported to the Minister of Communications on Sprint International New Zealand Limited's performance in complying with the Telecommunications Service Obligations Deed for Telecommunications Relay Services, which sets out the service quality requirements for meeting the telephone communication needs of deaf, hearing impaired and speech impaired people. The NZCC has advised the Minister of Communications that it is satisfied that Sprint has met all of the Service Quality Measures.
  Click here for more

Consumer issues

• Diners Club eighth to plead guilty over currency conversion fees
  Diners Club is the eighth financial institution to plead guilty to breaching the Fair Trading Act by failing to properly disclose its currency conversion fees. The breaches relate to Diners charge card transactions between 3 January 2002 and 10 June 2003. When customers used their cards overseas during this period they were charged a 1% fee for each currency conversion which was not declared on the Diners Club application forms for supplementary cards, and fee transaction schedules on its charge cards.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

ACCC media releases

The ACCC has issued the following media releases:

Mergers and Acquisitions

• ACCC opposes the proposed acquisition of Kmart by Woolworths Limited
  The ACCC has stated that it would oppose any attempt by Woolworths Limited to acquire Kmart and Officeworks from Coles Group Limited. It notes that although the acquisition of Officeworks in its own right would not be likely to substantially lessen competition (given that Woolworths does not presently operate a similar business to Officeworks) since Woolworths' proposal was for an acquisition of both Kmart and Officeworks, the ACCC had to oppose the combined acquisition of Kmart and Officeworks. The ACCC's investigation found that the proposed acquisition by Woolworths of Kmart would be likely to substantially lessen competition in a number of markets given that Woolworth's Big W is Kmart's closest competitor in a number of important respects. The ACCC has extended its timeline to allow further consideration of the proposed acquisition of Target (also owned by Coles) by Woolworths.
  Click here for more

• ACCC won't oppose acquisitions by Macquarie Media Group
  The ACCC will not intervene in the acquisitions by Macquarie Media Group (MMG) of Southern Cross Broadcasting and of nine regional radio stations owned by Fairfax, after accepting court enforceable undertakings which ensure that Southern Cross Syndication and related assets would be sold to a party independent of MMG in the event that MMG does not on-sell the business to Fairfax as is proposed.
  Click here for more

• ACCC won't oppose proposed acquisition of Alcan by Rio Tinto
  The ACCC will not intervene in the acquisition of Alcan Inc by Rio Tinto plc. Although the ACCC found the acquisition would result in significant aggregation in alumina production, particularly along the east coast, the ACCC considered that other sources of competitive alumina supply existed for the non-integrated purchasers of alumina, particularly from diversion of currently exported alumina into the domestic market.
  Click here for more

Market Behaviour

• Promoting competition or protecting consumers - the role of competition policy and its implications for Australian businesses
  In a speech to the John Curtin Institute of Public Policy Forum, the ACCC Chairman Graeme Samuel discusses the recent amendments to section 46 of the Trade Practices Act relating to the interaction between big and small businesses and the misuse of market power.
  Click here to access the speech
  Click here to access the media release

• ACCC v Trading Post and Google
  The ACCC case against Trading Post and Google Inc alleging misleading and deceptive conduct over sponsored links that appeared on the Google website continues. But the case against the third and fourth respondents, Google Ireland and Google Australia, has been discontinued. The court has made available to the public the ACCC's summary documents outlining the crux of the ACCC's case against Trading Post and Google.
  Click here for more

• Bovis Lend Lease ordered to pay $100,000
  A penalty of $100,000, injunctions and costs have been imposed against Bovis Lend Lease for engaging in conduct contravening section 45E of the Trade Practices Act 1974.
  Click here for more

• ACCC starts proceedings against Harris Scarfe Australia Pty Ltd
  The ACCC has instituted proceedings in the Federal Court against Harris Scarfe Australia Pty Ltd alleging that it engaged in misleading conduct in promoting a storewide sale.
  Click here for more

• Case further defines franchising agreements
  The meaning of a franchise agreement has been further defined in a judgment handed down by the Federal Court which dismissed the ACCC's application against Kyloe Pty Ltd, Impact Design Accessories Pty Ltd and associated persons in July 2006 for alleged contraventions of the Franchising Code of Conduct and section 51AD of the Trade Practices Act 1974.
  Click here for more

• ACCC grants interim approval for queue management system at Dalrymple Bay
  The ACCC has granted interim authorisation to Dalrymple Bay Coal Terminal Pty Ltd to extend the operation of its queue management system which is designed to address the imbalance between the demand for coal loading services at the terminal and the capacity of the Goonyella coal chain.
  Click here for more

Telecommunications

• ACCC seeks submissions on draft local loop pricing principles
  The ACCC is seeking further comment on the appropriate pricing principles for the Unconditioned Local Loop Service (ULLS) which allows telecommunications service providers to gain the use of the copper cables between end users and the telephone exchange. Submissions close on 6 November 2007.
  Click here for more

• ACCC begins public consultation on Telstra's transmission capacity exemption application
  The ACCC has issued a discussion paper on Telstra's application for exemption from standard access obligations over the domestic transmission capacity service on specified routes.
  Click here for more

• Notification of two telecommunications access disputes
  Under Part XIC of the Trade Practices Act 1974, Macquarie Telecom Pty Ltd has notified the ACCC of two access disputes with Telstra Corporation Limited. The disputes relate to the price paid by the Access Seeker to the Access Provider for the Digital Data Access Service and the price paid by the Access Seeker to the Access Provider for the Domestic Transmission Capacity Service respectively. The ACCC has begun the arbitration process.
  Click here for more

Consumer issues

• StoresOnline found in breach of undertakings: workshops get greenlight
  The Federal Court has declined to grant the ACCC an interlocutory injunction preventing StoresOnline International Inc and StoresOnline Inc from running various workshops in Australia.
  Click here for more

• ACCC begins proceedings against StoresOnline for alleged breaches
  In April 2006 StoresOnline provided the ACCC with an undertaking under section 87B of the Trade Practices Act 1974 following court action commenced by the ACCC in June 2005. In that case, the ACCC alleged that StoresOnline had engaged in misleading and deceptive conduct in the promotion and sale of its home business e-commerce software packages. From early October 2006, following the settlement of the earlier proceedings, StoresOnline returned to Australia to run further presentations. The ACCC began legal proceedings alleging StoresOnline contravened the s.87B undertaking in various ways and on numerous occasions during the course of those further presentations.
  Click here for more

• Online retailer recalls freestyle bicycles after ACCC action
  Overstockoutlet Pty Ltd has recalled its Freestyle 51cm steel frame bicycles and offered court enforceable undertakings to the ACCC after independent testing commissioned by the ACCC revealed the bicycles failed to stop in the required distance and did not have the required safety warnings.
  Click here for more

• Federal Court finds Today Tonight misled viewers
  The Federal Court found that Channel Seven broadcasters in Brisbane, Sydney, Melbourne and Perth, misled viewers during broadcasts of Today Tonight, breaching the misleading representations section of the Trade Practices Act 1974 (section 52). The findings relate to stories broadcast on Channel Seven's Today Tonight programme about a property investment training programme known as the 'Wildly Wealthy Women' (WWW). The judgment is significant as the court held that the Channel Seven broadcasters were unable to rely on s65A of the Trade Practices Act, the so-called 'publisher's defence', because they adopted statements made by WWW and had an arrangement with the women as to the general content of the broadcasts.
  Click here for more