The Ministry of Business, Innovation and Employment (MBIE) has released a Consultation Paper aimed at strengthening New Zealand’s competition laws, with a focus on the merger control regime and anti-competitive conduct.
1. Review of the merger regime
Mandatory merger control off the table
While New Zealand is one of the few countries a part of the Organisation for Economic Co-operation and Development (OECD) with a voluntary merger regime, the Government is not proposing to follow Australia and change to a mandatory filing regime, noting that the current regime is “working well”.
Nevertheless, MBIE is exploring whether it would be useful for the Commission to have more powers to investigate and deal with mergers that operate outside of the clearance process. These changes would be at the margin and could include:
- stay and/or hold-separate powers: allowing the Commission to suspend completion of a merger without needing to apply to the court for an interim injunction;
- call-in powers: allowing the Commission to require parties to apply for clearance; or
- company-specific mandatory notification powers: allowing the Commission to require certain companies with substantial market power or over a certain size to notify the Commission of any acquisitions (but with no suspensory effect).
Possible introduction of behavioural undertakings
In what would be a more substantial change, the Consultation Paper calls for comment on introducing the ability for the Commission to accept behavioural undertakings in order to address potential competition issues in the merger context. New Zealand is currently somewhat of an outlier in this regard. While these are rarely used in comparable jurisdictions, the Consultation Paper notes that they can have a place in allowing efficiency-enhancing mergers to proceed while satisfactorily addressing competition concerns without the need for divestment.
Changes proposed to SLC threshold
The New Zealand Government is exploring whether our long-standing substantial lessening of competition (SLC) test for assessing mergers should be changed to align with the reform in Australia, by:
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- making explicit that the test includes “creating, strengthening, or entrenching a substantial degree of market power in a market”; and
- addressing “creeping acquisitions” by aggregating the effect of mergers undertaken by the relevant parties over the last three years.
Other amendments to merger control
Comment is also sought on other potential amendments, none of which are likely to fundamentally change how the regime operates. These include:
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- clarifying the definition of “assets” in the context of an acquisition; and
- clarifying the test for a “substantial degree of influence”, which can be relevant when assessing minority acquisitions.
2. Review of the anti-competitive conduct provisions
Proposed introduction of a “concerted practices” limb
The Commerce Act prohibits anticompetitive provisions of “contracts, arrangements or understandings”. However, unlike other jurisdictions (including Australia), the prohibitions do not apply to “concerted practices”, which captures conduct falling somewhere between pure unilateral conduct and conduct which meets the “contract, arrangement or understanding” threshold.
The Consultation Paper cites “price signalling” as an example of where such a change could capture anticompetitive conduct which is not currently caught. The Consultation Paper cites anecdotal evidence of competitors sending price lists to each other when discussing this point.
MBIE is considering several options, including alignment with Australia. Striking a balance in this area is critical given the uncertainty that such changes will inevitably create.
Other amendments to the anti-competitive conduct provisions
The Consultation Paper also discusses the potential for high-level amendments to make the framework for the “collaborative activity” exception in the Act more accessible and efficient.
3. Proposals for new provisions in the Act
Options for new Commerce Commission rule-making powers
MBIE is considering new Commission powers to make industry codes or other rules that could improve competition in specific industries.
In some instances, additional rule-making powers would be a useful tool to address perceived competition issues without the need for a full market study. However, they could also increase the regulatory and compliance burden for businesses. Accordingly, any such powers should come with safeguards governing their use.
Modernising court injunction powers
The current injunction powers in the Commerce Act are for the most part limited to “restraining conduct”. MBIE’s Consultation Paper considers updating these powers to allow for performance injunctions (court orders requiring a person to do an act or thing). The rationale behind the proposal is that performance injunctions could plug potential gaps in the tools currently available to remedy competition harm, while also standardising provisions across sector-specific regimes that already provide for performance remedies.
MBIE has set an aggressive timeframe of 7 February 2025 for feedback on its proposals. Bell Gully will be submitting on the proposals with a view to ensuring the reforms are practically workable and strike an appropriate balance. We welcome feedback from clients and other interested parties on the issues covered. We are also happy to help clients with their submissions.
If you have any questions about the matters raised in this article, or if you’d like assistance with a submission, please get in touch with the contacts listed or your usual Bell Gully adviser.