Stronger regulation to promote competition passes third reading

Commerce and Consumer Affairs
  • strengthening New Zealand’s anti-monopolisation prohibition (section 36 of the Commerce Act)
  • repealing the safe harbour provisions protecting some intellectual property arrangements from competition law scrutiny
  • other changes to improve the functioning of the Commerce Act and the Commerce Commission.

A law to better protect competition has passed its third and final reading, Commerce and Consumer Affairs Minister, David Clark announced today.

The Commerce Amendment Bill, brings in a host of reforms to deter anti-competitive conduct, including strengthening section 36 of the Commerce Act and prohibiting the misuse of market power.

“When large, powerful firms can exercise market power, they can charge more and produce less. This can really hurt small businesses and consumers,” David Clark said.

“Effective competition between businesses promotes better quality goods and services at affordable prices. It also stimulates productivity and innovation.

“We know that up until now, section 36 in the Commerce Act has been difficult to enforce and insufficient to deter certain anti-competitive conduct.

“The Commerce Commission has been unsuccessful in three of its five cases before the courts. The last of these cases concerned conduct in the early 2000s. It is not sustainable to have a law that the competition authority is not able to enforce effectively.”

“The reforms will align the prohibition with the equivalent prohibition in Australia and uses a test that already operates in other parts of the Commerce Act.

“The amendments to section 36 will also better enable the Commerce Commission and private parties to take action against anti-competitive conduct.

“A section 36 prohibition, like the one passed today, which focusses on damage to competition in the actual market has been 20 years in the making.”

The Bill also introduces other improvements.

“For the first time ever, the Act now broadens the definition of cartel behaviour to include land covenants. The harm restrictive covenants can cause is evident from the Commerce Commission’s market study of the grocery retail sector, which the Government is working to address.

“The Act cracks down on unfair mergers or acquisitions that larger businesses might use to skew the market in their favour. It does this by increasing the monetary penalty the courts can impose to be in the order of $10 million.

“The Bill now also reflects Government’s view that intellectual property rights should not be treated any differently under competition law to other forms of property,” David Clark said.