New Zealand: Supplementary Order Paper to amend the Cartel Bill

In this FYI we report on a recent Supplementary Order Paper (SOP) introduced to amend the Cartel Bill – this suggests the enactment of the Cartel Bill isn’t far off. We also provide an update on developments in Australia where the Final Report of the “Harper Review” proposes some major competition law changes.

Cartel Bill: coming closer

Previous FYIs have discussed the content of the Cartel Bill and its implications for businesses. You will recall that among other matters the Cartel Bill broadens the scope of cartel conduct, provides for a “collaborative activities” exemption, and introduces prison sentences for cartel conduct. The Bill has taken quite some time to be enacted: it was first introduced to Parliament in late 2011. On 31 March 2015 a Supplementary Order Paper was put forward clarifying the transitional regime for the Cartel Bill. In summary, there will be a nine month transitional period after the Cartel Bill comes into force. Proceedings cannot be brought for conduct occurring during the nine month transitional period that breaches the prohibition on giving effect to a cartel provision. However, the existing provisions of the Commerce Act relating to price fixing and its exemptions (such as the joint venture exemption) will continue to apply during the transitional period. This SOP indicates that the Government is finally turning its mind to passing the Cartel Bill. The Bill is currently 16th on the Order Paper. The transitional period proposed in the SOP will give companies time to review their existing agreements to make sure they are compliant with the expanded cartel conduct prohibition before it starts to bite.

Australia: the Harper Review

The Final Report of the Competition Policy Review (known as the Harper Review) was also released in March 2015. The review is the most wide-reaching stocktake of the competition policy framework across the Australian economy in recent times. At some 539 pages long, the Final Report makes extensive recommendations for the reform of Australia’s competition law, policies and institutions. Some key recommendations are listed below.

Proposed amendments to the Competition and Consumer Act 2010 (CCA)

A proposed change that has attracted significant publicity relates to s46 of the CCA. Section 46 prohibits taking advantage of market power for a proscribed purpose (the equivalent of s36 of the Commerce Act in NZ). The Report considers that s46 is deficient in its current form. In a major change, the panel proposes that s46 should instead prohibit conduct by firms with substantial market power that has the purpose, effect or likely effect of substantially lessening competition. These proposed changes to s46 will be watched closely in NZ, given past criticism of the effectiveness of s36. A shift to an “effects” based test for taking advantage of market power would be a sea-change, given the issues that have arisen in particular with establishing the “taking advantage” and “purpose” elements of s36 in this country. In other changes, the panel proposes:

• various changes to the CCA’s cartel prohibition provisions to simplify them;
• the CCA’s price signalling provisions should be replaced by extending s45 (which governs contracts, arrangements and understandings that affect competition) to also cover “concerted practices” that have the purpose, effect or likely effect of substantially lessening competition;
• the prohibition on exclusive dealing should be removed. However, secondary boycott provisions should be retained and effectively enforced.

Reforming the ACCC

The panel recommends separating the functions of the ACCC and creating two new competition bodies. It also recommends creating a separate body responsible for competition advocacy and education, to be called the Australian Council for Competition Policy. This body would have the power to undertake market studies at the request of any government, and could also consider requests from market participants either to recommend changes to anti-competitive regulations to relevant governments or refer breaches of the law to the ACCC for investigation. While the ACCC should retain its existing competition and consumer functions, the panel recommends establishing a separate access and pricing regulator with responsibility for existing regulatory functions undertaken by the ACCC (and also the National Competition Council and Australian Energy Regulator). Lastly, the panel considers the ACCC would benefit from a more diverse range of views and experience at the Commission level. It recommends introducing part-time Commissioners to the ACCC whose commitments beyond the ACCC would broaden its perspective. Similarly, the panel recommends ending the practice of giving Commissioners specific responsibilities, so that the Commission as a whole is required to consider all sectors and interests.

Next steps

It is up to the Australian Minister for Small Business, the Honourable Bruce Billson, to review the panel’s recommendations. Minister Billson has stated that he will engage in a consultation process before deciding which of the Report’s recommendations to adopt. We will keep you updated on the outcome of the recommendations in Australia.

How does this impact NZ?

In NZ the Government has already signalled there will be a review of our competition laws in 2015. This review will include the operation of s36. As a result, these recommendations in the Harper Review in Australia are timely for NZ, and will no doubt be closely scrutinised. In the meantime, the main focus here will be on when the Cartel Bill comes in to force. Given the significant changes proposed by the Bill, companies will need to look closely at their existing agreements to make sure they are compliant. Please contact one of our competition experts below if you have any immediate questions. Otherwise we will continue to keep you updated on the Bill’s progress through Parliament.