Government to introduce stronger laws to prevent anti-competitive conduct
Published: 08 June 2020
The Government has agreed on changes to the Commerce Act to ensure New Zealand business can compete on a level playing field, and that competition law remains effective for the long-term benefit of consumers.
Amending section 36 of the Commerce Act
The main change involves amending section 36 of the Act. Section 36 is designed to prevent businesses with substantive market power from suppressing competition. Section 36, as it is currently drafted, has tilted the playing field in favour of incumbent firms and distorted competition. Determining whether a business has misused its market power is costly and difficult to establish, and this reduces incentives to comply with the law.
The Government will strengthen the law to prohibit firms with market power from engaging in conduct that substantially lessens competition, regardless of whether they would have done so if they did not have market power.
Other changes to the Commerce Act will include:
- allowing anti-competitive intellectual property arrangements to be assessed under competition law
- increasing penalties for businesses engaging in anti-competitive mergers
- technical changes to the treatment of anti-competitive covenants
- increasing the maximum number of Commerce Commissioners from six to eight to reflect the Commission’s growing responsibilities in recent years
- making it easier for the Commerce Commission to cooperate with other domestic agencies by sharing information it holds, subject to appropriate safeguards.
These changes are expected to be introduced by early 2021, depending on the Parliamentary schedule.
Importance of competitive markets
Competitive markets provide benefits for both consumers and businesses. Healthy competition prevents larger businesses from exerting their market power over small businesses, and protects consumers from higher prices in uncompetitive markets.
An effective prohibition against misuse of market power is particularly important in New Zealand as we have a high proportion of concentrated markets. As New Zealand’s economy recovers from the impacts of COVID-19 and business activity picks up, the Act has a crucial role in ensuring businesses can compete on their merits.
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