Introduction to this consultation
We have seen that land agreements, such as land covenants, have been used in ways that have the potential to lessen competition in the retail fuel, groceries and residential building supplies sectors. We are now trying to understand whether similar issues exist elsewhere in the economy, and, if so, the materiality and breadth of any impacts. To do this, we are seeking your views.
Purpose of this document
We want to understand whether, or to what extent, land agreements (such as covenants) could affect competition.
The Commerce Commission is an independent Crown entity and New Zealand’s primary competition, fair trading, consumer credit, and economic regulatory agency. 1 of its roles (among other things) is to carry out market studies – gather information on a market and identify whether there are features preventing it from working well. In all 3 of its market studies since 2018, the Commission has raised concerns about the adverse effect that land covenants can have on competition amongst businesses.
As part of the Government’s response to the Commerce Commission’s study into residential building supplies, MBIE is undertaking a review of land agreements, such as covenants, and how they affect competition across the economy.
The Commerce Act 1986 (Commerce Act) prohibits covenants, contracts and agreements that have the purpose, effect or likely effect of substantially lessening competition in a market. Despite this, through successive market studies, the Commerce Commission has identified covenants that are used to restrict the availability of land to competitors. It identified such covenants as a potential barrier to entry or expansion in the retail fuel industry, grocery retail industry and most recently in markets for residential building supplies.
The more examples of covenants and other contracts and agreements we are able to consider, the more reliably we will be able to determine what measures will be effective in promoting competition, and deterring anti-competitive behaviour, without unduly interfering with beneficial purposes served by these agreements in different markets.
We are seeking feedback on the problem and possible options simultaneously.
We are using this paper to seek views on both the problem and possible options at the same time. This is slightly unusual, as normally we would consult on whether there is an issue first, then develop options and test these separately. We are following a different process as the findings from the Commerce Commission’s studies indicates that the use of certain land agreements could impact competition, and we want to build on this.
We consider that the market study reports have provided enough information for us to develop high-level options (set out in Chapter 5), but we need more information on the nature of the problem (described in Chapter 4) to refine these further.
We will analyse submissions on this consultation and use these to determine whether there is an issue, and, if so, what possible solutions would be most appropriate. The information provided in submissions will be used to inform advice to Ministers as to whether change is necessary. If we proceed with options for change, we intend to carry out further targeted engagement on workability after consultation closes.
This review focusses on how private land agreements can impact competition between businesses (both retail and non-retail). It does not include:
- Planning regulation – We note the findings in the Commerce Commission’s market studies that planning law can have a significant impact on competition. However, reform of the Resource Management Act 1991 (RMA), and therefore planning laws, is being progressed through a separate review process, and 2 Bills are already under consideration (the Spatial Planning Bill and Natural and Built Environment Bill). Therefore, any comment around the effect of planning regulations on competition should be submitted through those channels. When we refer to ‘planning laws’ in this document, we mean all local government planning tools of regional, district and unitary authorities under the current RMA.
- Māori interests in land – In many cases there will be covenants on land to protect Māori interests and taonga. Care needs to be taken to ensure that the ability to use covenants or other agreements for this purpose is not curtailed. For the purposes of the discussion document, land agreements relating to Māori land will be out of scope, as will land agreements designed to protect Māori interests or taonga. Māori landholders are welcome to submit on any of the issues discussed in this document.
If you have any questions about the scope and issues raised, we encourage you to get in touch with us by email.
- Specific cases for enforcement – While we are asking for examples of land agreements which may impact competition, we are looking for patterns and trends, rather than recommending actions in relation to specific incidents. The Commerce Commission is responsible for compliance with, and enforcement of, the Commerce Act. The Commission’s decision to take enforcement action under the Commerce Act is made on a case-by-case basis with reference to its Enforcement Response Guidelines.