Restrictive Trade Practices Issues
F: A possible clearance system for trade practices
Unlike mergers, there is no clearance process for trade practices. If there were, parties could ask the Commission to approve the practice on the grounds that it did not contravene the restrictive trade practices provisions of the Act. At present, if parties want to obtain immunity under Part 2 they must seek an authorisation and make their case on public benefit grounds. However, the authorisation process is more complex, expensive and time consuming than a clearance system would be.
We reach a preliminary conclusion that a clearance system should be introduced. It could be useful in relation to conduct that is at the margins of legality and illegality and for technical breaches of the per se prohibitions.
G: A possible collective bargaining arrangement notification process
On 1 January 2007 Australia introduced a notification system for collective bargaining agreements where the total value of the transactions for each party will not exceed $3 million a year. The parties to a valid notification obtain immunity from challenge under the Trade Practices Act unless the ACCC issues a draft objection notice within two weeks. The system is largely intended to benefit small and medium-sized firms that have little or no bargaining power in their dealings with big business. We ask whether such a system should be introduced in New Zealand. It is possible that there are issues in monopsonistic markets, particularly in the health and agriculture sectors.
There are some risks. It would place the onus of proof on the Commission even though it has an information disadvantage. It could also divert Commission resources from important to possibly trivial investigations. The case for introducing a notification system would also be weaker if a clearance system were to be introduced.
On the other hand we do not have any information at present on the likely benefits should a collective bargaining notification system be introduced. Therefore, we have not drawn any conclusions to date on whether a notification system should be introduced.
H: The "lessening competition" jurisdiction test
Authorisation is not available unless the Commission concludes that the conduct in question lessens competition. A possible concern is that the test may be denying parties the opportunity to obtain immunity from legal challenge. Since the 1996 amendments which lowered the jurisdictional threshold from a substantial lessening of competition to a lessening of competition there have been two cases where the Commission declined to grant an authorisation because it concluded that there was no lessening of competition. We have not drawn any conclusions at this stage on whether this is a sufficiently important issue to justify any change.
However, if a trade practice clearance system were to be introduced then it would be important to make sure that the clearance and authorisation systems fit well together. Our view is that the best way to do so would be to copy the interaction between clearance and authorisation for mergers. That is, a person who seeks an authorisation would obtain a clearance if the Commission assessed that the conduct would not be anticompetitive. The "lessening competition" jurisdiction test would therefore be redundant.
I: Commission's powers to revoke, amend or replace authorisations
The Commission can revoke, amend or replace authorisations for three reasons. One reason is "a material change in circumstances since the authorisation was granted" (section 65(1)(b)). In effect, this provision allows the Commission to take away the protection of the authorisation because of events that were unknown at the time the application was considered. Thus, it means that a person who has been granted an authorisation may not have the degree of certainty needed to give effect to the authorised conduct. The main risks would appear to relate to major infrastructure projects with long payback periods.
Our preliminary conclusion in relation to section 65(1)(b) is that the applicant should be able to apply for a revocation, replacement or variation on public benefit grounds but that the Commission's power to make such changes on its own motion should be removed.3
J: Halting the conduct while the Commission considers the authorisation application
Section 59A(2) requires all parties to an agreement to stop giving effect to the conduct while the Commission is considering whether it should be authorised. One purpose of this provision is to discourage parties from behaving anticompetitively and then seeking authorisation. However, section 59B has the same purpose. It states that the immunity does not apply to conduct that predates the granting of an authorisation.
Another purpose of this section is to protect consumers from the irreversible damage that can be associated with anticompetitive conduct. However, in some cases it may harm consumers if it is mandatory to stop the conduct. Our preliminary conclusion is that more flexibility is needed. We consider that section 59A(2) should be modified to provide the Commission with the discretion to order that the conduct be halted.
K: Conference procedures
The Act provides for conferences to be held by the Commission during the course of authorisation and clearance applications. A conference can be called by the Commission of its own motion or at the behest of the applicant or any person to whom a draft determination is sent. The issue is whether anyone other than the Commission should be able to call a conference.
In our view, the main purpose of the conference provisions is to provide an effective means for the Commission to obtain information that will assist it to make high quality decisions. If that view is correct the decision to hold a conference should be the Commission's alone. That is our preliminary view.
Back to Top