Home / Uncategorized / The New Cartels Regime – what protection does it offer shippers?

 

As has previously been reported, the Commerce (Cartels and Other Matters) Amendment Act 2017 finally passed in August 2017. The Act amends the Commerce Act 1986 to better provide for pro-competitive collaboration between entities while also deterring anticompetitive cartel conduct.

Significant changes introduced by the Act included:
1. Replacing the “per se” prohibition on price fixing with a prohibition on “cartel provisions”, defined as a provision with the purpose or effect of “fixing prices”, “restricting output”, or “allocating markets”. As defined, these terms frequently appear in joint venture, distribution and franchise agreements;
2. Improved exceptions for certain pro-competitive conduct – namely, collaborative activities, vertical supply contracts and joint buying agreements;
3. The introduction of a clearance regime (similar to that already available for mergers) for companies wishing to enter arrangements that might include a cartel provision, but might also be regarded as a collaborative activity; and
4. A new regime for the international shipping industry, previously excused from the Commerce Act sections, introducing a targeted exception for specified activities such as vessel sharing, that improve the services supplied to importers and exporters.

After a nine-month transition period, the new “cartel provision” sections will come into force in mid-May this year, however there is a two year transitional period for agreements relating to international shipping (August 2019). Compliance with the new regime is particularly important given that earlier this year the Government introduced a new Bill to criminalise cartel conduct.

Competitor Collaboration Guidelines
The Commerce Commission has published its Competitor Collaboration Guidelines to shed light on how it will enforce the cartel prohibition, their approach to the new rules on collaboration, and how clearance applications will be processed. The Guidelines can be found here.Competitor-Collaboration-guidelines-January-2018

The Commission Commission’s Katie Rusbatch (Head of Competition) and Harriet Young (Policy analyst) presented on these guidelines at our recent OGM. A copy of their presentation can found here. Commerce Commission presentation to Shippers Council OGM 21.02.18

It was noted that no guidance has yet been issued on the clearance process for international shipping exceptions. It is a complex field and a new and untested regime – the Commerce Commission is open to assistance from the NZSC in this matter, and we hope to work closely with them in this area.

NZSC also took the opportunity to underline the rapid change occurring in the international shipping sector and the need for a close watch on potential anti-competitive activities.

Market studies powers

In this regard we note that in December last year, newly appointed Minister of Commerce and Consumer Affairs, Kris Faafoi indicated he would like to “take the politics out” of decision making on market studies by granting the Commission the ability to launch inquiries on its own initiative. The stated aim was to introduce these changes before the end of 2018, to be ready for action in 2019. The comments mark a shift from the previous Government’s position, which was that such inquiries should require the Minister’s approval.

Reform of s 36 – taking advantage of market power
The prospect of reform to s 36, relating to taking advantage of market power, is also on the horizon. The Labour Party’s 2017 election manifesto stated that the current approach to that section (ie the counterfactual test), was inadequate and merited a broader review than the “narrow review” commissioned by National earlier last year. If the Government does look to change the law, they could look to the recent changes introduced in Australia. Those changes included:
1. Removal of the “taking advantage” element, which does away with the need for the counterfactual test altogether; and
2. Amending the section so that it applies not only where there is one of the prescribed anti-competitive purposes, but also where the conduct has an anti-competitive effect.

 
 
 
 
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