Proposed changes to New Zealand’s competition law have completed the select committee stage of the Parliamentary process, bringing reform a step closer to becoming law. These changes will be of particular interest to businesses considering a merger or looking to be exempt from the Commerce Act for certain conduct, and businesses with substantial market power.
The Commerce (Promoting Competition and Other Matters) Amendment Bill (summarised in our previous update) covers a package of reforms to merger control and other parts of the Commerce Act. The select committee has made largely technical changes in response to submissions, with no fundamental shifts in policy direction.
Key highlights from the select committee's changes are set out below.
Predatory pricing: no changes to new prohibition
A new prohibition on below-cost pricing by a business with substantial market power remains as originally proposed. The select committee left it unchanged despite concerns raised in submissions and a departmental report on the Bill flagging that the prohibition "would increase compliance costs and litigation risk without materially improving legal certainty". The select committee has also changed the commencement date for the new prohibition so that it comes into force the day after Royal Assent (rather than six months later). While changes could still be made to the Bill (including to the commencement provision), businesses with market power will need to start getting ready to assess pricing practices against the proposed new prohibition.
Merger control: tweaks in response to submitter concerns
Submitters on the Bill, including us, raised concerns about the scope and clarity of new Commerce Commission powers to suspend and call-in acquisitions, and "lookback" at previous acquisitions when considering the likely effect of a merger. The select committee has made some tweaks, but not significant changes to the new powers. The changes will mean businesses proposing an acquisition that raises potential competition issues will need to factor in the Commission's powers when considering factors like deal timing and risk.
There will, however, be a new potential avenue to address competition concerns in the merger context – behavioural undertakings. The select committee made some changes to lower the statutory threshold initially proposed for the Commission to accept an undertaking. However, convincing the Commission to accept an undertaking will still be a complex task.
The Bill also reverts to the status quo in terms of what asset acquisitions are caught by the merger regime.
Class exemption power: changes to enable possible 'de minimis' merger exemption
The proposed power for the Commission to issue class exemptions has been expanded so that a class of mergers could be exempt from the Commerce Act. The report says that this would empower the Commission to create a targeted class exemption for smaller mergers that are unlikely to cause competitive harm but might technically contravene the Act. We agree that the power is appropriate in that it may help in avoiding overreach into markets with a small overall impact on New Zealand's economy (or part of it), but the logic is difficult to reconcile: a merger that breaches the Act (even "technically") is by definition one that is likely to substantially lessen competition – ie, to cause competitive harm. Whether the Commission will use this power in practice remains to be seen.
Confidential information: shorter protection period
The Bill limits the application of the Official Information Act to confidential information provided to the Commission. Following concerns raised by the Ombudsman, the protection period has been shortened from 10 years to an initial period of five years.
Notification regime: remains, with some tweaks
The select committee has recommended refinements to the new notification regime, which will provide a streamlined authorisation process for certain types of conduct – such as collective bargaining where the value of the goods or services is $3m or less per party over 12 months, and resale price maintenance.
Pro-competition regulation studies: new power removed
A proposed new power for the Commission to carry out studies of pro-competition regulation has been removed, as existing market study powers cover similar ground. However, the list of recommendations that the Commission can make in a market study has been updated to expressly include recommending the development of pro-competition regulation and reforms to reduce regulatory barriers to competition.
AI and competition law: guidance to follow
The Bill does not address AI directly. However, the departmental report on the Bill acknowledges that businesses would benefit from greater clarity as AI tools increasingly influence pricing and market behaviour. It encourages the Commission to publish guidance making clear that businesses remain liable for conduct that breaches the Act, whether carried out by humans or facilitated by AI tools. Further policy work is expected as technology and overseas approaches develop.
The timing of the remaining Parliamentary stages for the Bill is not certain. If it is passed before the election, many of the substantive changes are likely to come into force in the first quarter of 2027.
If you have any questions about how the changes might apply to your business, please contact a member of our competition law team.
