At Morrison Kent Lawyers we have been monitoring developments initiated by the Commerce Commission during the ongoing COVID-19 pandemic and national lockdown.
In a media statement published on 22 March 2020, the Commerce Commission sought to offer reassurance to businesses providing essential goods and services.
According to the Commerce Commission’s Chair, Anna Rawlings, enforcement action under the Commerce Act will not be taken against businesses “who are cooperating to ensure New Zealanders continue to be supplied with essential goods and services during this unprecedented time.” The Chair continued to say that non-essential cooperation, such as information sharing on pricing or business strategy, will not be tolerated where it is not necessary for the current situation.
The Commerce Commission subsequently issued further guidance for businesses who do not participate in essential goods and services markets. For such businesses the position remains unchanged – legitimate arrangements can, in appropriate circumstances, be accommodated under New Zealand’s competition laws.
In general, the Commerce Act prohibits persons from entering into any arrangement that could harm competition in the New Zealand market. This means that even where an arrangement is not prohibited by one of the ‘cartel’ prohibitions, it will be prohibited if it is likely to be harmful to competition.
A cartel provision, on the other hand, is a provision in any arrangement that is likely to fix prices, restrict supply or divide markets. An arrangement which contains a cartel provision is unlawful unless one of the statutory exceptions apply, regardless of whether the provision has a harmful effect on competition.
The Commerce Act does, therefore, recognise that in certain circumstances, cartel provisions are less likely to harm competition. There are three exceptions to the cartel prohibitions that may apply to a given situation.
The three exceptions cover:
- “collaborative activities”,
- “vertical supply contracts”, and
- “joint buying and promotional arrangements”.
For More Information
Morrison Kent routinely provides advice to businesses on their obligations under the Commerce Act, and are well placed to help you assess your business strategy against the statutory exceptions and other options under the Act.
While the pandemic persists, it will become increasingly important to ensure that your business strategies continue to be lawful, relevant and protective of the continuity of your business.