2012 achievements

The Commerce Commission has ended the year with a welcome Christmas present for former Credit Sails investors after a $60 million settlement with the companies involved. It was a very satisfying way to end a busy year. Here’s a quick look back at our year.

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It’s the putting right that counts

When it comes to protecting consumers we have a range of tools at our disposal. We can litigate, seek settlements that compensate affected consumers, and we can educate businesses and consumers. Here are some of our most notable achievements.

Fair Trading Act

  • We settled with five companies after our investigation into the failed Credit SaILS investment product. While the companies involved have not accepted liability they have agreed to create a $60 million settlement fund for eligible Credit SaILS investors.
  • IAG paid up to $3.48 million to customers affected by miscalculations in their annual insurance adjustments following a settlement with the Commission. Many of the customers were Canterbury earthquake victims.
  • Vodafone was fined $960,000 for three misleading advertising campaigns. Vodafone has responded constructively to the litigation and has upgraded their compliance programme.
  • Christmas hamper company Chrisco lowered its layby cancellation charges and refunded approximately 750 customers after it was fined $175,000 as a result of misrepresentations of customers’ cancellation rights.
  • The Commission was part of a combined agency investigation into a pro-forma invoicing operation. Led by the Serious Fraud Office, with involvement from the Inland Revenue Department and Organised Financial Crime Agency New Zealand, six suspects have been arrested and charged under the Crimes Act.  
  • As 2012 ends, around 20 Fair Trading Act cases are still before the courts.
  • During 2012 a total of 227 compliance advice and 20 warning letters regarding possible breaches of the Fair Trading Act have been issued by the Commission. The majority of these have come from our Low Level Inquiry Unit, which aims to resolve complaints within 20 business days and focuses on immediate changes in a trader’s behaviour.

Credit Contracts and Consumer Finance Act (CCCF Act)

  • We published a raft of new plain English fact sheets on our website about consumer credit contracts and consumer leases. We also developed a simple new brochure which helps consumers to know their rights when borrowing money or buying goods on credit.
  • We welcomed the sentencing of a third tier lender who had breached a number of provisions of the CCCF Act in the Christchurch District Court. Barry Hunt was fined $18,532 and ordered to pay $1,461.79 in court costs.
  • We launched civil proceedings against MTF/Sportzone in the Auckland High Court. We allege that some of the fees charged by the creditors in this case are unreasonable. The Commission is seeking compensation on behalf of affected consumers, and importantly is also seeking clarity on the correct interpretation of the fees provisions of the CCCF Act.
  • We continued our focus on targeting lower tier lenders based in Auckland, with the majority of investigations focusing on information disclosure.
  • We also sought and obtained our first banning order under the CCCF Act preventing an individual from setting up, operating or working in the consumer finance industry.

Major cartel cases and other competition work

We’ve been busy progressing two major cartel cases, and increasing our advocacy work. We’ve also seen merger applications increasing as the year progressed.

Commerce Act

  • We had an important win in our ongoing freight forwarding cartel case. The Court of Appeal confirmed the New Zealand High Court’s jurisdiction in case against Kuehne+Nagel International AG.
  • We achieved a number of settlements in our long-running air cargo cartel case. Various airlines settled with the Commission this year, bringing total current penalties to $21.375 million.
  • In August the Court of Appeal upheld a record $12 million penalty imposed against Telecom in April 2011 for breaching the Commerce Act, following an unsuccessful appeal by Telecom. The Court of Appeal found that from February 1999 to late 2004 Telecom unlawfully took advantage of its market power to charge downstream competitors disproportionately high prices for wholesale access to its network.
  • Also in August the Court of Appeal cleared the way for the Commission’s claims against Australian packaging company Visy Board Pty Ltd, for its part in an alleged cardboard packaging price-fixing cartel. The Court of Appeal overturned High Court findings which had limited the case against Visy Board, and reinstated all of the Commission’s claims against the company.
  • We have been involved with Christchurch businesses letting them know about potential competition issues that could arise in the rebuild of their city. We aim to ensure businesses who are part of the rebuild know how the Commerce Act applies to them and to head off illegal practices such as bid rigging and price fixing.
  • We launched new guidelines to help New Zealanders understand more about how the Commission enforces its consumer and competition legislation. The Enforcement Response Guidelines explain what enforcement responses are available to the Commission, and what criteria and considerations are taken into account when deciding which response to use.
  • We’ve seen the number of merger applications climb as the year progressed. The most significant of these were:
    • In March we granted a clearance application for IAG (NZ) Holdings Limited to acquire certain business assets of AMI Insurance Limited. The acquisition involves the transfer by AMI of its business, excluding its Canterbury earthquake liabilities, to a newly created company called AMI Newco.
    • In June we declined an application from epay for clearance to acquire Ezi-Pay.
    • In September we cleared Fonterra to acquire the dairy processing assets of New Zealand Dairies Limited (in receivership).
    • And in October we cleared Vodafone New Zealand to purchase rival TelstraClear Limited.

A busy year of regulatory work and court challenges

  • Litigation was a major feature of the year. The much anticipated merits appeals of the input methodologies for electricity lines, gas pipeline businesses and airports were held in the High Court in Wellington between September and December. Further hearings are scheduled for February with a decision expected in the first half of 2013.
  • We welcomed a Supreme Court decision in November confirming that the Commission is not required to determine a starting price input methodology for electricity distribution and gas pipeline services. This confirms the decision by the Court of Appeal in June 2012, and enabled us to complete the work resetting the default price quality paths for electricity distribution businesses which had been significantly delayed.

We put in significant work this year to promote a better understanding of the markets we have responsibility for.

Finally, we finished the year with some major announcements on the price and quality of regulated services.

We have remained committed to ensuring a high level of industry engagement, understanding and transparency in all of our work. We have taken considerable effort to brief investors, customers and other stakeholders this year on our work and the specific decisions that we make – particularly where issues are market sensitive.