Commerce Commission review of enforcement framework relating to single-firm conduct
25 February 2009
The Commerce Commission has commenced a review of the effectiveness of the enforcement framework for addressing allegations under section 36 of the Commerce Act that a firm has taken advantage of its market power.
Section 36 prohibits a person with a substantial degree of power in a market from taking advantage of that power for the purpose of restricting competition. It is particularly important as it prohibits large companies from using their market power to restrict new entry into markets, prevent or deter competitive conduct or squeeze competitors out of a market.
Commission Chair Paula Rebstock noted that virtually all competition law regimes have similar provisions addressing prohibited unilateral or 'single-firm' conduct (known elsewhere as 'abuse of dominance' or 'monopolisation') and that there is presently ongoing debate internationally regarding the appropriate scope and effective enforcement of such provisions.
"If large firms are permitted to leverage their market power to limit competition, incentives to growth and innovation will be reduced and consumer welfare harmed. The role of section 36 is particularly important in New Zealand because many of our markets are highly concentrated. We are therefore reviewing our recent performance in section 36 cases to see how it can be made more effective," said Ms Rebstock.
The Commission has appointed an expert panel to advise it on the review. The panel members are the Right Honourable Thomas Gault DCNZM, Acting Judge of the Supreme Court, Professor Sir John Vickers of Oxford University (and formerly head of the UK's Office of Fair Trading), Professor Stephen Calkins (Wayne State University Law School, Detroit) Mr James Farmer QC and Mr Peter Hinton, a partner in Simpson Grierson, Auckland.
The Commission plans to complete its review in late 2009.
Section 36(2)of the Commerce Act 1986 provides that: "A person that has a substantial degree of power in a market must not take advantage of that power for the purpose of -
(a) restricting the entry of a person into that or any other market; or
(b) preventing or deterring a person from engaging in competitive conduct in that or any other marker; or
(c) eliminating a person from that or any other market."
Prior to the 2001 amendment to the Commerce Act, section 36 prohibited a person with "a dominant position in a market" from "using" that position for the anti-competitive purposes noted above.