Commission ends plans to draft enforcement guidelines on misuse of market power
18 October 2010
The Commerce Commission will no longer develop guidelines on section 36 of the Commerce Act. Section 36 is aimed at preventing companies with substantial market power from using or taking advantage of that market power to deter competition.
The Commission had put the development of guidelines on hold pending the outcome of the Commission's appeal to the Supreme Court in the Telecom '0867' case. That case was the first opportunity for the Supreme Court to consider and determine the appropriate legal analysis under section 36.
On 1 September 2010 the Supreme Court dismissed the Commission's appeal, bringing the proceedings to an end and reaffirming that the counterfactual test is the sole determinative approach to deciding when a firm has unlawfully used or taken advantage of its dominance under section 36.
"In light of the Supreme Court's decision in the 0867 case, there is limited value that the Commission can currently provide by developing section 36 guidelines," said Dr Mark Berry, Commerce Commission Chair.
The Commission will continue to assess each case it investigates on its facts to determine whether to proceed to litigation under section 36.
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.
0867. In June 1999 Telecom announced that residential customers would be charged for calls to internet service providers (ISPs) unless they used an 0867 dial-code. Telecom only made the 0867 number range available to other telecommunications network operators if they agreed that the 0867 number range was not covered by existing interconnection agreements, so that Telecom was not required to pay charges relating to those calls. Telecom sought to introduce a two cent per minute charge to customers not using the 0867 prefix after 10 hours' use.
The Commission alleged Telecom contravened section 36 when it introduced its 0867 package in 1999. The Supreme Court rejected the Commission's appeal on 1 September 2010. The Supreme Court judgment can be viewed under the case number SC 76/2009 at http://www.courtsofnz.govt.nz/from/decisions/judgments-supreme/judgments-supreme-2010
The Commerce Commission first announced it would review the enforcement framework and develop guidelines about section 36 on 25 February 2009. The media release can be accessed on the Commission's website at http://www.comcom.govt.nz/media-releases/detail/2009/commercecommissionreviewofenforcem/