Taiwan Fair Trade Commission - 22 February 2011

Dr Mark Berry, Chair, The New Zealand approach to monopolisation, mergers and cartels

Introduction

Chapter II of the Fair Trade Act 2010 (Taiwan) is dedicated to three cornerstone restrictive trade practice matters; namely, monopolies, mergers and concerted actions. While the text of the Taiwanese law on these topics differs in some material respects to the counterpart provisions under our Commerce Act 1986 (NZ), these are subjects on which there can be a rich international dialogue. We can learn from each other on matters of policy choices and approaches to decision-making.

This paper aims to inform upon the New Zealand approach to monopolies, mergers and cartels. In so doing, I will endeavour to make some comparative observations between the approaches taken in Taiwan and New Zealand.

Monopolisation

Being a small economy, New Zealand businesses understandably face challenges in acquiring the scale to operate efficiently and compete effectively, especially in global markets. The level of aggregation that may be tolerated in New Zealand markets is therefore higher than in some larger economies. This tolerance for higher market shares, however, necessitates an increased reliance on rules prohibiting anticompetitive practices by dominant firms. In a small market context, it is especially important that monopolisation rules be effective and easily administrable.

Monopolisation is perhaps the single most complicated area of antitrust law. Every competition jurisdiction in the world of which I am aware has struggled to develop clear rules to distinguish illegitimate anti-competitive activity from legitimate, aggressive competition. Even in the United States, the recent Department of Justice report on Single-Firm Conduct led to public disagreements between the Department of Justice and the Federal Trade Commission and was then withdrawn.

In this section of my speech, I will discuss New Zealand's experience in the area of single-firm conduct, focusing on a recent case that has produced the first statement from our highest court on the proper approach to take in abuse of dominance cases. I will also draw some brief parallels and distinctions between the New Zealand approach and what I understand to be the approach in Taiwan.

The Statutory Framework

Monopolisation is addressed under Part II of the Commerce Act, primarily in s 36. That provision prohibits a firm with a substantial degree of market power from taking advantage of that power for the purpose of preventing, deterring or excluding competition. Monopolistic practices may also breach s 27 of the Act if such practices involve agreements that have the purpose, effect or likely effect of substantially lessening competition in a market. In addition, Part IV of the Act provides for mechanisms that may result in the formal regulation of the price or quality of goods or services in markets that are subject to little or no competition. For the purposes of my remarks today, however, I will limit discussion to the general monopolisation prohibition in s 36, which is at the centre of the framework regime applicable to single-firm conduct in non-regulated industries.

There are aspects to New Zealand's monopolisation provisions in s 36 that set them apart from parallel provisions in other countries. Although threshold requirements associated with market power and illegitimate purposes are familiar to other jurisdictions - including Taiwan, whose parallel provisions refer to monopolistic enterprises with a "dominant position" and to types of conduct whose effect or lack of justification indicate an anticompetitive purpose - the statutory requirement in s 36 that a firm "take advantage" of its market power is, to my knowledge, unique to New Zealand (and Australia). The means of demonstrating this special requirement has been at the heart of most litigious disputes involving allegations of anticompetitive single firm conduct in New Zealand.

Section 36 has three interlinking requirements:

A substantial degree of market power: A firm cannot be in breach of s 36 unless it possesses a substantial degree of market power. This means the ability of a firm to act substantially free from competitive constraints. In order to discern whether that ability exists, one typically defines a relevant market, and assesses the extent of actual and potential competition, and the extent of any countervailing power. A substantial degree of market power is a lesser threshold than a "dominant position", which was previously the standard applicable in New Zealand. In contrast to the safe harbours provided for in Art 5 of your Fair Trade Act, s 36 does not contain statutory presumptions as to when certain market shares will or will not give rise to the requisite degree of market power. Rather, it is a question of fact to be determined by the court in each case. Consistent with market power analyses elsewhere, high market share and barriers to entry or expansion are typical features associated with the existence of substantial market power.

Taking advantage of that market power: It must be established that the firm with a substantial degree of market power has "taken advantage" of that power. Prior to 2001, s 36 required that a firm's dominance be "used", but the courts have clarified that there is no difference between the concepts of "use" and "take advantage"; both expressions have been held to require the demonstration of a causal connection between a firm's market power and the anticompetitive conduct in which it is alleged to have engaged. It is this required connection that sets New Zealand monopoly law apart from parallel laws elsewhere. Whereas other jurisdictions tend to focus on the purpose and/or the effects of conduct by dominant firms, New Zealand focuses the analysis on a different question, namely whether the firm with substantial market power would have engaged in the impugned conduct if it did not possess market power. This enquiry has become known as the "counterfactual test", as it posits what the firm would have done without substantial market power but otherwise in the same circumstances.

Motivated by a prohibited purpose: Finally, it must be established that the firm has taken advantage of its market power for a proscribed purpose. Section 36 sets out a number of prohibited purposes, namely to restrict entry into a market, prevent or deter someone from engaging in competitive conduct in a market, or eliminate someone from a market. A prohibited purpose may be established by reference to direct evidence of what is said or done by the firm and also by inference from conduct and circumstances. It is enough that the purpose, if found, be a substantial purpose even if it is not the only purpose for which a firm has taken advantage of its market power.

Section 36 is targeted at exclusionary conduct. The decided cases in New Zealand have tended to focus on issues related to predatory pricing and access to essential inputs. Section 36 does not prohibit monopoly pricing per se, except insofar as it may be engaged in for exclusionary reasons, such as to deter the ability of a downstream competitor from competing effectively with the dominant firm in that market. As already noted, there are separate provisions in the Commerce Act that are directed to price regulation in markets facing little or no competition.

Unlike Arts 10 and 19 of your Fair Trade Act, s 36 does not refer to "unfair" trade practices, nor does it set out a list of the types of conduct that will or may contravene the provision. The range of conduct captured by s 36 is limited only by the "counterfactual" test's requirement that the conduct be of a type that would not have been engaged in absent the firm's substantial degree of market power.

The three stage enquiry mandated by s 36 is nearly identical to that set out in the equivalent Australian legislation, s 46 of the Trade Practices Act 1974. The Australian provision has undergone refinements in recent years, which I will briefly discuss, but the core statutory approach there is the same as in New Zealand and focuses on whether a dominant firm has taken advantage of its market power for a prohibited purpose. Because of the similarity in legislation and approach, and also because of the public policy of encouraging closer cooperation and economic integration between Australia and New Zealand, it is routinely the case that firms, advisers and the courts in New Zealand refer to jurisprudence and developments in Australia to inform their analysis of dominant firm conduct under s 36 of the Commerce Act.

Despite the similarities in approach between Australia and New Zealand, the jurisprudence in each jurisdiction has evolved differently. This is particularly so in regard to the crucial issue of "counterfactual" analysis, or the means of enquiring into whether a dominant firm has "taken advantage" of its market power. This issue is the one that determines most s 36 (and s 46 Trade Practices Act) cases. Accordingly, it has been the subject of much study and analysis, and its need for clarification was the basis for a recent appeal taken by the Commerce Commission to the Supreme Court.

The Counterfactual Test in NZ

In New Zealand, the crucial - and usually determinative - statutory requirement that a firm "take advantage" of its market power has been analysed through a judicial construct known as the "counterfactual test". This test was adopted by the United Kingdom Privy Council, which until recently was the highest judicial authority in New Zealand. As already described, this test asks whether the dominant firm would, or could rationally, have engaged in the conduct it in fact adopted if it did not have the benefit of its substantial market power. If the firm would have engaged in the conduct even without its market power, then the firm passes the counterfactual test, has not "taken advantage" its market power, and therefore does not breach s 36.

The counterfactual test was first adopted by the Privy Council in its 1995 decision in Telecom v Clear, an access case.[1] In a subsequent case decided in 2006,[2] the Privy Council - in a split decision - confirmed that the counterfactual test was the sole means of determining whether a firm has taken advantage of its market power. In reaching this view, the majority of the Privy Council was concerned to draw a clear line between pro-competitive and anticompetitive conduct such that dominant firms could manage their affairs with certainty and engage in aggressive competition without fear of breaching s 36. In its view, the counterfactual test allowed clear line-drawing because it required a strong causal connection between a firm's market power and its impugned conduct before liability could be found. If a dominant firm is prohibited from engaging in conduct that a non-dominant firm would engage in under similar circumstances, then it was being held back from competing freely on the merits.

The counterfactual test has been a matter of some controversy in New Zealand. Perhaps the most criticised aspect of the test derives from its hypothetical nature and in particular the difficulty in identifying the attributes of a hypothetical firm that does not possess a substantial degree of market power but is otherwise in the same circumstances as the dominant firm. The test requires its own difficult line-drawing in terms of what factors actually give a defendant its market power. The task is complicated by the fact that market power is a concept of degree; if one or more significant attributes of market power are not removed from the counterfactual, then the outcome will inevitably be that there has been no breach of s 36, because the posited non-dominant firm could rationally have acted in the same way as the defendant. The consequent importance to both the plaintiff and defendant of getting the hypothetical world "correct" means that the stakes are high, and much resource and energy is expended in arguing about the appropriate hypothetical to compare against the factual.

Indeed, the Privy Council's reaffirmation of the counterfactual test in 2006 was partly in response to concerns raised by judges in the Court of Appeal that the hypothetical exercise required by the test could unnecessarily complicate the enquiry mandated by s 36. In the Port Nelson case, Justice Gault stated that that it "was not easy to see why use of a dominant position should not be determined simply as a question of fact without need to postulate artificial scenarios".[3] Later, in the same case that culminated in the Privy Council's reaffirmation of the counterfactual test, Justice Gault noted the limitations of the test and that "it substitutes new questions...for those it seeks to solve".[4]

A strict counterfactual analysis has also been criticised for its shortcomings as a screen for anticompetitive conduct.[5] Some unilateral conduct may be of no concern, or even pro-competitive, when engaged in by non-dominant firms in a competitive market, but may be anticompetitive and cause substantial consumer harm when engaged in by a dominant firm. To the extent that there are types of conduct that are equally rational for dominant and non-dominant firms to engage in, but which have anticompetitive connotations only when practised by dominant firms, such conduct is not captured by the counterfactual test. Instead, that test is rather far removed from the purpose and impact of the conduct in question.

The Approach in Australia

The counterfactual test mandated in New Zealand by the Privy Council was based on a similar mode of analysis adopted in the seminal Australian case known as Queensland Wire.[6] However, both in Queensland Wire and in subsequent cases decided by the High Court and Federal Court of Australia, other modes of analysing whether a firm has "taken advantage" of its market power have been developed and applied.

In particular, the High Court of Australia has recognised and applied lower threshold tests of "taking advantage" under s 46 of the Trade Practices Act 1974 that are based on factual rather than hypothetical assessments. Prominent among these alternative approaches are:

The "materially facilitated" test: this approach was first formulated by the High Court of Australia in the Melway case decided in 2001.[7] Like the counterfactual test, this approach involves a comparative enquiry. However, a much lesser connection is required to be demonstrated between a firm's substantial market power and its conduct. Rather than the stringent "but for" test of causation used in the counterfactual test, the relevant analysis involves asking whether the dominant firm's conduct was "materially facilitated", or made easier, by the existence of its substantial market power, even if the conduct may not have been impossible without the power. This test was subsequently used, in conjunction with other approaches, by the High Court of Australia in the Rural Press[8] case and by the majority of the Full Federal Court in the Safeway[9] case.

The "Deane J" approach: this approach is named after its author, Justice Deane of the High Court of Australia, who developed the mode of enquiry in his concurring reasons in the Queensland Wire case, decided in 1989.[10] The Deane J approach asks whether the purpose of the dominant firm's conduct could only be achieved by virtue of the firm's substantial market power. If so, then the firm has taken advantage of its power. This approach was referred to with approval by the High Court of Australia in Melway[11] and subsequently applied in its Rural Press[12] and NT Power Generation[13] decisions.

The alternative approaches identified and used by the courts in Australia for determining when a firm has taken advantage of its substantial market power stand in contrast to the sole reliance in New Zealand on the counterfactual test as enunciated by the Privy Council. The development in Australia of alternatives to the counterfactual test occurred at a time when s 36 of the Commerce Act and s 46 of the Trade Practices Act were similarly worded. Section 46 of the Trade Practices Act has since been amended, in November 2008, to codify the availability of these and other alternative tests, including the counterfactual test, for determining when a dominant firm has taken advantage of its substantial market power. The statutory formulation, in what is now s 46(6A) of the Trade Practices Act, makes it clear that no one test or approach is mandatory or determinative of the issue, and the list of tests to which the courts "may" have regard is not exhaustive.[14]

By contrast to the situation in New Zealand, then, the approach to single-firm conduct in Australia has been quite flexible. The recent amendments to s 46 of the Trade Practices Act only codified a judicial trend, which was already well underway, to view unilateral conduct by dominant firms from a variety of angles depending on what approach was best suited to elucidating the issue. Even when a counterfactual test was used, Australian courts have not appeared to concern themselves with particularly complicated or time consuming formulations of what the counterfactual world should look like and have eschewed a highly structured approach to counterfactual analysis.

The Telecom Case and the Supreme Court

This brings me to a discussion of the recent Telecom case[15] decided by the New Zealand Supreme Court. This case was important, among other reasons, for the fact that it represented the first opportunity for New Zealand's Supreme Court to consider the proper approach to s 36 of the Commerce Act. The Supreme Court was established in 2004 to replace the Privy Council as New Zealand's highest judicial authority. It is widely acknowledged that the Commission appealed the Telecom case to the Supreme Court to shine a spotlight on what was understood to be the divergence of approach between Australia and New Zealand on the crucial issue of determining when a firm takes advantage of its substantial market power. The main objective of the Commission's appeal was to depart from the Privy Council's reliance on the counterfactual test as the sole and determinative test of when a firm takes advantage of its market power. Only the Supreme Court had the authority to make that departure.

The Telecom case involved New Zealand's incumbent telecommunications service provider, Telecom, and its conduct in responding to the surge in internet use during the late 1990s. Telecom had the only ubiquitous access network, including 98% of all access lines and 99% of all residential access lines. Telecom succeeded in negotiating favourable, asymmetric, interconnection agreements with rival carriers. However, the rapid growth in residential dial-up internet use meant that economic conditions soon turned to Telecom's disadvantage.

Rival carriers saw an opportunity to compete for internet service providers (ISPs) to host on their networks by offering to share with them the termination payments generated by the one-way call traffic originating from residential dial-up users on Telecom's network. With most ISPs hosted on rival networks, Telecom soon faced a negative balance of termination payments. To stem the flow of these payments, and to manage the congestion on its network from increased internet calls, Telecom introduced what became known as the "0867" package. Under the package, Telecom raised prices for residential customers by imposing certain charges unless these customers switched to ISPs with 0867 numbers or to Telecom's own ISP. At the wholesale level, Telecom asserted that 0867 numbers fell outside the terms of the existing interconnection agreements with its rivals and therefore were not subject to termination charges. Telecom also required rival carriers to sign up to new internet traffic agreements, which eliminated termination charges, as a condition of obtaining 0867 numbers that they could provide to their ISP customers.

The Commerce Commission commenced proceedings under s 36 of the Commerce Act, alleging that Telecom had taken advantage if its substantial market power in both the wholesale and retail access markets for the purposes of preventing or deterring competition. The Commission asserted that Telecom had used its 0867 package to get around its termination payment obligations and to stifle new competition from rival carriers and ISPs. It would not have introduced the 0867 package, and risked the loss of its residential customers who did not want to change their ISP, if it were not the only residential retail telecommunications provider.

The Commission's case was dismissed at trial and on appeal. As had been the case in many prior s 36 cases, the claim foundered on the issue of taking advantage of substantial market power. Both Courts determined that the Commission had not demonstrated that a hypothetically non-dominant Telecom would not have introduced the 0867 package. However, Justice Hammond in the Court of Appeal went to some effort to highlight the difficulties of applying the counterfactual test under s 36, especially on the particular facts arising in that case. Although accepting that he was bound by the Privy Council precedent requiring use of the counterfactual test, Justice Hammond said the following on behalf of the Court:

"We do however make these comments. This case exposes the realities of the difficulty of counterfactual analysis and that it is not always of utility in the context of a case such as the present. The reality of the case is that it is about terminating charges which are markedly above cost and the willingness of Telecom, under threat of regulation, to share its monopoly rents with Clear. Any realistic counterfactual must take monopoly rents as a given. It is difficult to see how there can be any plausible counterfactual about the distribution of monopoly rents where non-dominance has to be assumed: in the absence of dominance there can be no monopoly rents."[16]

In the circumstances, it is perhaps not surprising that the Commission saw this case as a particularly appropriate factual matrix in which to urge, on appeal to the Supreme Court, the departure from Privy Council precedent and the adoption of a more flexible approach that, like Australia, recognises several alternative means of demonstrating whether a firm has taken advantage of its substantial market power, without relying solely on the counterfactual test.

And so it was that the Commission sought leave from the Supreme Court to appeal on that very issue. Leave was granted, and the appeal was heard in June 2010. The Commission's key contentions in seeking to overturn the Privy Council's strict adherence to the counterfactual test were that:

  • the counterfactual test was out of step with Australian jurisprudence in which a more flexible approach had developed, recognising different tests;
  • there were concerns about the workability and utility of the counterfactual test, articulated by commentators, the Court of Appeal in earlier cases and by the minority of the Privy Council itself; and
  • the counterfactual test, unlike the other more flexible tests in Australia, fails in some instances to properly screen for anticompetitive conduct because it assumes that conduct that is equally rational for a dominant and non-dominant firm to engage in is not of concern.

The Supreme Court rendered judgment in September 2010. It dismissed the Commission's appeal. Interestingly, the Supreme Court did not share the Commission's understanding that the approaches set out in the Australian authorities differed materially from the counterfactual test required by the Privy Council. Rather it appeared to interpret the Australian jurisprudence as being consistent with the Privy Council precedent applicable in New Zealand. In particular, the Court seemed not to recognise any salient difference between the counterfactual test and either of the "materially facilitated" or Deane J tests. While apparently acknowledging the different formulations of these enquiries, the Court emphasised what it viewed to be the essential feature common to all of them, namely the employment of a "comparative exercise".

Thus, in discussing the Deane J approach, the Court stated that "[t]his approach, albeit focussed on purpose, again implicitly involves a comparison between what BHP could achieve with dominance and what it could have achieved without dominance - the actual and the hypothetical".[17] Similarly, the Court stressed the comparative nature of the "materially facilitated" approach developed in Melway, stating that the High Court of Australia's "qualification of the word 'facilitated' by the word 'materially' [was] to make it clear that their approach was not departing from the comparative exercise undertaken in Queensland Wire".[18] Although the Supreme Court is accurate in its categorisation of the alternative approaches as examples of comparative analyses, it is not immediately apparent that this characterisation provides an accurate portrayal of the way that Australian law applies. Under Australian law there is the real potential for the various approaches to focus on different factors and to produce different answers.

Indeed, the way in which the materially facilitated and Deane J tests have been used in Australia strongly indicates that they are viewed as separate alternative tests from the counterfactual approach. For instance, although the High Court of Australia recognised the materially facilitated approach in Melway, it refused to actually apply it in that case - and instead determined the case on the basis of the counterfactual test - on the grounds that the Australian Competition and Consumer Commission (ACCC) had sought to rely on the materially facilitated test for the first time on appeal. If the tests were substantially the same, it would be difficult to explain the High Court of Australia's reluctance to apply one of them on these grounds.

In any event, however, the Supreme Court rejected the possibility of a range of tests potentially applying, noting that this "would not assist with the predictability of outcome".[19] The Court then laid down what it considered to be the nub of the analysis in any given case, holding that "[t]he essential point is that if a dominant firm would, as a matter of commercial judgment, have acted in the same way in a hypothetically competitive market, it cannot logically be said that dominance has given it the advantage that is implied in the concepts of using or taking advantage of … a substantial degree of market power".[20] And later in its judgment the Court emphasised that "it must be shown, on the balance of probabilities, that the firm in question would not have acted as it did in a workably competitive market".[21] Although the Court does not use the moniker, this is effectively a verbatim restatement of the counterfactual test laid down by the Privy Council, and most commentators have interpreted the decision to have upheld the prevailing approach as previously mandated by the Privy Council.

Despite the clarity of language in the Court's restatement of the counterfactual test, it must be acknowledged that references elsewhere in the judgment to the concept of "facilitation" could raise questions about whether the Court intended to broaden the mandated approach. The Court's observation that "market power gives some advantage if it makes easier - that is, materially facilitates - the conduct in issue"[22] is especially tantalising. However, it would seem that the few references to this concept must yield to the numerous explicit passages setting out the mandatory approach, which requires the plaintiff to prove that the defendant "would not" have engaged in the conduct at issue in the absence of market power. This stringent 'but for' connection requirement does not, as a matter of logic, leave room for the operation of the materially facilitated test. But the conflicting language used in the Supreme Court's judgment does, it seem, invite a degree of speculation as to whether the Court has intended to soften the strictures of the counterfactual test in New Zealand. The Court's apparent decision not to refer explicitly to the "counterfactual test" in its judgment, but rather to speak of a "comparative exercise", may give oxygen to such speculation. As one commentator has put it, "Did the Supreme Court intend to confirm the counterfactual test by a different name? Or did it intend to introduce some greater flexibility?"[23] The answer is not clear.

In practical terms, it remains to be seen how willing plaintiffs will be to bring claims in reliance on the Supreme Court having imported the materially facilitated test, or any other lower threshold test than the traditional counterfactual approach previously adopted by the Privy Council. It seems unlikely that the question would be resolved without further appellate intervention. And the substantial cost and complexities that attend most s 36 cases suggests that proceeding on an expansive interpretation of the Supreme Court's judgment would not be without significant risk. The present weight of informed opinion is against an expansive interpretation and in favour of the view that the Supreme Court has reaffirmed the strict counterfactual test, although perhaps re-branding it as a "comparative test". No doubt there will be further commentary to come.

For now, the consequence of the Supreme Court's judgment for the Commission, firms and their advisers is a significant measure of uncertainty. The decision has not delivered the alignment with Australian jurisprudence that the Commission had sought in terms of being able to employ alternative, lesser threshold, tests for determining whether a firm has taken advantage of its substantial market power. As a result of the very clear availability of alternative tests in Australia, which have now been codified in s 46(6A) of the Trade Practices Act, it would seem that any policy preference in New Zealand for clear alignment with Australia will require legislative intervention. The most in-depth analysis to date of the Supreme Court's judgment reaches the same conclusion:

"The position we have arrived at…as a result of [the Telecom case] is that s 36 in its current form is as flexible as New Zealand's highest court has been able to interpret it. If greater flexibility… is required or substantive similarity with Australian law on single-firm conduct is a driving objective, then legislative amendment to s 36 along the lines of s 46(6A) [of the Australian Trade Practices Act] is now the only option."[24]

Mergers

The legislative approach to merger control in New Zealand follows, by international standards, a standard test. Part III of the Commerce Act prohibits mergers and acquisitions that substantially lessen competition. In this section of my speech, I will highlight some key principles which apply under this test, and I will also outline some process issues. I will make some comparative observations with Taiwanese merger law.

The New Zealand approach to Merger Review

Prior to the introduction of the substantial lessening of competition test in 2001, the Commission's focus was upon the exercise of single firm market power. Under the dominance threshold as it was known, acquisitions were prohibited only if, as a result of the acquisition, a person would be, or would be likely to be, in a dominant position in a market or if their dominant position in a market would be strengthened. Courts set a high threshold for market power under this old dominance test. For this dominance threshold to be reached, there needed to be "more than 'high' market power,"[25] although the position did not need to be "so controlling that it [was] impenetrable".[26]

The current substantial lessening of competition threshold for business acquisitions under s 47 of the Act is similar to (and based on) the equivalent United States provision, s 7 of the Clayton Act. It is now intended to capture both co-ordinated and unilateral market power. Alignment with the substantial lessening of competition merger test which applies under s 50 of the Australian Trade Practices Act was a further motivation for this change. Section 47 of the Commerce Act prohibits mergers which have the effect or likely effect of substantially lessening competition in a market.

Unlike the Taiwanese regime, the New Zealand Commerce Act provides for a voluntary notification regime for business acquisitions. If a proposed acquisition is likely to raise competition concerns under the Act, prospective acquirers of assets of a business or shares may either:

  • apply to the Commission for clearance with or without offers of undertakings to dispose of assets or shares necessary to address the competition concerns;
  • apply to the Commission for authorisation on the basis that the public benefits of the acquisition outweigh the anticompetitive detriments; or
  • proceed with the acquisition with the risk of either the Commission or any other party initiating proceedings before the High Court in relation to that acquisition.

Key Differences between the Taiwanese and New Zealand approach to Merger Review

I thought I would begin by noting what as I see as the key differences between the Taiwanese and New Zealand approaches to merger review, before providing an overview of the New Zealand clearance and authorisation processes.

In Taiwan, parties to merger and acquisition transactions are subject to pre-notification requirements. Under Art 11 any merger and acquisition involving at least one Taiwanese enterprise, and falling within one of the circumstances set out in Art 11, must not be completed without the Fair Trade Commission's prior approval. I also note there are several exemptions to the approval requirement in Art 11-1. As I said earlier, the New Zealand legislation provides for a voluntary notification regime. Any pre-merger notification is at the discretion of the merging parties. The Commission encourages parties to inform it of potential applications and to engage in pre-notification discussions but ultimately it is the merger parties who must elect whether or not to seek clearance or authorisation.

The New Zealand authorisation regime is similar to the Fair Trade Commission's ability to approve an application for merger if the overall economic benefit of the merger outweighs the disadvantages resulted from competition restraint. The substantive basis under Art 12 Fair Trade Act appears to be equivalent to our net public benefits approach.

The Fair Trade Law gives the Fair Trade Commission broad powers of enforcement. As I will discuss later, the Commission must apply to the Court when seeking penalties or a divestment order and only the Court can decide whether an acquisition has substantially lessened competition, either through ruling on cases brought by the Commission or a third party, or on appeal or judicial review of the Commission's clearance or authorisation decisions.

The timing of the process varies between our organisations. The Commerce Act provides that the Commission has 10 working days to determine an application for clearance or 60 working days to determine an application for authorisation. These statutory timeframes may be extended with the agreement of the parties.

In contrast, I note that once an application is made with the Fair Trade Commission, unless the Fair Trade Commission affirmatively rejects an application or requests an extension of its review period within 30 days of the application, the parties may proceed to close the merger and acquisition transaction.

Interestingly in the New Zealand context, clearance or authorisation expires 12 months after being granted by the Commission, which means, subject to third party appeal of the Commission's decision, that neither the Commission nor any other person may take action to oppose the transaction within 12 months of such clearance or authorisation being granted. Keeping these key differences in mind, I will now provide an overview of the clearance and authorisation approval process in New Zealand.

The Commission's Analytical Framework - Clearance

Clearance is a form of Commission approval which immunises merging firms from Commerce Act liability for the deal. Parties may elect to seek a clearance prior to making an unconditional offer or closing a conditional transaction under s 66 of the Act. The Commission will assess the merger pursuant to the clearance application and either accept or decline it. In granting a clearance, the Commission must be satisfied that the acquisition will not have, or would not be likely to have, the effect of substantially lessening competition in a market.

The Commission's Mergers and Acquisitions Guidelines[27] explain the Commission's broad analytical framework for applying the substantial lessening of competition test to mergers and acquisitions. The Guidelines have been developed over a number of years and are currently being updated.

The first step is to determine the relevant market or markets. As acquisitions considered under s 66 are prospective, the Commission uses a forward-looking type of analysis to assess whether a lessening of competition is likely. Hence, an important subsequent step is to establish the appropriate hypothetical future with and without scenarios, defined as the situations expected:

  • With the acquisition in question (the factual); and
  • In the absence of the acquisition (the counterfactual).

The impact of the acquisition on competition is then viewed as the prospective difference in the extent of competition in the market between those two scenarios. The Commission analyses the extent of competition in each relevant market for both the factual and the counterfactual scenarios, in terms of:

  • Existing competition
  • Potential competition; and
  • Other competition factors, such as the countervailing market power of buyers or suppliers.

Such approach to counterfactual analysis has been endorsed by the Courts. Indeed, our Court of Appeal has said that the counterfactual test is "elementary" to analysis of a substantial lessening of competition.[28] Unlike the old dominance test, the substantial lessening competition test "now focuses on possible change along the spectrum of market power rather than on whether or not a particular position [ie dominance] has been attained".[29]

A peculiarity of the New Zealand setting under which the counterfactual test is applied is that the Commission is required in each case to take into account all likely counterfactuals, and assesses the substantial lessening of competition test against each of these. If the merger fails on the basis of any one of these counterfactuals, it must be declined, even if this counterfactual may not be the most likely one.[30]

Divestment

Sometimes a merger's competitive detriments can be lessened (or extinguished) by selling part of the acquirer or part of the target firm's business. Just as the Fair Trade Commission can require parties to agree to various undertakings or conditions to its approval, s 69A of the Commerce Act provides the Commerce Commission with the statutory power to accept undertakings to dispose of assets or shares. We consider that this gives us the power to accept structural divestiture remedies but unlike other international competition agencies, not behavioural remedies, which by their nature, require ongoing Commission monitoring and are more difficult to enforce.

Where divestment undertakings are accepted by the Commission, they are deemed to form part of the clearance or authorisation. If a person contravenes an undertaking given, the clearance or authorisation to which it relates is void from the date given.

Safe Harbours

The Commission's Guidelines set out "safe harbours" which are intended to give guidance as to which business acquisitions are unlikely to substantially lessen competition and contravene the Act. The 'safe harbours' rely on a concept of a "three firm concentration ratio" (CR3) for markets. The CR3 for a particular market is calculated by combining the market shares of the three largest businesses and measuring that market share as a percentage of the total size of the market. As noted in the Guidelines, the Commission is unlikely to consider that an acquisition substantially lessens competition where either of the following situations exist:

The three firm concentration ratio in the relevant market is below 70% and the market share of the combined entity is less than 40%; or

The three firm concentration ratio in the relevant market is about 70% and the market share of the combined entity is less than 20%.

Safe harbours provide a screening device for the purposes of administrative convenience and are not intended as a replacement for case-by-case analysis.

The Commission's Analytical Framework - Authorisation

Moving on to the second option available to acquirers of assets or shares, the Commission may grant authorisations for business acquisitions that would otherwise breach the Act. The Commission must determine whether the relevant acquisition would result in a substantial lessening of competition. If so, the Commission must determine whether the detriments flowing from such a lessening of competition are outweighed by the public benefits that result or would be likely to result from the provisions.

The Commission views "public benefit" as any gain and "detriment" as any loss to the public of New Zealand. The analytical emphasis is on gains and losses measured in terms of economic efficiency. If the Commission is satisfied that the public benefits outweigh the detriments, it will authorise the proposed merger.

Similar to your approach to merger review, in that the Fair Trade Commission may review a merger using the general or simplified procedure depending on the particular circumstances, in May 2009, the Commission published Streamlined Authorisation Process Guidelines.[31] These guidelines explain a streamline process for "arrangements authorised that result in clear public benefits and have a relatively limited impact on competition." The Guidelines identify a number of factors which can decide whether an application is suitable for the streamlined process.

The Commission evaluates detriments and benefits in authorisations under principles set out in the Guidelines to the Analysis of Public Benefits and Detriments.[32] These Guidelines are currently being updated, but the economic principles used in assessing benefits and detriments remain the same. The detriments assessment will focus on detriments arising in the future from the lessening of competition and will include the loss of allocative efficiency, loss of incentives to avoid waste, loss of product quality and the loss of incentives to innovate. The benefits assessment will focus on efficiency gains, economies of scale and scope, better utilisation of capacity and cost savings.

Appellate Rights

If the Commission declines clearance or authorisation, the parties to the acquisition may appeal against that determination to the High Court to have the determination modified, reversed or referred back to the Commission for reconsideration.

Review Process

In assessing an application, in addition to the information provided by the applicant to the Commission, the Commission gathers and analyses information from the target company, as well as market participants, including competitors, customers, suppliers and other persons interested in the proposed transaction.

The Commission usually gathers information through interviews. The investigation process allows the Commission to test information or propositions put to them in the application and more fully understand how the market operates in order to assess the impact of the proposed acquisition.

The Commission also works with other competition agencies, to promote cooperation and coordination such as the 2002 cooperation arrangement we have with you and the ACCC.

Taking Enforcement Action

I would now like to move on to briefly discuss merger enforcement. As noted above, if the acquirer decides to proceed with an acquisition which is likely to raise competition concerns, they run the risk of either the Commission or any other party initiating proceedings before the High Court in relation to that acquisition. The Commission has a maximum of two to three years (depending on the remedy sought) from the time of the acquisition to initiate substantive proceedings before the High Court.[33] In practice, the Commission will initiate proceedings as quickly as possible in order to minimise the potential for the merged entity to either co-mingle the acquired assets, or diminish the value of those assets, in such a way as to undermine the effectiveness of any competition remedies that may be imposed.

The Commission also actively monitors transactions that affect markets in New Zealand and where the Commission becomes aware of a transaction that has not been notified it may investigate the transaction. If on investigation it considers that the "non-notified" transaction substantially lessens competition in a market in New Zealand it may commence proceedings alleging that the transaction contravenes s 47 of the Act.

As noted in my initial observations on the key differences between the Taiwanese and New Zealand merger regimes, the Fair Trade Commission has broad powers of enforcement under the Fair Trade Act. Under Art 13, the Fair Trade Commission can order dissolution of the enterprise or a divestment of shares for example. In New Zealand the Commission must apply to the court for such an order. The Commission can also apply to the court for the following:

  • an order for pecuniary penalties if there is a contravention of s 47 or penalties for a contravention of an undertaking given to it; and
  • an injunction from the court to block a merger that breaches or would breach s 47 or an undertaking accepted by the Commission.

Cartels and Collusive Conduct

I turn finally to the topic of cartels and collusive conduct. Cartel activity is one of our priority areas and I understand that cartels are also one of your focus areas, and that you are interested especially in the role of leniency as a key tool in dealing with cartels.

The New Zealand Approach to Cartels

Part II of the Commerce Act proscribes cartel and collusive conduct that substantially lessens competition. The legislation goes further. It deems that collusive conduct which fixes prices between competitors is illegal. In that instance, no economic analysis is required to prove a breach and arguments in defence regarding potential economic benefits are not relevant.

The entering into agreements and the giving effect to agreements are separate offences. Attempting to enter into an agreement is also an offence. The Act also proscribes the role of a third party acting as a facilitator.

The activities of trade associations can also be captured such that each member of the association is a party to any agreement entered into by the Association. The onus is on each individual member to prove that they were not party to any agreement.

The legislation also proscribes agreements entered into overseas which affect a market in New Zealand although the legislation does not cover the liability of individuals in every case. This position was recently clarified by the Supreme Court in Poynter v Commerce Commission.[34] The Court concluded that the conduct of Mr Poynter's subordinates within New Zealand was not attributable to him because s 90 does not deal with the attribution of conduct of subordinates to a superior who is neither their employer nor their principal.

Generally, the legislation is well established although case law is limited. Our legislation is similar to that of Australia which has broader case law which our courts can consider. Leniency is not legislated and I will discuss that later.

Section 27 of the Act prohibits provisions in contracts, arrangements or understandings that substantially lessen competition. Price fixing provisions between competitors are considered to be contrary to public policy and harmful to competition such that they are deemed to be per se anti-competitive and illegal under s 30 of the Act. While s 27 is effects-based and requires a competition analysis to prove the purpose, effect or likely effect of the arrangements, s 30 is form-based and creates per se liability. The inquiry is simply whether or not the provision or conduct falls within the statutory language.

Conduct amounting to price fixing and prohibited under Art 14 of the Taiwanese Fair Trade Act of 2010 as "concerted action" as defined in Art 7, would therefore be considered as a breach of s 27 via the deeming provision of s 30 of the Commerce Act. Your limitation of the term "concerted action" to "horizontal concerted action at the same production and/or marketing stage" is similar to the requirement of "the supply or acquisition of goods or services by persons in competition with each other" in s 30 of the Commerce Act.

The interrelationship between our ss 27 and 30 was perhaps best outlined by Justice Fisher in Commerce Commission v Taylor Preston Ltd[35] :

"Once a price-fixing provision is established for the purposes of s 30 there will necessarily be a contravention of the prohibition contained in s 27(1). That result is effected by deeming the price-fixing provision to have the purpose, or likely or actual effect, of substantial lessening of competition in a market."

For a provision in an arrangement to be regarded as a price fixing provision deemed to substantial lessening of competition under s 30, each of the following circumstances must exist:

  • there must be a contract, arrangement or understanding, entered into by, and/or given effect to by, competitors, which contains a provision that has the purpose, effect or likely effect of, fixing, controlling or maintaining prices for services, or providing for the fixing, controlling or maintaining of prices for services.

The Act requires concerted action in the form of a "contract, arrangement, or understanding". Whilst a "contract" is an agreement enforceable at law, "arrangements" and "understandings" are terms which describe something less than a formal contract. None of the three terms are defined in the Commerce Act and Australian and New Zealand courts have tended to treat the three concepts as distinct. Essentially, two requirements must be met: there must be a meeting of the minds and that meeting of the minds must give rise to an agreed course of conduct with a clear expectation as to future conduct.

We are following with interest developments in both the New Zealand and Australian courts regarding the requirement of mutuality of obligation and mutual intercommunication, even if that communication is by conduct.

We have noted the deeming of the act of a trade association, including a resolution of a general meeting of members or a board meeting to restrict activities of enterprises, as a concerted action under Art 7 of the Fair Trade Act. We have a similar deeming provision in the form of s 2(8) of the Commerce Act. Certain agreements and recommendations are deemed to have been entered into by the members along with the association. Section 2(9) mitigates this situation somewhat as it provides that liability will not arise where members (expressly) notify the association in writing that they dissociate themselves from the contract, arrangement, or understanding. Members will also avoid liability where they can establish that they had no knowledge of the offending contract, arrangement, or understanding.

Similar to your power in terms of Art 14 to provide approval of a concerted action if "beneficial to the economy as a whole", the Commerce Act provides in s 58 for the Commission to grant authorisation for certain restrictive trade practices, including price fixing.

We operate within a civil legal system. Any decisions on whether a cartel and specific collusive behaviour breaches the Act are determined by the High Court. Equally the judiciary determine any financial remedies which include a deterrence element. In contrast, we understand that the Fair Trade Commission can apart from ordering to cease, rectify or take corrective action, also impose an administrative penalty on any enterprise violating the provisions of the Fair Trade Act.

Enforcement Powers

We have legal powers to request the production of information and documents and also to request that persons of interest attend and give evidence at an information gathering hearing or interview in our offices. At a hearing a party must answer all questions truthfully although the evidence cannot be used directly against the person. More recently we have asked parties under investigation to take a more compliant stance and provide information without the need for compulsion. This has, on the whole, been welcomed. It has contributed to efficiency goals and helped us reduce costs. It also benefits parties if activities can be concluded in a shorter time. In recent times many, but not all, parties have agreed to assist our information gathering and have responded to requests for information and to be interviewed without our need to compel them to comply.

In addition, in particular circumstances we can gain a search warrant from the District Court to search the premises of a party and seize both hard copy and digital documents which are relevant to our enforcement activity.

Also, in support of our investigative activities, we can prosecute a party if they knowingly attempt to deceive or mislead the Commission. However the time period in which such action can be initiated is limited to only 6 months.

Outreach

Historically, our prime focus has been on investigation of business conduct, and this has lead to various decisions on the best course of action depending on the facts. A variety of outcomes are possible, such as prosecution, public warning or compliance advice.

We have recently expanded the focus of our approach and now regard outreach and educative activity as important in assisting to achieve compliance with legislation and thus the achievement of competition in markets.

We can help businesses to raise their awareness of the competition legislation prohibitions regarding collusion arrangements and to raise their understanding that the benefits from compliance can be far reaching.

There is a widespread view that the threat of detection, awareness of the legislation and awareness that the legislation is enforced leads to lower levels of collusive activity. The heightened awareness of the legislation and of the potential damage to the economy and the heightened perceived risk of being discovered destabilises businesses that are parties to collusive agreements. It encourages the cessation of collusive activities.

This is where "leniency" has a role to play. It encourages and enables parties to cease their activities. It ensures that parties can stop their activities with no risk of a financial cost to themselves as a result of any action the Commission might take. There is of course a growing level of "class actions" in some countries with potential implications for all colluding parties whether they apply for leniency or not. I will talk further about our activities in relation to leniency at a later stage.

Returning to outreach, over the years we have provided information and education in various formats. This has included speeches, presentations, leaflets, media releases and via our website. Some activity has been sector specific whilst the bulk has been generic.

In more recent times we have reviewed and enhanced our web based information and we are stepping up our activities in a variety of ways.

We have instigated surveys to measure the perceptions of various stakeholders and this activity will be continued. We are also adopting sector specific outreach activity. This activity starts with research to understand the level of awareness and compliance and any specific competition issues. The first sector we are engaging with in this way is the construction sector. This sector was identified as a result of the voluminous experiences of collusive activity in this sector in other countries. We are proposing to engage with other sectors in a similar manner. These sectors will be chosen based on their importance to the economy. In addition we are developing dialogue and relationships with trade associations at a broader level and providing information through them to their members.

Leniency

Members of the International Competition Network (ICN) generally agree that leniency is the number one tool in cartel detection. I understand different countries have had differing experiences depending on their culture and the size and structure of the population and type of businesses.

Prior to the introduction of our first leniency policy we investigated primarily domestic collusive behaviour. We identified these cases largely due to information that we received from the public. We have a dedicated contact centre that receives large volumes of "complaints" by phone, letter and email. We have a variety of outcomes to investigations. These include taking no action where there is unlikely to be a breach through providing compliance advice and issuing warnings to taking enforcement action through the courts in a number of cases. We have undertaken enforcement action through the courts against businesses operating in various industry sectors including the bread industry, petrol retailing, meat processing and ophthalmology in the health sector. We also took enforcement action against collusive behaviour in the wood chemicals industry. The wood chemicals or wood preservatives industry is one which is susceptible to collusive conduct. It produces a commodity product in a business to business market where businesses will often pass through any cartel overcharge to their customers. The Court imposed a record Commerce Act penalty of $7.5m in total in this case. This level of penalty is only now likely to be surpassed in 2011, subject of course to judicial findings. Another notable achievement pre-leniency was a settlement concluded last year with the major credit card companies and issuing banks. They agreed to change their practices in the setting of the interchange fee and as a result retailers in New Zealand stand to benefit by an estimated minimum $70m to $80m over the next 3 years. We hope that this reduced cost to retailers is reflected in lower prices to consumers.

We adopted our first leniency policy in late 2004. Following the introduction of the first leniency policy we received applications from many companies that were undertaking collusive activity on an international and often global basis and which affected a market and consumers in New Zealand. Previously we were unaware of this activity. The first policy was endearingly simple. Its main value was the fact that it promised immunity. Potential applicants were left in no doubt about the benefits open to them. It did not however give us the leverage we required to benefit from the provision of information in a timely manner. The resulting investigations proved to be larger than we had previously undertaken. Some were document heavy and some were interview heavy - some being both. It put a strain on our resources and in some instances the investigative activity required the full three years allowed in our legislation before court action is initiated.

We revised our leniency policy in February 2010. Our leniency policy continues to provide conditional immunity to the first party that applies and is eligible. If any subsequent applicants apply they are only eligible to apply for leniency under our cartel cooperation policy. This is consistent with ICN Best Practice which aims to ensure that only the party that destabilises the cartel and provides sufficient evidence of the cartel is eligible for conditional immunity.

At this time we adopted the internationally adopted terms of "immunity" and "leniency". Immunity means that parties are immune from prosecution. Leniency is effectively an agreement to work towards a negotiated penalty submission to the High Court which recognises the contribution of the party to the efficiency and conclusion of the Commission's enforcement activity. The penalty submission normally reflects the contrition and admissions of the party and usually will be achieved through a joint submission of agreed facts.

Thus our overall approach is under the banner of leniency. Within that banner, "immunity" is granted to the first to meet the requirements and others are granted a recommendation for a more lenient penalty than would be the case had they challenged our action through the courts.

The principle change to our revised leniency policy is around the eligibility to apply for conditional immunity. We introduced a marker system for conditional immunity applications and we have also made the option of conditional immunity available even once an investigation is underway. The latter is subject of course to the overriding condition that it is only available to the first party that meets the criteria where we do not have sufficient evidence to commence proceedings.

The key reasons for the revisions to the policy were to encourage parties to apply to us in a timely manner through the availability of the marker system and to provide parties with the greatest incentive to self report cartel behaviour through the availability of conditional immunity even once an investigation is underway. This is consistent with the approach taken by the US Department of Justice Antitrust Division. Their Immunity Policy allows applications until they have sufficient evidence to initiate proceedings.

We have published our "Cartel Leniency Policy and Process Guidelines" as well as a range of answers to "Frequently Asked Questions" on our website.[36]

In terms of the process for an applicant applying for conditional immunity, there is a prescribed process set out in the Guidelines.

An applicant must contact the General Manager of our Competition Branch to make an application for a "marker" for conditional immunity.

The General Manager then checks internally as to whether conditional immunity is available.

If conditional immunity is available, we confirm to the applicant that they have been granted a "marker". At this time we agree the information that must be submitted to us for the marker to be perfected and thus for the applicant to obtain conditional immunity. There is also a timeframe agreed for the provision of the information, usually 28 days at most.

By providing this "marker" system we are effectively granting them first place in the queue for immunity. We believe that through this process we are ensuring that a party can report conduct to us as soon as possible but with a clear expectation as to the information that will be necessary. If a party is not able to provide the required information then the marker will lapse and another party could apply for conditional immunity. Indeed, last year, an applicant was not able to perfect the marker and did not obtain conditional immunity.

If we have already started to undertake an investigation, then a party can still apply for a marker and in that instance we have a procedure to determine whether we have sufficient evidence to initiate proceedings. Whilst that assessment is undertaken we grant the applicant a marker to preserve their position. To ensure that we only take account of our current evidence we do not take into account any information from the applicant in the assessment.

To ensure that our leniency policy is as clear as possible for potential applicants we also publish copies of model conditional immunity agreements on our website. These are for both individuals and companies, together with documents to aid the applicant's understanding of their obligations such as a template detailing the types of information that will be required to perfect a marker for conditional immunity.

Throughout our process, only conditional immunity is granted. It is only upon the conclusion of our enforcement activities and when ongoing cooperation has been provided throughout that process that unconditional immunity is granted.

Finally more generally, I would like to update you on possible legislative changes that may be of interest to you. There is currently a Bill before parliament to enable formal information sharing between the Commerce Commission and Competition agencies in other countries. Secondly, the government is considering introducing criminal sanctions alongside the existing civil sanctions to deter collusive activity. Currently, a consultation review is underway following the release by our Ministry of Economic Development of a discussion document on cartel criminalisation. We already have experience in taking enforcement action at a criminal standard in some of our consumer work and we await the result of the deliberations.

Concluding Remarks

I trust that my outline of the New Zealand monopolisation, merger and cartel provisions is informative. I have certainly found interesting my preliminary study of Chapter II of your Fair Trade Act.

I am most grateful to you for the opportunity to have delivered my comparative remarks on Taiwanese and New Zealand law, and I look forward to an ongoing dialogue.

[1] Telecom v Clear [1995] 1 NZLR 385.

[2] Carter Holt Harvey Building Products Group Ltd v Commerce Commission [2006] 1 NZLR 145.

[3] Port Nelson v Commerce Commission [1996] 3 NZLR 554, 577.

[4] Carter Holt Harvey Building Products Ltd v Commerce Commission (2001) 10 TCLR 247, paras [72]-[75].

[5] See, for example, Round and Smith, "Strategic Behaviour and Taking Advantage of Market Power: How to Decide if the Competitive Process is Really Damaged? (2001) 19 NZCLR 427, 431-432.

[6] Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177.

[7] Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1, para [51].

[8] Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53.

[9] Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (2003) 198 ALR 657.

[10] Supra, 197-198.

[11] Supra, paras [27]-[28].

[12] Supra, para [53].

[13] NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90, paras [149]-[150].

[14] Section 46(6A) provides that:

In determining for the purposes of this section whether, by engaging in conduct, a corporation has taken advantage of its substantial degree of power in a market, the court may have regard to any or all of the following:


(a) whether the conduct was materially facilitated by the corporation's substantial degree of power in the market;

(b) whether the corporation engaged in the conduct in reliance on its substantial degree of power in the market;

(c) whether it is likely that the corporation would have engaged in the conduct if it did not have a substantial degree of power in the market;

(d) whether the conduct is otherwise related to the corporation's substantial degree of power in the market.


This subsection does not limit the matters to which the court may have regard.

[15] Commerce Commission v Telecom Corporation of NZ Ltd (2010) 12 TCLR 843.

[16] Commerce Commission v Telecom Corporation of New Zealand [2009] NZCA 338, para [100].

[17] Supra, para [17].

[18] Supra, para [21].

[19] Supra, para [30].

[20] Supra, para [31].

[21] Supra, para [34].

[22] Supra, para [33].

[23] O Meech "'Taking Advantage' of Market Power" [2010] NZLJ 389, 391.

[24] Meech, supra, 392.

[25] Commerce Commission v Port Nelson Ltd (1995) 6 TCLR 406, 441.

[26] Port Nelson Ltd v Commerce Commission (1996) 7 TCLR 217, 242.

[27] http://www.comcom.govt.nz/mergers-and-acquisitions-guidelines-consultation/

[28] Commerce Commission v Woolworths Ltd (2008) 12 TCLR 194, [4].

[29] Air NZ Ltd and Qantas Ltd v Commerce Commission (No 6) (2006) 11 TCLR 679, [121].

[30] Woolworths Ltd v Commerce Commission (2008) 8 NZBLC 102,128, [118] and [122]. For further analysis of this test, see Berry and Scott "Merger Analysis of Failing or Exiting Firms under the Substantial Lessening of Competition Threshold" (2011) Canta LR (forthcoming, March 2011).

[31] http://www.comcom.govt.nz/authorisations-2/

[32] http://www.comcom.govt.nz/benefits-and-detriments-guidelines-consultation/

[33] Section 85(2) of the Act provides a statutory limitation period of two years for applications for divestment orders. A longer statutory limitation period of three years applies for applications for pecuniary penalties.

[34] Poynter v Commerce Commission [2010] NZSC 38.

[35] Commerce Commission v Taylor Preston Ltd [1998] 3 NZLR 498.

[36] www.comcom.govt.nz/cartel-leniency-policy/