Commercial cooperation during COVID-19

Monday, March 23, 2020

The Government and Commerce Commission yesterday both issued statements to recognise the greater need for commercial cooperation during the COVID-19 pandemic. The underlying concern is to allay fears that strict competition rules might get in the way of legitimate and common-sense collaboration in responding to COVID-19.

The Minister of Commerce and Consumer Affairs issued a policy statement asking the Commerce Commission to, when exercising its powers under the Commerce Act, be more flexible than normal to enable businesses to work together, potentially share resources or otherwise cooperate to ensure consistency of supply of both products and services required by New Zealanders.

While the Minister highlighted supermarkets and telecommunications companies as being examples of businesses needing to operate in a more collaborative way, the policy statement potentially extends across the Commission’s treatment of all New Zealand businesses.

Key points of the policy statement are:

  • It applies only to essential goods and services. The Minister does not provide an exclusive list of what falls within this category but mentions grocery products by way of example.
  • The policy statement appears to be primarily directed at the actions of businesses that would otherwise breach Part 2 of the Commerce Act. Part 2 includes limitations on price-fixing, market allocating, production limitations, exercise of substantial market power for particular anti-competitive purposes, and agreements that have the purpose or effect of limiting competition.
  • The Commission is independent of the Government and the Government cannot require the Commission to act in a certain way. The policy statement therefore cannot and does not override the Commission’s independence or its statutory powers. The policy statement, instead, is something for the Commission to take into account in exercising its powers.

The Commission in its response has made it clear in its own media statement in response that it is aligned with the Government’s proposed approach. The Commission responded, welcoming the approach and providing reassurance that businesses should not feel constrained by the Commerce Act in working to meet New Zealanders’ needs in the current circumstances.

The Commission confirmed that it will not be taking enforcement action under the Commerce Act against businesses who may need to cooperate to ensure the supply of essential goods and services to New Zealanders. If businesses need to, for example, to share staff, distribution networks or otherwise work with competitors to ensure security of supply, the Commission is happy for businesses to do this.

The Government and Commerce Commission have, however, made it clear that this flexible approach does not extend to businesses who use the current pandemic as an excuse to justify non-essential collusion or anti-competitive behaviour. The Commission will not look kindly on businesses who engage in sharing pricing information or strategy where it is not necessary.

The actions of businesses that would otherwise breach the Commerce Act need to be proportionate to the need they are seeking to meet, and in place only for as long as needed to meet that need.

The Commission has indicated that  is directing its leniency to certain actions primarily falling within Part Two of the Commerce Act, it is unlikely to allow similar relaxations for mergers and acquisitions subject to the Commerce Act, or to requirements under the Fair Trading Act 1986 or other consumer protection legislation.

The Commission has indicated that it will be providing further guidance around this over the next few days.

If you have any questions about whether steps your business is intending to take are permitted under the more lenient approach outlined above, please contact Nick Crang or Danielle Consedine.

 

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.‚Äč

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