The long arm of competition law

09 Jan 2018

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Yes, there is a branch of law called competition law. Simply put, its aim is to make sure consumers get the best price, by making sure companies compete with each other in the fullest possible way. It applies not only to companies, but to the key decision makers in the companies and to industry associations and the like.  As you can guess, it has a very long reach, like our health and safety laws. But unlike health and safety, it has global impact. 

Every developed country has its own set of competition laws that apply to every company and person that sells anything in that country; New Zealand regulates New Zealand, Australia regulates Australia, and so on. Nearly every country we trade with has competition laws that apply to any New Zealand individual and company selling anything in that country. A decision made to fix prices in New Zealand for the Australian market, for example, could see those involved facing prosecution in Australia.

There has been a recent change to competition law in New Zealand and our regulator, the Commerce Commission, has made industry organisations of its targets following this law change. What is worse is that an industry organisation can, by breaching competition law, pass that breach on to its members. However, the new law permits collaborative activities defined as “efficiency-enhancing activities between competitors” where they combine their activities for ‘benign’ purposes, or purposes that are pro-competitive. Essentially, what they are doing must not breach the statutory test of substantially lessening competition. There must also be no aim, expressed or implicit, that the information is being provided to set prices or control volumes across competitors that are members of the association. Information supplied should only be an information point, and what everyone does with that information is up to them alone, no-one else.

Current pricing information cannot be shared; pricing information that is three months old may not be so risky. Volume information can be current provided if it is very clear about the way it is used, and it is pro-competitive, does not name individual competitors, is aggregated across the sector, and those purposes are set out in documents and associated information. If the volume data is used to determine market supply to influence prices, then it will likely breach competition law in any country around the world. If, however, the volume information is used to ensure consistent market supply and a quality offering, then it is unlikely to breach competition law anywhere. Unfortunately it is ‘in the eye of the beholder’ whether or not there has been a breach, and that eye belongs exclusively to the competition law enforcement agencies, and the courts for any countries concerned. 

The bottom line is that you should get expert competition law advice on what you are doing so as to protect your organisation and all its members, especially if you are providing any market data back to members. 

- Mike Chapman, CEO