The Bell Gully Regulator Report lists recent changes, decisions and developments at the main New Zealand corporate, commercial and competition regulatory bodies and also lists relevant updates from the Australian Competition and Consumer Commission. This edition of the Regulator Report covers the period from 14 November to 17 December 2008. For further details on any matter in this report, just click on the hyperlinks in each item.

As this is our last issue for the year, we would like to take this opportunity to wish you all the very best for the holiday season and the New Year. Regulator Report will be back in February 2009.

The Treasury

Final Specimen Deeds - Wholesale Funding Guarantee Facility
Updated Specimen Deeds for the Crown Wholesale Funding Guarantee Facility are now available.
Click here for more
Click here to read Bell Gully commentary on the Crown guarantee scheme

The New Zealand Exchange (NZX)

NZX proposes reforms to capital raising and flexibility
On 26 November 2008, NZX released a set of draft changes to the Listing Rules of NZSX/NZDX and NZAX markets for consultation. The new rules are focused on increasing the speed and reducing the cost of capital raising for NZX listed issuers. NZX has signalled it believes the new rules are required as a matter of urgency to help listed issuers raise capital in a period of credit rationing and reduced options for capital-raising. As a result, the consultation period for feedback on the new rules is short. Submissions on the first consultation paper ended on 10 December and NZX released its exposure draft containing a summary of its policy decisions on 15 December, with the second round of submissions due on 22 December. NZX expects to send the amended rules to the Minister of Commerce on 30 December 2008. This will mean that the new rules could be in force by 2 March 2009 (following the 40 working day disallowance period under the Securities Markets Act 1988).
Click here for Bell Gully commentary on the initial consultation paper
Click here for Bell Gully commentary on the exposure draft
Click here to read the first press release
Click here to access the initial consultation paper
Click here to read the press release on the exposure draft
Click here to read the exposure draft

Ministry of Economic Development (MED)

Interim report on measures to combat financial crisis
In response to the financial crisis, the Capital Market Development (CMD) Taskforce has prepared an interim report with recommendations for policy changes to help New Zealand businesses through the downturn. The recommendations are a package of proposals that will improve businesses' access to capital and reduce the costs of raising capital.
Click here for the press release
Click here to read the interim report
Click here to read Bell Gully commentary on the interim report

Infrastructure briefing for incoming Minister 2008
A briefing has been prepared by the MED, the Treasury, the Ministry of Transport, the Department of Internal Affairs and the Ministry for the Environment to respond to the creation of a new overarching infrastructure portfolio.
Click here to read this briefing paper

Key economic development opportunities and challenges
MED has issued an overview briefing summarising their view of the areas likely to be most critical to increased productivity, based on the new Government's stated intentions and MED's practical experience of advising on and implementing economic growth policies across the business-focused portfolios that they support.
Click here to read this briefing paper

Vote Economic Development
A briefing has been prepared by MED for the incoming Minister to introduce the Minister to the Economic Development portfolio and Vote Economic Development in light of the government's stated intentions in this portfolio. Work under Vote Economic Development aims to create an environment for business that supports productivity growth, and build the capability of firms, sectors and regions.
Click here to read this briefing paper

MED releases submissions on its review of franchising regulation
The MED is conducting a review of franchising regulation to explore whether there are any widespread problems in the franchising sector which may require franchise specific regulation. It has now released the submissions it received on the Review of Franchising Regulation Discussion Document (August 2008). Submissions closed on 21 November 2008.
Click here to access the submissions
Click here to read Bell Gully commentary on this review

Companies Office

Certificates of Good Standing
In November 2008, the Companies Office launched an electronic service enabling you to request a certificate evidencing a company's incorporation and registered status. A "Certificate of Good Standing" is mainly used when a company is required to prove that it is incorporated in New Zealand and that the Registrar is not taking any action to remove it from the register. Each certificate costs NZ$25 and is delivered to your email address.
Click here for more

Annual returns must be filed online in 2009
In 2009, all annual returns must be filed electronically. For information on how to file an online annual return including step-by-step instructions and an animated demonstration please visit www.companies.govt.nz/annualreturn.

Securities Commission

Moratorium proposals - what investors should consider
The Securities Commission has published a statement setting out factors investors should consider when faced with a moratorium proposal.
Click here for more

Commission alerts issuers to financial reporting matters
The Securities Commission has identified matters issuers need to focus on as a result of its recent review of financial statements. The areas identified by the Commission as requiring particular attention when preparing upcoming interim and full-year reports are:

• the fair value of assets - the basis of determination and how well this has been disclosed;
• impairment of assets such as goodwill;
• related party information, in particular, key management personnel compensation; and
• disclosure of significant judgments, key assumptions and major sources of estimation uncertainty.

Other significant matters include: support for the value of intangible assets, and definition and classification of cash flows.

The Commission reviewed the reports of 40 issuers with March and June 2008 balance dates as part of its financial reporting surveillance programme.
Click here for more

SECURITIES ACT EXEMPTION NOTICES

The following Securities Act Exemption Notices have been published for this period:

Securities Act (Calibre Asset Services Limited) Exemption Notice 2008
This notice, which comes into force on 1 January 2009 and expires on 31 December 2013, exempts Calibre Asset Services Limited from section 54 of the Securities Act 1978, subject to a condition, and from clause 4(1)(a) of Schedule 7 of the Securities Regulations 1983, in respect of units in certain Australian unit trusts issued to the public in New Zealand.

Securities Act (ASB Group Investments Limited) Exemption Notice 2008
This notice, which comes into force on 5 December 2008 and expires on 31 December 2013, grants exemptions in respect of certain units issued by ASB Group Investments Limited, namely the ASB Cash Fund and ASB Term Fund. The exemptions relate to receipt of investment statements and register and certificate requirements. The exemptions regarding investment statements follow the exemptions granted in the Securities Act (Continuous Debt Issues) Exemption Notice 2002, except that the conditions of the exemptions in this notice on the ASB Cash Fund are new. The exemptions relating to register and certificate requirements follow the exemptions in section 5(2C) of the Securities Act 1978 on debt securities issued by registered banks, and the exemptions and conditions in the Securities Act (Continuous Debt Issues) Exemption Notice 2002.

Securities Act (Meridian Energy Limited) Exemption Notice 2008
This notice came into force on 28 November 2008 and expires on 27 November 2013. The exemption relates to debt securities issued by Meridian Energy Limited (Meridian) and guaranteed by a guaranteeing group comprising Meridian and some (but not all) of its subsidiaries. The notice exempts Meridian from certain requirements relating to the registered prospectus for the debt securities and from requirements relating to information that must be provided to security holders on request.

Securities Act (Stock and Station Agents) Exemption Amendment Notice 2008
This notice came into force on 28 November 2008. It amends the Securities Act (Stock and Station Agents) Exemption Notice 2002 to include Allied Farmers Limited. This means that Allied Farmers will be exempted from certain provisions of the Securities Act 1978 and Schedule 2 of the Securities Regulations 1983 in respect of specified debt securities (as that term is defined in the 2002 notice).

Securities Act (New Zealand Deposit Guarantee Scheme−Collective Investment Schemes) Exemption Notice 2008
This notice came into force on 28 November 2008 and expires on 12 October 2010. The notice exempts certain issuers of securities in respect of collective investment schemes from certain provisions of the Securities Regulations 1983, in order to facilitate the operation of the New Zealand deposit guarantee scheme. The notice applies to those issuers that are a party to a deed of nomination entered into with the Crown in relation to the deposit guarantee scheme and under which the issuer is designated as a nominated beneficiary for the purposes of deeds of guarantee.

Securities Act (New Zealand Deposit Guarantee Scheme) Exemption Amendment Notice 2008 (2008/439)
This notice, which came into force on 28 November 2008, substitutes new clause 7(3) and (5) of the Securities Act (New Zealand Deposit Guarantee Scheme) Exemption Notice 2008 (the principal notice); and substitutes a new clause 10(a) of the principal notice. Clause 7(3) and (5) of the principal notice provide conditions to the exemptions from regulation 17 of the Securities Regulations 1983 (which relates to restrictions on the distribution of certain advertisements). The conditions have been amended to distinguish between advertisements that are investment statements and advertisements that are not investment statements, and to ensure that the conditions are consistent with other conditions in the principal notice that relate to investment statements.

Securities Act (Richina Pacific Limited) Exemption Notice 2008
This notice came into force on 28 November 2008 and expires on 30 November 2009. It concerns a proposal to amalgamate Richina Pacific Limited, Richina Enterprise Holdings Limited, Richina Enterprise Holdings (SLC) Inc, and a newly established company called Richina Limited (Newco) pursuant to Part VII of the Bermuda Companies Act 1981. Those companies would continue as Newco, but under the name Richina Pacific Limited. Shareholders in the companies that are amalgamated will be issued with four classes of shares in Newco. This notice exempts Newco from sections 37 and 37A(1)(a) of the Securities Act 1978 and regulations 12(1) and 23(1)(b) of the Securities Regulations 1983, subject to certain specified conditions.

Securities Act (Pohutukawa Private Equity II Limited) Exemption Notice 2008
This notice, which came into force on 21 November 2008 and expires on 31 December 2009, exempts Pohutukawa Private Equity II Limited and 25 associated special purpose investment companies from clause 10(1)(c) of Schedule 1 of the Securities Regulations 1983, which is a requirement that a registered prospectus must provide a prospective statement of cash flows.

Takeovers Panel

Guidance on the recovery of expenses under rule 49(2) of the Takeovers Code
The Takeovers Panel has published a new Guidance Note (in Code Word (No.24)) to assist market participants in identifying what costs are "properly incurred" in respect of the target company and the target company's directors' entitlement to recover expenses under rule 49(2) of the Takeovers Code. This follows on from the Panel's draft guidance note on this issue in August. The Panel has concluded that it is not correct to treat the expenses actually approved by the court in the 1972 case, Canterbury Frozen Meat Company Ltd v Waitaki Farmers' Freezing Company Ltd, as being exhaustive of what expenses might be properly incurred, but notes that the general principles put forward in that case can be applied to rule 49(2). In the Panel's view what is critical is the nature of the expense and whether it falls within the general category of expenses identified by the court in that case, taking into account the legal and corporate environment at the time the takeover occurs.

Section 2 of the Guidance Note discusses Canterbury Frozen Meat Company. Section 3 highlights the demands made of target companies and their boards and section 4 of the note considers how the expenses arising from those demands should be categorised in terms of the categories recognised by the court in Canterbury Frozen Meat Company. The Panel concludes that the company must prove that four elements have been satisfied before an item of expense will be allowed under rule 49(2), namely that:

• the expenditure falls under one of the following three categories:

• Category 1 - Expenditure incurred in complying with the:

• procedural requirements of the Code; and

• law and directors' fiduciary obligations which touch on the target company's response to a takeover.

• Category 2 - Expenditure incurred for the purpose of safeguarding the offerees' interests.

• Category 3 - Expenditure incurred in reimbursing directors for expenses properly incurred on behalf of, and in the interests of, the shareholders of the target company in relation to the takeover offer or takeover notice.

• it was reasonable (with reference to circumstances existing when the expenses were incurred) to incur the expense by engaging in that kind of activity;

• it was reasonable (with reference to circumstances existing when the expenses were incurred) to spend that amount on that kind of activity; and

• there is a sufficient nexus between the incurring of the expenditure and the offer or the takeover notice.

Expenses which the Panel have identified as not being recoverable from the bidder under rule 49(2) include: expenses incurred by engaging in defensive tactics not permitted by rule 38 of the Code; expenses incurred by the board in investigating competing offers; and payments intended or likely to influence shareholders to either reject or vote against an offer. The Panel also notes that it is difficult to envisage the circumstances in which "success fee" arrangements with advisers could be regarded as being properly incurred and therefore recoverable under rule 49(2).
Click here to read this new Guidance Note

Code Word (No.24)
The Panel has issued Code Word (No.24) which includes coverage of:

• the Guidance Note: recovery of expenses under rule 49(2) of the Code (as noted above);
• corrections on its article on the Kerifresh transactions in Code Word (No. 23);
• a farewell to Alastair Lawrence, Deputy Chariman; and
• an update on recent Panel appointments.

Click here to read this issue

TAKEOVERS CODE EXEMPTION NOTICES

The following Takeovers Code Exemption Notices have been published for this period:

Takeovers Code (Phitek Systems Limited) Exemption Notice (No 2) 2008
This notice applies to acts or omissions occurring on or after 24 November 2008 and expires on 31 January 2009. Because of changes in the transactions to which the Takeovers Code (Phitek Systems Limited) Exemption Notice 2008 that was Gazetted on 30 October 2008 applies, this notice revokes and replaces that notice. The Takeovers Panel has granted exemptions for:

• K One W One Limited, TMT Ventures Limited, and VIF/TMT Ventures Limited from rule 7(d) of the Takeovers Code to the extent that rule 7(d) requires the notice of meeting to be in accordance with rule 16(b) of the Code in respect of any increase in the percentage of voting rights held in Phitek Systems Limited (Phitek) under a proposed rights issue; and
• Phitek from rule 16(b) of the Code in respect of the notice of meeting.

Takeovers Code (RLV No. 3 Limited) Exemption Notice 2008
This notice applies to acts or omissions occurring on or after 17 November 2008 and expires on 31 December 2011. The Takeovers Panel has granted an exemption for:

• Fengli Group (Hong Kong) Company Limited (Fengli) from rule 7(d) of the Code in respect of any increase in its voting control that results from the allotment of voting securities to it as a result of the allotment of a second tranche of placement shares, or the exercise by Fengli of its placement options, of RLV No. 3 Limited (RLV) shares under a subscription agreement between Fengli and RLV to the extent that the notice of meeting (which Fengli is required to send to its shareholders under rule 7(d) of the Code) does not comply with rule 16(b) of the Code; and
• RLV from rule 7(d) of the Code in respect of the notice of meeting RLV is required to send to its shareholders relating to the proposed resolution to approve the allotments to Fengli.

Electricity Commission

Briefing to the incoming Minister
The Electricity Commission has prepared a briefing paper for the incoming Minister, Gerry Brownlee, outlining the Commission's:

• principal functions;
• organisation; and
• achievements to date.

The paper also outlines major projects in progress and sector development issues.
Click here for more

New Zealand Commerce Commission (NZCC)

SPEECHES

Law Practitioners Seminar Series
On 18 November, Paula Rebstock, NZCC Chair, gave a speech to the Wellington District Law Society. In her speech, she spoke about the benefits that competition offers, what the NZCC is doing, and what the NZCC intends to do in the areas of Commerce, Fair Trading and Consumer Credit Law. She also touched briefly on the NZCC's economic regulatory responsibilities and how, where there is little or no competition, the NZCC aims to foster the outcomes over time that could be expected from competitive markets.
Click here for more

MEDIA RELEASES

The NZCC has issued the following media releases:

Industry regulation and regulatory control

• NZCC announces input methodologies processes and timeframes
  In accordance with section 52V(1) of the Commerce Act 1986, the NZCC has issued a notice of intention outlining the process that will be followed and setting out the proposed timeframes for the input methodologies project. The project aims to provide enhanced transparency and certainty within the regulatory regimes administered under the Commerce Act.
  Click here for more

• NZCC releases guidelines on school uniforms
  The NZCC has issued guidelines to provide information and guidance to schools when they enter into arrangements for the supply of school uniforms.
  Click here for more

• It's not easy being green - NZCC releases guidelines on green claims
  The NZCC has released guidelines to businesses that make environmental, or "green", claims in their marketing.
  Click here for more

Mergers and acquisitions

• Coca-Cola Amatil NZ applies for clearance to acquire Baker Hall
  The NZCC has received an application from Coca-Cola Amatil (NZ) Limited seeking clearance to acquire the hot-fill bottling production line, brands and associated business assets of cordial products, bearing the brands Baker Halls and Barker Halls Originals, from Old Fashioned Foods Limited.
  Click here for more

• NZCC provides guidelines on the process for merger and acquisition clearance applications
  Following public consultation the NZCC has published guidelines to assist businesses and their advisers when applying to the NZCC for a clearance to merge with or acquire assets of a business or shares. The NZCC has also revised the application form for merger and acquisition clearances.
  Click here for more

• New Zealand Woolscourers applies for clearance
  An application seeking clearance has been made by Auckland businessman David Ferrier/New Zealand Woolscourers Limited for a number of transactions affecting the wool scouring industry.
  Click here for more

Market behaviour

• Alleged international air cargo cartel to be prosecuted
  The NZCC has initiated proceedings in the High Court in Auckland against 13 airlines and seven airline staff for alleged cartel activity in relation to air cargo.
  Click here for Air NZ's press release
  Click here for the NZCC's press release

Telecommunications

• NZCC releases September quarterly report on telecommunications market
  The NZCC has released its September quarterly monitoring report containing key statistics about telecommunications markets in New Zealand.
  Click here for more

• NZCC issues standard terms determination for the mobile co-location service
  The NZCC has released its final standard terms determination (STD) on the non-price terms on which access providers must make co-location on cellular mobile transmission sites (the Mobile Co-location Service) available to other mobile network operators.
  Click here for more

• Telecommunications Act: NZCC releases draft Telecom TSO cost calculation for 2007/08
  The NZCC has released a telecommunication service obligation (TSO) Cost Calculation Determination for the Local Residential Telephone Service covering the 2007/08 year. The draft cost is $70.7 million.
  Click here for more

• NZCC releases report on numbering management
  The NZCC has released its report on telecommunications numbering in New Zealand currently administered under the Number Administration Deed.
  Click here for more

• Telecommunications Act: NZCC releases draft Telecom TSO cost calculation for 2006/07
  The NZCC has released a telecommunication service obligation (TSO) determination for the Local Residential Telephone Service covering the 2006/07 year. The draft cost is $62.8 million.
  Click here for more

• Draft TSO Determinations released by NZCC
  The NZCC has released its 2007/08 draft determinations on:
• the cost of the Telecommunications Relay Service (TRS) for the hearing impaired; and
• the proportion of the cost to be met by each party liable to contribute to the cost of the TRS and the local residential telephone service obligation.

Each TSO draft determination covers the period 1 July 2007 to 30 June 2008.
Click here for more

Consumer issues

• NZCC urges shoppers to be savvy this Christmas
  As the pre-Christmas shopping season gathers momentum the NZCC is issuing a timely reminder to consumers of their rights under the Fair Trading Act and Credit Contracts and Consumer Finance Act.
  Click here for more

• NZCC investigation highlights variable results in sunscreen testing
  An investigation by the NZCC, after allegations that some sunscreen failed SPF or Broad Spectrum testing, has highlighted a problem with the application of the current sunscreen standard that is mandatory in Australia and voluntary in New Zealand.
  Click here for more

• GE Money customers get refunds
  Several thousand customers who bought items on "interest free" terms but were incorrectly charged interest will get more than $3 million back, after an out of court settlement between the NZCC and GE Finance and Insurance, trading as GE Money.
  Click here for more

• Elevator company admits attempted price fixing
  The NZCC has concluded an investigation into anti-competitive conduct in the elevator industry, reaching a settlement with one company.
  Click here for more

Australian Competition and Consumer Commission (ACCC)

ACCC media releases

The ACCC has issued the following media releases:

Mergers and acquisitions

• ACCC not to oppose Commonwealth Bank of Australia's proposed acquisition of Bank of Western Australia Ltd
  The ACCC will not oppose the proposed acquisition of BankWest and St Andrew's by the Commonwealth Bank, after concluding that the acquisition is unlikely to substantially lessen competition under section 50 of the Trade Practices Act 1974 in the markets in which they compete.
  Click here for more

• Revised merger guidelines issued
  The ACCC has issued its revised Merger Guidelines 2008.
  Click here for more

• ACCC seeks comment on Baiada Poultry Pty Ltd's proposed acquisition of Bartter Enterprises Pty Ltd
  The ACCC has issued a Statement of Issues on Baiada Poultry Pty Ltd's acquisition of Bartter Enterprises Pty Ltd. Bartter Enterprises is the owner of the Steggles brand, which it claims is the second largest producer and marketer of chicken and turkey products in Australia.
  Click here for more

Market behaviour

• Court orders British Airways PLC to pay $5 million for price fixing
  The Federal Court in Sydney has ordered British Airways PLC to pay AUD$5 million in pecuniary penalties for breaching the price fixing provisions of the Trade Practices Act 1974.
  Click here for more

• Court orders Qantas to pay $20 million for price fixing
  The Federal Court in Sydney has ordered Qantas Airways Limited to pay AUD$20 million in pecuniary penalties for breaching the price fixing provisions of the Trade Practices Act 1974.
  Click here for more

• ACCC grants authorisation to dentists for fee-setting in shared practices
  The ACCC has granted authorisation to enable dentists and dental specialists in shared practices to agree on the fees they charge their patients.
  Click here for more

• ACCC allows ClubsNSW to collectively bargain with Tabcorp and Sky Channel
  The ACCC has not objected to the collective bargaining notifications lodged by ClubsNSW for collective negotiations with Tabcorp and Sky Channel.
  Click here for more

• ACCC proposes to deny authorisation to Air New Zealand and Air Canada's Cooperation Agreement
  The ACCC has issued a draft determination proposing to deny authorisation to Air New Zealand and Air Canada to give effect to a Cooperation Agreement.
  Click here for more

• Australialink gives undertakings to Federal Court
  Potential customers for some online business directories will be made aware that they are being solicited for advertising following undertakings to the Federal Court, Brisbane.
  Click here for more

Telecommunications

• ACCC publishes data on take-up of broadband access services
  The ACCC has published information concerning the number and distribution of services supplied over Telstra's customer access network.
  Click here for more

• ACMA and ACCC release joint report on communications infrastructure and services
  The Australian Communications and Media Authority and the ACCC have released a joint report titled Communications Infrastructure and Services Availability in Australia 2008.
  Click here for more

Consumer issues

• Court declares operators of Designer Brand Outlet website misled consumers
  The Federal Court has declared consumers buying from the Designer Brand Outlet website have been misled.
  Click here for more

• ACCC institutes proceedings against Australialink
  The ACCC has instituted proceedings in the Federal Court, Brisbane against Australialink Pty Ltd; its director, Ms Rachel Dargie; and general manager, Mr Desmond O'Keefe.
  Click here for more

• $120,000 penalty against sports gear maker
  Skins Compression Garments Pty Ltd, the supplier of Skins brand sports compression garments, has been penalised AUD$120,000 after being found to have engaged in resale price maintenance, in contravention of the Trade Practices Act 1974. Skins was also found to have engaged in misleading or deceptive conduct in advertising and promoting its products. The case was instituted by the ACCC.
  Click here for more

• Nappy biodegradability claims declared false and misleading
  The Federal Court of Australia has declared that claims that an Australian developed nappy was "100% biodegradable" were false and misleading after ACCC legal action.
  Click here for more

• Misleading use of Australian Made logo on cosmetic, therapeutic goods
  A cosmetics and therapeutic goods supplier has admitted using the Australian Made logo without permission from the Australian Made Campaign Limited.
  Click here for more

• Clarus Telecom declared to have misled consumers
  The ACCC has obtained orders by consent, in the Federal Court Melbourne, after Clarus Telecom Pty Ltd engaged in false and misleading conduct.
  Click here for more