Commerce Act compliance guide
Tuesday 7 September 2010
The aim of the Commerce Act 1986 is to promote competition in markets for the
long-term benefit of New Zealand consumers.
You can compete vigorously for customers, however, you and your company will
face significant penalties if you "overstep the mark" by acting
anti-competitively.
This card will assist you in understanding what you can and cannot do under
the Commerce Act. It will also assist you in keeping your competition
honest.
Generally
| DO |
DO
NOT |
-
Compete vigorously for customers on the basis of price, service, and
quality.
-
Establish a 'compliance culture' in your company.
-
Establish good record-keeping procedures – record discussions with
competitors as a diary note to rebut any accusations of anti-competitive
collusion.
-
Speak to your manager if you have concerns about whether your actions are
anti-competitive.
-
Treat email with caution. Email is easily forwarded and "deleted" emails are
easily recovered.
-
Ensure any information about competitors is obtained from independent
sources. Diary note how you obtained the information. |
-
Appear to be too closely associated with your competitors. If you cannot
avoid mixing with the competition, ensure that you do not discuss prices or
pricing policies.
-
Attend meetings with competitors unless these cannot be avoided. (Industry
meetings are often necessary to discuss health and safety, resource management,
new technology and other generic industry issues.)
-
Formulate plans with others, which have the purpose of harming the
competitive process or imposing artificial structural barriers to workable and
effective competition. |
Pricing
| DO |
DO
NOT |
|
|
-
Arrive at a formal or informal (includes 'winks and nods') agreement,
arrangement, or understanding (an "Arrangement") with a competitor about:
-
prices, discounts, benefits or concessions;
- timing of price changes;
-
credit terms or extending credit; or
- profits or profit margins.
-
Exchange price lists, or other price information with a
competitor. |
Collective boycotts
| DO |
DO
NOT |
-
Seek to stop discussions about boycotting competitors. If it continues, leave
the room.
-
Speak to your manager if you have any concerns. |
-
Enter into an Arrangement with a competitor that has the purpose of
restricting, limiting, or preventing a competitor's access to customers or
suppliers.
-
NB: It is a defence if the Arrangement does not substantially lessen
competition. However, this may be difficult to prove and the obligation rests
with the parties involved. |
Recommending prices
| DO |
DO
NOT |
-
Print a price on your product so long as it is preceded by the words
"recommended price".
-
Recommend a resale price so long as your customers are informed in writing
that they are free to charge a lower price.
-
Speak to your manager (and not your customer) if you have any concerns with a
customer's resale pricing. |
-
Tell resellers of your goods what prices they can charge on resale.
-
Refuse to supply or "punish" a reseller if they do not price goods at or
above a minimum level.
-
Offer benefits to resellers for pricing goods at or above a minimum
level. |
Misuse of market power
The Commerce Act prohibits certain conduct by firms with a "substantial
degree of power in a market". Whether your firm has a substantial degree of
power in a market is a complex legal and economic question. A large market share
is an indicator but not conclusive. If you think your company can persistently
behave in a manner different from the behaviour a competitive market would
enforce, then:
| DO |
DO
NOT |
|
|
-
Prevent new players coming into the market.
-
Squeeze competitors out of the market.
-
Take action aimed at deterring competitors from
competing. |
Other anti-competitive arrangements
The Commerce Act also prohibits other Arrangements with the purpose, effect
or likely effect of lessening competition in a market in a real way.
For practical purposes, this may occur if, as a result:
-
competitors are likely to be eliminated from the market;
-
new competitors are deterred from setting up; or
-
customers or suppliers are forced to accept much less advantageous terms or
entry or expansion will be more difficult.
Business acquisitions
For further information, please contact your usual Bell Gully adviser or:
Auckland
Phil
Taylor
Partner
Torrin
Crowther
Partner
Wellington
Jenny
Stevens
Partner
David
Blacktop
Senior Associate
Disclaimer
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
