Largest Commerce Act reform in 20 years: a game changer?

We set out below our take on the key proposals, both the good and those for which there appears to be limited evidence of a problem that justifies this level of intervention. 

Today’s announcements follow the consultation process run by MBIE which commenced in December 2024. You can find our alert on this here and our submission on MBIE’s Consultation Paper here.

The game changers

We have been calling for a number of these reforms for some time so it is pleasing to see them a step closer to fruition.

1. Introduction of behavioural undertakings
   
   The ability for the Commerce Commission (the Commission) to accept behavioural undertakings from merging parties as a condition for merger clearance or authorisation is welcome. Currently the Commission can only accept undertakings to divest shares or business assets to address a perceived competition issue. The Commission’s inability to accept behavioural undertakings to date has meant that potentially valuable, efficiency-enhancing mergers have been prohibited, and has put us out of step with most other countries, including Australia.
   
   
2. Constructive collaboration 
   
   The Government has announced a new statutory notification regime allowing businesses to notify the Commission of proposed collaborative conduct, which may breach the cartel prohibition, and to proceed unless the Commission objects. This would help to improve certainty and reduce costs for collaborating parties who are not comfortable to rely solely on a self-assessment.  
   
   
3. Enhanced protections for confidentiality
   
   The enhanced protections for confidential information will be welcomed by many. The Government recognises the increasing reluctance among business to share information with the Commission for fear that it will be released pursuant to the Official Information Act. Accordingly, stronger confidentiality orders, which can apply for up to ten years after the Commission has concluded its analysis, are proposed.
   
   However, striking the right balance between these considerations and ensuring that parties accused of wrongdoing are given a fair opportunity to respond will be important. 

Moving the dial?

While the amendments above are generally welcome, a number of other reforms have been introduced without an obvious justification and risk adding uncertainty or having unintended consequences. In particular, the consultation documents have not offered substantive, real-world examples of harm that these provisions are aimed at addressing. The devil will be in the detail and the draft legislation will be important.

1. Proposals aimed at “creeping” and “killer” acquisitions
   
   The Government proposes to enable the Commission to assess patterns of small business acquisitions over a three-year period, and to clarify the test used by the Commission to assess so-called “killer” acquisitions, where dominant firms acquire innovative start-ups.
   
   While, naturally, there are examples of firms making a number of smaller acquisitions, we are not aware of any analysis showing why this would justify the proposed amendments. We think the current legal framework is sufficient to capture such transactions.
   
   To address ‘killer’ acquisitions, the Government is proposing to explicitly clarify that the “substantial lessening of competition” or “SLC” merger test includes conduct that creates, strengthens, or entrenches a substantial degree of power in a market, in line with recent reforms in Australia. Again, we do not agree that the SLC test needs to be changed in this way – the core question remains whether the acquisition results in an SLC compared to a likely scenario without the acquisition. However, if New Zealand were to make this change in order to align with Australia, we think it should be accompanied by a change to the burden of proof (which we expand on below) to avoid ending up with a more restrictive regime than Australia.
   
   For these reasons, we do not see a compelling reason to make these changes.
   
   
2. Predatory pricing
   
   Changes to predatory pricing rules did not feature in MBIE’s Consultation Document. They appear to have their genesis in work regarding the grocery sector but are to be rolled out more broadly. While the phrase “predatory pricing” may not feature in the current legislation, the concept is well known and is often described as a classic misuse of market power which breaches competition law.
   
   In summary, the Government is proposing to:
   
   
   • • introduce an objective economic test for ‘below-cost’ pricing that amounts to “predatory” pricing, with presumptions including that pricing below “Average Variable Cost” or “Average Avoidable Cost” over a sustained period is unlawful;
       
       
     • make explicit that proof of recoupment of losses from below-cost pricing is not required to establish predatory pricing; and
       
       
     • confirm that short-term promotional pricing, including one-off specials, de minimis discounts, or mistaken pricing are not captured unless part of a sustained pattern of below cost pricing behaviour.

   
   Very few of the established competition law regimes globally have a statutory definition of predatory pricing, albeit the proposed cost measures are fairly well established. In our experience, it is not the cost measures themselves that create the complexity (and therefore uncertainty) but rather the inherent complexities in applying them, e.g. in terms of cost allocations, appropriate time periods, rationale for the pricing, etc. Our recently amended prohibition on the misuse of market power is yet to be tested in courts. When that time comes, history suggests that our courts will pay significant attention to the jurisprudence from the EU, UK, Canada and Singapore, suggesting the codification of predatory pricing at the current time is unnecessary.

3. Performance injunctions
   
   In Bell Gully’s submission on the Consultation Document we opposed the introduction of a new power for the courts to issue performance injunctions in relation to anticipated contraventions of competition laws. The threat of ex-post enforcement is sufficient to deter anticompetitive conduct. In our view, there is no problem identified with the current regime that would require this change. The proposed justification is that courts have greater powers under different legislation, but that in itself is not a reason to enlarge the courts powers under the Act.
   
   
4. Burden of proof
   
   While the changes above appear to lack objective justification, more concerning is the Government’s inaction on New Zealand’s current approach to the burden of proof for merger applications. The current approach requires an applicant for merger clearance to prove, to a standard well beyond the balance of probabilities, that the merger will not SLC. Specifically, if the Commission is “unable to exclude a real chance of a SLC”, it must decline the clearance.
   
   As set out in our submission on the Consultation Paper, New Zealand’s approach to burden of proof is out of step with that in other countries. Our merger control law should not be designed in such a way as to presume mergers are anticompetitive. It is disappointing that this has not been addressed in the proposals announced today, particularly when this is coupled with more stringent tests for “creeping” or “killer” acquisitions.

Commerce Commission structure: change in governance to deliver better outcomes 

Finally, citing an independent review led by Dame Paula Rebstock (a former Commission Chair), the Minister of Commerce today explained that the Commerce Commission has outgrown its current structure, with the board handling both governance and regulatory decisions. For that reason, the proposed changes include changes to the Commission’s structure so that it has a new governance board. This will bring the Commission’s structure in line with other Government bodies, such as the Reserve Bank, which split governance and decision-making. 

Next steps

The changes are reflected in amendments to the Commerce Act that will be introduced to Parliament before the end of the year and passed into law by mid-2026. We will be following the release of the bill and select committee process closely and hope that there will be further opportunities to engage, during that process, with the issues. 

For further information or advice on how these reforms may affect your business, please contact your usual Bell Gully adviser or one of our competition law specialists.

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.