COVID-19 Commerce Commission issues guidance but cartel risks remain

Monday 23 March 2020

Authors: Glenn Shewan, Torrin Crowther, Michael Tilley and Gabrielle Carter

​​​​​COVID-19 is affecting all businesses. Huge swings in demand (generally down, but in some cases up) and logistical challenges are looming large. 

Major market or industry disruptions such as COVID-19 can cause competing businesses to come together and consider joint initiatives aimed at achieving better outcomes for an industry and its customers. The Government and Commerce Commission over the weekend have issued guidance on their approach to enforcement of the Commerce Act during this time.

On Sunday, Minister of Commerce and Consumer Affairs, Kris Faafoi released a statement asking the Commerce Commission to take account of the exceptional circumstances created by COVID-19 when monitoring business behaviour in coming weeks. The Government has recognised that essential sectors like supermarkets and telecommunications companies may need to work in a more collaborative way than the Commerce Commission would normally be comfortable with.

In turn, the Commerce Commission has released its own state​ment​ reassuring businesses providing essential goods and services. The Commission stated that it:

"has no intention of taking enforcement action under the Commerce Act against businesses who are cooperating to ensure New Zealanders continue to be supplied with essential goods and services during this unprecedented time. If you need to work with your competitors to share staff or distribution networks or take other measures to ensure security of supply, you are able to do this".

However, it also goes on to sound a warning that it:

"will not tolerate unscrupulous businesses using COVID-19 as an excuse for non-essential collusion or anti-competitive behaviour. This includes sharing information on pricing or strategy where it isn't necessary in the current situation".

Other jurisdictions are also tackling these issues. For example:

  • on Thursday last week the UK government announced that it was relaxing some elements of competition law to allow supermarkets to work together. The UK Competition and Markets Authority followed this with a statement that echoes that of the Commerce Commission here, confirming that it has no intention of taking competition law enforcement action against cooperation between businesses or rationing of products,

  • the Australian Competition and Consumer Commission on Friday provided urgent interim authorisation to allow the Australian Banking Association and banks to work together to implement a small business relief package. The package will allow for the deferral of principal and interest repayments for loans to small businesses, in all sectors, impacted by the COVID-19 pandemic.

In light of the statements by the Minister and the Commission, essential businesses should feel empowered to explore activities with their competitors where necessary to address critical security of supply issues that have arisen from COVID-19. However, they should be aware that these statements do not provide any specific legal protection. Accordingly, like all businesses, they should ensure that such activity does not go beyond that necessary to deal with COVID-19 specific issues. The Commission is well-aware that past crises have given rise to so-called 'Crisis Cartels', and it has been very clear that such conduct will not be tolerated.

Where the line is in practice is not always easy. Business should seek advice if they are unsure, and it may well be that engagement with the Commerce Commission is appropriate in many circumstances. If necessary, steps such as urgent authorisations might be sought, similar to the Australian banking authorisation referred to above.

The Commission has indicated that it will release further guidance in the coming days. In the meantime, please get in touch with the contacts listed or your usual Bell Gully advisor if you have any questions or concerns.

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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.

For more information
  • Glenn Shewan

    Partner Auckland
  • Torrin Crowther

    Partner Auckland
  • Jenny Stevens

    Partner Wellington
  • Penny Pasley

    Senior Associate Auckland
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