First published in NZ Lawyer, 19 October 2012.
On 31 August, the Court of Appeal held in Commerce Commission v Visy
Board Pty Limited  NZCA 383 that the New Zealand Courts should accept
jurisdiction in proceedings against Visy, an Australian company, alleging
breaches of the Commerce Act 1986 (Act).
The judgment follows hard on the heels of the Court's decision in Kuehne
+ Nagel International AG v Commerce Commission  NZCA 221 (31 May
2012) (the subject of the issue 187, 29 June 2012 edition of this column), where
jurisdiction was found to exist on the basis that the conduct of a New Zealand
subsidiary could be attributed to a Swiss holding company under section 90(2).
Visy extends the reach of the Act further.
In 2007, Visy admitted in proceedings brought by the Australian Competition
and Consumer Commission in the Federal Court of Australia that it had breached
the Trade Practices Act 1974 by colluding with its principal competitor, Amcor,
in relation to the supply of corrugated fibreboard packaging (CFP). They had
reached an overarching understanding to share markets and fix prices, as well as
a number of customer-specific understandings. Pecuniary penalties of A$36
million were imposed on Visy.
The Commerce Commission (Commission) brought proceedings against Visy in the
High Court, alleging that it had also breached the Act in New Zealand. It
claimed that the over-arching understanding extended to trans-Tasman customers
operating in New Zealand, and that Visy and Amcor had also given effect to eight
further price-fixing understandings relating to major customers with operations
in New Zealand.
The Commission served its proceedings on Visy in Australia. Visy protested
the jurisdiction of the New Zealand Courts, and the Commission's application to
set aside that protest was largely dismissed by Justice Heath. Both Visy and the
Commission challenged the decision.
The decision of the Court of Appeal
The Court of Appeal allowed the Commission's appeal, dismissed Visy's
cross-appeal, and remitted the matter to the High Court for further case
management. Relevantly, it identified three situations in which the New Zealand
Courts might acquire jurisdiction over foreign defendants:
where the relevant conduct occurred in New Zealand (rule 6.29 of the High
Court Rules and section 90(2)(a) of the Act);
where the conduct of a person in New Zealand can be attributed to a foreign
body corporate (section 90(2)(b) of the Act);
where a person resident or carrying on business in New Zealand engaged in
conduct overseas which affected a market in New Zealand (section 4(1) of the
Jurisdiction was found to exist here principally on the first and third
Conduct in New Zealand (rule 6.29 of the High Court
The Court of Appeal applied the two-stage test to rule 6.29 identified in
Kuehne + Nagel. That required the Commission to establish a good
arguable case that the relevant acts or omissions occurred in New Zealand, and
that there was a serious question to be tried on the merits. Visy conceded that
the second limb was satisfied.
Here, there was sufficient evidence, given the preliminary nature of the
jurisdictional inquiry, that the overarching understanding between Visy and
Amcor had extended to New Zealand. That understanding did not underpin the whole
of the New Zealand market, but trans-Tasman and major customers had been
"plainly affected" by the understanding (at ).
There was also evidence that Visy itself – rather than its local subsidiary –
had engaged in conduct in New Zealand in relation to four customer-specific
understandings (relating to Goodman Fielder, Mainland, apple boxes and
Fonterra). The relevant conduct consisted of Visy staff visiting customer
premises, participating in presentations to customers, assisting with the
submission of tenders (sometimes as part of a trans-Tasman RFP process), and
sending emails and making telephone calls to staff employed by Visy's New
Zealand subsidiary. Although none of this conduct itself involved collusion with
Amcor, it was sufficient to ground jurisdiction that the conduct related to
customers or bids that were the subject of the price-fixing arrangements made in
Conduct outside New Zealand (section 4)
Under section 4(1), the Act extends to conduct outside New Zealand by any
person who is resident or carrying on business in New Zealand, but only to the
extent that such conduct affects a market in New Zealand.
Jurisdiction was found to exist for all eight customer-specific
understandings (those listed above plus Coca-Cola, Inghams, PPCS/Richmond and
Huhtamaki). The Court of Appeal considered a number of factors before concluding
that Visy itself was carrying on business in New Zealand, despite being an
Australian company and despite the existence of a separate New Zealand company.
Those factors were:
Visy presented itself to customers as a single trans-Tasman operation, with
the New Zealand business effectively run as a division rather than a stand-alone
Visy was keenly involved in the New Zealand operations;
Visy dealt direct with customers with New Zealand needs, particularly large
customers regarded Visy as a single supplier;
Visy staff frequently visited the New Zealand subsidiary;
there was regular communication between Visy and its New Zealand subsidiary
(by phone and email), and between Visy and its customers;
Visy often acted on behalf of its New Zealand subsidiary.
The Court of Appeal concluded that the second limb of section 4(1) – which
requires that the relevant conduct "affects" a market in New Zealand – did not
require the Commission to show that the collusion had a "demonstrable effect" on
such a market (at -). It was sufficient that it "related to" such a
market, in that it impacted on or was likely to impact on competition. That test
was clearly made out here. The cartel conduct "plainly related to, was concerned
with, and was directed towards" a CFP market in New Zealand (at ). Section
4(1) thus provided an alternative route to jurisdiction.
Given the close interest that they usually take in the running of their New
Zealand subsidiaries, in light of this judgment it seems likely that many
Australian parent companies will find themselves subject to the jurisdiction of
the New Zealand Courts under both rule 6.29 and section 4(1) of the Act, even
where there is a separate New Zealand company and the price-fixing conduct
itself did not occur here. The Court's findings are consistent with a continuing
trend towards setting a low bar at the jurisdictional stage in circumstances
where New Zealand customers are affected by the conduct of parties resident
overseas, notwithstanding the Supreme Court's more cautious approach in
Poynter v Commerce Commission ( 3 NZLR 300).
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.