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Competition law reform continues with s 36 Discussion Paper released

January 25, 2019

Contacts

Partners Anne Callinan, James Craig
Senior Associates Nina Blomfield

Competition law (inc cartels)

The Government’s appetite for competition law reform continues unabated, with section 36 the latest to come under scrutiny. The Minister of Commerce and Consumer Affairs, Hon Kris Faafoi, has today released through MBIE a Discussion Paper entitled Review of Section 36 of the Commerce Act and other matters.

Section 36, last amended in 2001, prohibits a firm with (1) a “substantial degree of market power” from (2) “taking advantage” of that power for (3) an anti-competitive purpose. Of those three elements required to prove a breach of s 36, it is the second “taking advantage” and third “purpose” element which the 73-page Discussion Paper narrows in on.

The “taking advantage” of market power requirement, involves a complex counterfactual assessment questioning how the incumbent firm would behave in a competitive market if it were stripped of its market power. The Discussion Paper says it is difficult to apply and “fails to condemn all anti-competitive conduct”. The suggested solution is an “effects-based” test following the example of recently amended Australian legislation, under which, instead of needing to show that a firm had an anti-competitive purpose, it would be enough to prove the conduct had an anti-competitive effect.

The Discussion Paper also touches on the “outdated, unclear and poorly understood” intellectual property provisions of the Commerce Act, suggesting that instead of the current exempt status, intellectual property should be treated the same as any other property. It also proposes to close an “inadvertent” loophole in relation to covenants, which the recently introduced cartel provisions technically do not apply to.

MBIE is seeking submissions on the Discussion Paper by 9am on 1 April 2019.

If you have any questions about the proposed changes, our specialists would be happy to discuss.

The full Discussion Paper and a summary are available here.

Contributors jesse.tizard@simpsongrierson.com