1. INTRODUCTION AND SUMMARY

1.1 This submission on the Commerce (Promoting Competition and Other Matters) Amendment Billis made by The New Zealand Initiative (the Initiative), a Wellington-based think tank supported primarily by major New Zealand businesses. In combination, our members employ more than 150,000 people.

1.2 The Initiative undertakes research that contributes to the development of sound public policies in New Zealand, advocating for a competitive, open, and dynamic economy and a free, prosperous, fair, and cohesive society.

1.3 The Initiative’s members span the breadth of the New Zealand economy. The views expressed in this submission are those of the author rather than the Initiative’s members.

1.4 We support elements of the Bill that improve the Commerce Commission’s ability to obtain candid information and protect those who provide it, including strengthened confidentiality arrangements and meaningful penalties for unauthorised disclosure of confidential material.

1.5 We are concerned, however, about two aspects of the Bill that risk undermining competition by deterring pro-competitive conduct or by imposing disproportionate compliance burdens:

(a) Predatory pricing / misuse of market power (new s 36C): moving toward costbased tests while not requiring proof of recoupment risks, capturing aggressive but pro-consumer price cutting and may chill legitimate rivalry.

(b) Part 3A market studies (“study of pro-competition regulation”): the proposed power enabling the Commission to require businesses to prepare forecasts and forward plans and to do so according to a Commission-specified methodology is a substantial imposition and risks recreating old-style, high-burden market studies.

1.6 The National-ACT coalition agreement committed to reorient market studies toward entry barriers. It states:

“Reform market studies introduced by the Commerce Amendment Act 2018 to focus on reducing regulatory barriers to new entrants to drive competition.” (National-ACT coalition agreement, p 4)

1.7 The Bill’s Part 3A changes move in the opposite direction: they expand the Commission’s ability to impose significant costs on businesses in support of a “pro-competition regulation” recommendation, rather than ensuring market studies focus on identifying and removing barriers to entry and expansion. This is particularly concerning, given that neither the Commission nor the Minister has shown any interest in pursuing market studies in obvious cases where regulations may create a substantial lessening of competition. Why grant new and costly powers before even testing the new model?

1.8 The Bill also clarifies that, in assessing whether an acquisition substantially lessens competition, the effects may include the combined effects of acquisitions within a relevant three-year period. In a prior joint submission by the Initiative and the International Center for Law & Economics, we cautioned against broad “creeping acquisitions” rules – particularly those that aggregate transactions across a moving
window creating uncertainty and imposing substantial costs without a clear theory of harm. The approach in this Bill is narrower than some proposals we criticised (it operates by assessing the next acquisition rather than creating a standalone creeping acquisitions regime or notification-threshold aggregation). Nonetheless, guardrails are still warranted to ensure the “where relevant” qualifier does real work and does not become an across-the-board presumption against acquisition-led growth.

1.9 Recommendations

(a) Confidentiality: retain the strengthened confidentiality and penalties provisions, while ensuring the Commission remains accountable through transparent public reasoning (even where underlying evidence must remain confidential).

(b) Predatory pricing: amend the proposed provision to reduce the risk of chilling proconsumer price cutting, including by reinstating a meaningful recoupment requirement or a robust equivalent screen.

(c) Part 3A market studies: repeal sections 50 to 51E and replace them with a confined study mechanism focused solely on identifying and recommending the removal of regulatory barriers to entry and expansion. In addition, remove the proposed power to compel the preparation of forecasts and forward plans under a Commissionspecified
methodology, as it is constitutionally objectionable and inconsistent with
a disciplined, barrier-focused model.

(d) Serial acquisitions / three-year aggregation / mergers: remove the proposed provision, as the Commission can already act in cases where serial acquisitions result in a substantial lessening of competition. If retained, ensure the legislation and/or accompanying guidance embeds limiting principles so aggregation is used only where there is a coherent theory of harm, preserves reliance on prior clearances, and avoids de facto retroactive “unscramble the eggs” outcomes. Similarly, reconsider the repeal of s46 or provide an alternative safe-harbour

(e) Behavioural remedies: Where ongoing behavioural obligations are contemplated, the Act and/or the Commission’s practice should emphasise limiting principles: obligations should be used only where clearly necessary, should be narrowly tailored to an articulated theory of harm, should be time-limited where feasible, and should be subject to transparent reasoning and review.

(f) Collaboration pathways: The Bill’s notification and class exemption mechanisms should be implemented with safeguards clearly in view, particularly sunset/review disciplines and transparency around the rationale for any exemption category and its continuation.