Edmonds Judd

Commerce Act 1986

Business briefs

Commerce Act 1986 and Commerce Commission review

Last year the government announced a comprehensive review of New Zealand’s competition framework to combat monopolistic practices and boost economic productivity. Limited options and high price points in the grocery, banking and building supply sectors are reflective of market failures resulting from such practices and, subsequently, prompted this review.

 

Commerce Act 1986: The review includes a revision of the long-standing merger regime embedded in this legislation. Although mergers can enhance efficiency, they may also create a power imbalance in the market and limit consumer choice. The current regime will be reconsidered to mitigate the risks posed by larger companies that make small, incremental acquisitions of smaller companies.

 

The government also wants to provide greater clarity to the Act’s anti-competitive conduct provisions. Its aim is to increase certainty as to what constitutes anti-competitive collusion – in turn, appeasing concerns that typically deter businesses from engaging in beneficial collaboration.

 

Commerce Commission: The review will also evaluate the commission’s structure and governance – specifically, whether it is capable of effectively enforcing competition laws. The introduction of specific commissioners and a divisional model to contribute to accountability and strategy will also be considered.

 

The government’s focus on strengthening competition laws aims to deliver greater choice, lower costs and increase productivity for all New Zealanders.

 

 

Reform of overseas investment laws to boost economic growth

The Overseas Investment Act 2005 will undergo significant reform, the government has announced. New Zealand is currently ranked the most restrictive country in the OECD for overseas investment.[1] The reform intends to combat this position by increasing openness to foreign investment that should attract more international investors.

 

To achieve what the government believes will be a more dynamic and competitive economic environment, a suite of statutory changes have been proposed to reduce barriers to investment where such investment does not present any identified risk to New Zealand’s interests. Key proposed changes include:

  • Fast tracking approvals: simplifying the assessment process by establishing basic tests and assuming investment will be permitted unless risks are flagged
  • Targeted scrutiny: retaining flexibility to analyse investments on a case-by-case basis and impose conditions or block them if necessary, and
  • Retaining current scope: ensuring the government can continue to scrutinise sensitive investments, including farmland.

 

Legislation to implement these changes is expected to be introduced this year.

 

 

Tax changes for charities

Charities can expect to see a raft of tax changes in May. These changes are intended to reduce the scope for exploitation of loopholes in the current framework. In other words, the government wants to ensure that entities receiving tax benefits are distributing their funds for charitable purposes – as opposed to structuring themselves as charities and building up funds that are not being used for charitable purposes.

 

This review will focus on charities that operate commercial businesses and whether they should pay tax on profits retained in the business. When announcing the changes, the Minister of Finance, Nicola Willis, mentioned that entities such as cereal manufacturer Sanitarium and early childhood education provider BestStart are among the types of organisations potentially impacted by the changes.

 

This removal of tax-free status is to be balanced against the need to support charities and to recognise the significant role New Zealand charities play in our communities. As a result, some charities may lose certain tax benefits.

 

These changes are part of a broader tax policy work programme that also includes exploring user-pays models for infrastructure projects and other revenue raising measures. The changes aim to ensure fairness while maintaining vital support for the charitable sector.

 

 

[1] BusinessNZ, 6 September 2024. https://businessnz.org.nz/wp-content/uploads/2024/09/240906-A-future-for-Foreign-Direct-Investment-into-NZ.pdf

 

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Business briefs

Cartel conduct: New Zealand’s first ever criminal cartel prosecution

The Commerce Commission recently filed criminal charges against two construction companies and their directors for alleged bid-rigging of publicly funded construction contracts. This is New Zealand’s first ever criminal prosecution for alleged cartel conduct under the Commerce Act 1986.

 

Bid-rigging, or collusive tendering, occurs where some or all the bidders collude to pre-determine who will win the bid or tender. This is a form of cartel conduct that is prohibited by the Act.

 

The case is currently before the court so information is limited but, if found guilty, the companies and their directors could face serious penalties. Each company could be fined up to $10 million, three times their commercial gain from the cartel conduct or 10% of their turnover per year per breach. Each director could be imprisoned for up to seven years and/or fined up to $500,000.

 

The Commission’s willingness to bring criminal proceedings for cartel conduct is a warning for all businesses to understand their obligations under the Act and have adequate processes to avoid engaging in cartel conduct.

 

New privacy rules for biometrics

The Office of the Privacy Commissioner (OPC) has announced it will release a draft policy code early this year regulating the collection and use of biometric information. The code will have direct implications for any businesses dealing with biometric information.

 

Biometric information is any information about a person’s biological or behavioural characteristics, such as fingerprints, face, voice or eyes. It is increasingly common for businesses to collect and use biometric information to verify people’s identities online, enhance retail security, control access to devices or physical spaces, or to monitor attendance at a site or a work place.

 

While the use of biometrics has significant benefits for businesses, it also increases the risks of profiling, discrimination, bias, and lack of transparency and control to individuals.

 

The OPC has proposed three categories of rules that businesses must comply with when collecting and using biometric information. These are:

  1. Proportionality assessment: Businesses must undertake a proportionality assessment to ensure that the reasons for collecting biometric information outweigh the risk of privacy intrusion
  2. Transparency and notification: Businesses must be open and transparent with individuals and the public about the collection and use of their biometric information, and
  3. Purpose limitations: The collection and use of biometric information will be restricted for certain purposes.

 

The public will have an opportunity to provide feedback on the code before it is implemented.

 

New reporting obligations for large businesses

The Business Payment Practices Act 2023 will come into effect on 25 May 2024. It will require large businesses to publicly report information on their payment practices to the Business Payment Practices Register.

 

The legislation applies to businesses with more than $33 million in annual revenue and $10 million in third party expenditure. The information that must be reported on includes:

 

  • The average time to pay supplier invoices
  • The percentage of invoices paid in full within the required timeframe, and
  • A description of the business’s standard payment terms (if any).

 

If a business fails to comply with its reporting obligations, it could be fined up to $9,000. If a business intentionally provides false or misleading information, it could be fined up to $500,000.  The Act is designed to address payment delays that can have significant impacts on the cash flow for New Zealand’s small and medium-sized businesses.

 

If you would like more information or advice on any of the above topics, please feel free to contact us.

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650