On Friday the Commerce Commission (NZCC) issued guidelines on its approach to considering cooperative initiatives between competitors in response to COVID-19.1
These guidelines are further to the Commerce and Consumer Affairs Minister's policy statement on 22 March 2020 requesting that the NZCC "be more flexible than it might be in normal times around allowing businesses to work together",2 and the NZCC's response 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".3 See our previous alert here for more detail on those previous statements.
Guidance on the NZCC's approach to enforcement
The NZCC's guidance outlines the factors it will consider in deciding whether to take any enforcement steps in relation to COVID-19 collaborations. In effect, the guidance expands on its 22 March statement to outline how the NZCC will assess whether:
- businesses "are cooperating to ensure New Zealanders continue to be supplied with essential goods and services", which the NZCC has said it will not take enforcement action against; or
- businesses are "using COVID-19 as an excuse for non-essential collusion or anti-competitive behaviour", which the NZCC has said it will not tolerate.
The non-exhaustive list of factors that the NZCC has said it will consider include:
- whether the new measure is being taken in good faith and in response to COVID-19 challenges;
- whether an identical outcome could be achieved by a business acting alone;
- whether the collaboration relates to essential goods and services, although there is no legislative or NZCC guidance regarding which goods and services qualify as "essential";
- whether the collaboration "covers no more than is necessary, and lasts no longer than necessary" to deal with COVID-19 challenges, and whether that necessity is subject to ongoing review throughout the collaboration;
- the limitations placed on information sharing to ensure a clear nexus between information shared between competitors and the COVID-19 response; and
- whether the collaboration is inclusive, or whether, for example, it excludes smaller businesses from efforts to cooperate.
The NZCC has said that it will also consider the response of government agencies and other affected parties (including suppliers, customers and employees) in exercising its discretion.
Of course, these factors must be assessed within the existing Commerce Act exceptions for collaboration between competitors (for example, the collaborative activities exception). That is to say, even if a collaboration in response to COVID-19 does not have all the characteristics in the NZCC's guidance (for example, it does not relate to "essential" goods or services), that does not change the legal framework that the NZCC must apply.
NZCC willing to provide case-by-case guidance directly to businesses
The NZCC's guidance makes clear that businesses retain the ability to self-assess the compliance of their conduct with the Commerce Act, including by reference to this additional guidance from the NZCC. Any proactive and upfront approach to the NZCC in relation to potential collaboration remains voluntary.
However, the NZCC "encourages" businesses to advise it about planned collaboration with competitors, and notes that any enforcement decision will consider:
The extent to which the participants have proactively engaged with the Commission, including fully and transparently disclosing the measures to the Commission, and addressing any concerns raised by Commission staff.
In response to any proactive approaches by businesses, the NZCC has undertaken to work to industry timeframes and make senior staff available to carry out time-sensitive discussions, requiring "full and frank" cooperation from affected parties in return.
While this undertaking to work to industry timeframes relates only to the NZCC providing informal comfort to parties regarding how it will exercise its enforcement discretion, the guidelines also stipulate that the NZCC will "seek to streamline" urgent applications for formal protection. Under the Commerce Act, the NZCC is able to formally grant:
- clearance for proposed conduct that falls within the collaborative activities exception in the Commerce Act. The NZCC has a target of 30 working days to consider such applications. However, given the new and untested nature of the exception and clearance regime, and the consequences of clearance (formal statutory immunity), it is unclear whether the NZCC would be able to meet that timeframe or process applications in a timeframe that is useful for any collaborations in response to COVID-19; and
- authorisation for conduct that breaches the Commerce Act, but that has a public benefit that outweighs any harm. The NZCC targets providing a decision on "straightforward" applications within 40 working days. However, given the NZCC's average working time over the last 20 years for considering authorisation applications is 170 working days, and the usual need to present economic evidence in relation to public benefits, it again remains to be seen whether the NZCC could grant authorisation within a timeframe that is useful for any collaborations in response to COVID-19.
Potential for further guidance for non-essential goods and services
The NZCC's guidance relates solely to the supply of essential goods and services at this stage. However, it has not ruled out issuing further guidance in the future in relation to the supply of non-essential services, perhaps in recognition of how broadly the impacts of COVID-19 are being felt across the economy. Of course, the existing legislative exceptions, including the collaborative activities exception, continue to apply to the supply of all goods and services.
Any questions?
If you have any questions, or would like assistance in implementing any coordinated industry response to COVID-19, please get in touch with Troy Pilkington. We have significant experience advising businesses on collaborative arrangements, including in response to COVID-19, and we will help you proceed with confidence.