Present blog is the gist of speech of Craig Fross released from Ministry of Commerce of New Zealand.
"Thank you for the introduction and for inviting me to speak today.
Based on the calibre of presenters and the agenda for the next two days,
this year's conference will no doubt provide some challenging and
stimulating discussion around competition law, policy and regulation in
New Zealand.
I would like to start by explaining the government's key policy objectives, because these drive the reforms. At the broadest level, the government has four key policy objectives for the next three years."
These are:
•responsibly managing the Government's finances;
•building a more competitive and productive economy;
•delivering better public services; and
•supporting the rebuild of Christchurch.
For New Zealand to realise its potential, it's essential that we build
a more competitive and productive economy. Effective competition spurs
innovation, which in turn underpins the productivity of individual
firms and the public sector.
Competition law promotes a
competitive culture in New Zealand, it is an important tool because it
applies to all sectors, except those specifically exempt.
The Commerce Act is designed to incentivise competitive behaviour
through prohibiting anti-competitive practices. Clear and robust
legislation is an important part of the regime but it alone cannot
achieve the Government's objectives.
I'd like to spend a
moment commenting on the other institutions that have an important role
to play: the Commerce Commission, the courts, commentators and you - the
people that advise business.
The Commerce Commission helps build a more competitive and productive economy through administering and enforcing the law.
Over the past year the Commission has honed its focus on lifting
voluntary compliance by placing greater emphasis on helping businesses
understand what they need to do to comply with the law.
To
do this, the Commission has focused on education initiatives and
improving the quality of engagement with stakeholders. The work done to
raise awareness in the construction sector is a great example of using
softer methods to promote compliance with the Act, and it is my
understanding that this has been very successful.
Advisors also play a significant role in ensuring that the competition regime operates as intended.
The Commerce Act does not set out prescriptive rules.
It is principle-based.
This means it is essential that advisors understand the purpose of the Act.
This enables advisors to provide savvy advice, which in turn will facilitate pro-competitive business transactions.
Courts also play an important role. High quality judicial precedent
plays an integral part in building a more productive and competitive
economy.
To the extent that cases come before the Courts,
the Commission and advisors also have a role in influencing how the
judiciary understands the purpose and structure of the legislation.
We cannot forget about the commentators. We need them.
Their critiques of decisions contribute to the quality of debate and ultimately improve the quality of decision-making.
Commentators generate discussion. This has to be a good thing.
Academics and advisors can also play a role in holding the courts and
the Commission to account. This contributes to quality debate on policy
and legislative issues.
Similarly forums such as this
conference allow a detailed discussion of developments in competition
law and policy increase the capability of all institutions.
This makes it a real privilege for me to talk today because as Minister
of Commerce I see my role as supporting the network of people and
institutions that will help build a more competitive and productive
economy.
This brings me to the final feature of our
competition regime that is integral to the promotion of a competitive
culture in New Zealand: the legislation.
As you will be
aware, there are currently two bills before Parliament designed to
improve the operation and enforcement of competition law in New Zealand.
These are the Commerce Commission (International Co-operation and Fees)
Bill, and the Commerce (Cartels and Other Matters) Amendment Bill.
The Cartels Bill in particular is a significant piece of law reform as
the competition provisions of the Commerce Act have not been subject to
any substantial amendment since 2001.
I know many of you
here today have participated in the policy development of these Bills,
and I commend those of you who have done so.
I would like to
spend a few moments talking about how the Cartels Bill furthers the
Government's policy objectives and key issues that were considered as
part of the policy process.
The Cartels Bill is about enabling business.
It does a lot more than just criminalise hard-core cartel conduct.
It enbables business to entire into pro-competitive, innovative and efficient collaborative activity.
This Bill will:
• Clarify the scope of the prohibition.
•Introduce a collaborative activity exemption
•Introduce a clearance regime so that businesses can test with the
Commission to find out whether their proposed collaborative activity
gets the green light.
The initial stages of the policy
process focused on whether or not to criminalise hard-core cartel
conduct….so it is understandable that when people think about the Bill,
they focus on criminal sanctions.
BUT, this Bill does so much more.
It aims to clarify the scope of the prohibition against hard-core
cartels, in part by introducing the collaborative activity exemption.
The scope of the collaborative activity exemption is broad and focuses
on the substance of the activity, not the form of the arrangement. As a
result, it should apply to all pro-competitive collaborations.
The collaborative activity exemption has also been designed so that
businesses can assess for themselves whether their proposed
collaboration falls within the exemption. The exemption sends a clear
signal that the Government recognises that pro-competitive, innovative
and efficiency enhancing collaborative activities are essential to New
Zealand realising its productive potential.
The design of the prohibition is critical.
I don't think we would have achieved our policy objectives had we
introduced criminal sanctions while retaining the current prohibition.
In considering whether to criminalise hard-core cartel conduct, my
predecessor Simon Power had regard to the Legislative Advisory Committee
Guidelines.
He identified three factors of particular relevance and I'd like to spend a moment discussing these.
The Guidelines suggest that regard should be had to the following questions:
•Will the conduct in question, if permitted or allowed to continue
unchecked cause substantial harm to individual or public interests?
•Is the conduct that is to be categorised as a criminal offence able to be defined with precision?
•Would public opinion support the use of the criminal law, or is the
conduct in question likely to be regarded as trivial by the general
public?
These questions are crucial because they focus both
on the legislative design but also on the role of the various
institutions in making the regime work.
During the policy
process some submissions suggested that the scope of the prohibition was
unclear and may prohibit pro-competitive conduct. To some extent, some
of the discomfort with criminalisation appeared to be a product of
uncertainty about the current law.
Given the feedback about
the current prohibition, answering the questions posed by the Guidelines
becomes problematic. Obviously if the current prohibition seems to
capture or hinder pro-competitive behaviour from occurring, allowing
this to continue does not cause substantial harm.
A large
part of the policy process was about listening to competition law
experts and business about how we could get the design of the Bill
right.
The Bill specifically aims to clarify the scope of
the prohibited conduct and provide safeguards - namely the collaborative
activity exemption and clearance regime - to encourage businesses to
continue to find ways to collaborate and innovate in a way that builds
their productive and competitive capacity.
The government is not shy about the fact that people intentionally participating in hard-core cartels deserve to go to jail.
Any behaviour that distorts prices and undermines the competitiveness of New Zealand markets - is not acceptable.
People that intentionally participate in hard-core cartels deserve to
be sanctioned in the same way as those that participate in tax evasion,
fraud and other white collar crimes.
We know these are significant changes. To provide greater certainty, the government has invited the Commerce Commission to:
•Develop prosecution guidelines that outline when they would take a criminal prosecution; and
•undertake further advocacy work to promote better understanding of the prohibitions in the Commerce Act.
These reforms will also have a significant impact on the operation of
the legislative regime. Cabinet has agreed to sequence the introduction
of the new regime so that the majority of the regime will come into
force on the day the Act receives royal assent, but to delay the
commencement of criminal sanctions. This should leave sufficient time
for the regime to bed-in, alleviating some of the uncertainty.
While the amendments arose from the question of whether or not to
introduce criminal sanctions for hard-core cartel conduct, the Bill does
much more.
The design means that the focus should no longer
be on criminal sanctions, but rather on facilitating pro-competitive
collaborative activities.
The industry's focus must change.
If everyone continues to focus on criminal sanctions - we will miss a real opportunity to improve the current regime.
I anticipate that the Bill will receive its first reading soon, but the exact timing will depend on Parliamentary priorities.
The Bill will then be referred to the Commerce Select Committee for
consideration. Select Committee provides an opportunity for legal
practitioners to add value, both by identifying areas where the proposed
regime could be improved, and highlighting the features of the regime
that are an improvement on the current regime.
Constructive
input into the legislative process at this stage is invaluable, and
helps ensure that the regime has the robustness to stand the test of
time.
Another important part of this suite of reforms is the
Information Sharing Bill, which also ties into the amendments of the
Cartels Bill. The ability for the Commerce Commission to share
compulsorily-acquired information with equivalent overseas regulators is
another lever the Government can use to deter anti-competitive
behaviour, especially behaviour that takes place overseas but affect New
Zealand.
Both the Cartels Bill and the Information-Sharing
Bill represent significant reforms for New Zealand competition law, and
go directly towards achieving the Government's policy objective of
building a more competitive and productive economy.
As I
have mentioned, this does not mean that competition law acts within a
vacuum. The Commission, the Courts, commentators and advisors have a
vital role to play in ensuring the workability of the law. In this
context I urge you to consider the Cartels Bill and the policy intent
behind it, and encourage you to participate in the Select Committee
process by identifying features of the Bill that represent an
improvement, and where the Bill could be enhanced.
Again,
thank you for providing me with opportunity to address you today, and I
wish you all the best for the rest of the conference.
