A policy at risk: an evaluation of the competition thresholds in the Commerce Act 1986

Abstract

This thesis evaluates the competition thresholds contained in the Commerce Act 1986 against the objective of the Act to promote competition in markets within New Zealand. It discusses the underlying concepts and economic principles which form the foundation of competition law, and examines the interpretation of the competition thresholds in the jurisdictions from which they were derived: the European Community in the case of the threshold of ‘dominant position’ and the United States in the case of ‘substantial lessening of competition’. The thresholds in the Trade Practices Act 1974 and the Commerce Act 1986 are then reviewed, with decisions of the Trade Practices Tribunal and the Courts in Australia and the Commerce Commission and the Courts in New Zealand being analysed. The debate which has taken place in both jurisdictions in relation to the appropriate competition thresholds is considered, together with the impact of the Closer Economic Relations Treaty between Australia and New Zealand and its influence on any changes which may be appropriate to the competition thresholds in New Zealand. As a result of this analysis, this thesis concludes that the ‘dominant position’ threshold has been misinterpreted. As a consequence, mergers resulting in very high levels of concentration may be able to proceed without scrutiny and the actions of many powerful firms may fall outside the ambit of the Act. It is argued that this interpretation places at risk the Act’s object of promoting competition in markets within New Zealand, and, in relation to mergers is out of step with policies currently being implemented in Australia and the United States. It is accordingly recommended that the ‘dominant position’ threshold be replaced by the threshold of ‘substantial lessening of competition’ for mergers and the ‘substantial degree of market power’ threshold for unilateral action. No change is recommended to the threshold for restrictive trade practices, although it is recommended that its future application be carefully monitored. It is argued that these changes are required to enable the Commerce Act 1986 to play the role that it was intended to play in promoting competition in markets within New Zealand.