The scope of powers for the NZ Commerce Commission (Commission) has recently expanded. The Commission has had confirmation that it can consider non-economic factors in a decision on a proposed merger or acquisition; and Parliament has legislated for the Commission to have the power to undertake market studies.

In late 2017, the High Court upheld the Commission’s consideration of non-economic factors in its decision not to grant authorisation to the proposed NZME – Fairfax Media merger in NZME Limited v Commerce Commission [2017] NZHC 3186 [18 December 2017].

  • In the mergers and acquisitions context, the Commission follows broadly a two-step process: it will not give clearance unless satisfied that the proposed merger will not be likely substantially to lessen competition; but where clearance is denied, the Commission may nonetheless give authorisation if satisfied that the overall benefits to the public will outweigh detriment from the loss of competition (see further our May 2017 article on the Commission’s approach to several notable merger proposals).
  • The proposed merger would have combined New Zealand’s largest newspaper and online news providers, and the High Court agreed with the Commission in relation to four of the six relevant markets. Accordingly, the High Court upheld the Commission’s decision not to grant clearance.

The key issue in relation to the Commission’s having declined to grant authorisation was the role of non-economic factors in the decision. Notably, the loss of media plurality if the two entities were to merge. The Commission is bound to give primary regard to economic efficiencies, but there are no explicit limits on what it can and cannot take into account. However, the appellants drew on previous decisions to argue that the Commission was required to quantify the potential benefits and detriments as much as possible.

In upholding the Commission’s decision, the High Court in NZME accepted that the maintenance of media plurality was important for the quality of New Zealand’s democracy, and thus a valid consideration. The decision therefore continued the recent trend of easing the courts’ stance on the importance of quantifying benefits and detriments.

In September 2018, the Court of Appeal affirmed the High Court’s decision (NZME Limited v Commerce Commission [2018] NZCA 389). The Court of Appeal stated that the Act gives the Commission a broad scope of factors to consider in making an authorisation decision, including both economic and non-economic features.

The Commerce Amendment Act was passed in October 2018, and enables the Commission undertake “competition studies”, whether on recommendation from the Commerce Minister or on its own initiative, where this is believed to be in the public interest.

The Commission has already begun competition studies on the retail fuel and mobile telecommunications markets, and has posted draft guidelines for consultation on its approach to competition studies.