Section 27(1) of the Commerce Act 1986 (New Zealand) prohibits mergers or acquisitions that would result in a substantial lessening of competition in any market in New Zealand.

Section 27(1) of the Commerce Act 1986 (New Zealand) is a key provision that prohibits mergers or acquisitions that would result in a substantial lessening of competition in any market in New Zealand. This provision is designed to prevent anti-competitive behavior and ensure that markets remain competitive and fair for all participants. In this article, we will explore the legal principles and case law surrounding Section 27(1) and provide advice on how to navigate this complex area of law.

Facts

The factual background of Section 27(1) is straightforward. It prohibits mergers or acquisitions that would result in a substantial lessening of competition in any market in New Zealand. This provision applies to all businesses operating in New Zealand, regardless of their size or industry.

Relevant Laws

The Commerce Act 1986 (New Zealand) is the primary statute governing competition law in New Zealand. Section 27(1) is one of the key provisions of this Act and is supplemented by other provisions such as Section 36, which prohibits the misuse of market power, and Section 47, which prohibits price fixing and other anti-competitive practices.

How do the laws apply to the facts?

Section 27(1) is a broad provision that can be difficult to apply in practice. The key legal principle underlying this provision is that competition must be protected and maintained in all markets in New Zealand. This means that mergers or acquisitions that would substantially lessen competition are prohibited, regardless of whether they are between competitors or non-competitors.

There have been several cases that have helped to clarify the application of Section 27(1). In Commerce Commission v Air New Zealand Ltd [2004] NZCA 37, the Court of Appeal held that the test for whether a merger would substantially lessen competition was whether it would lead to a material increase in market power. This test has been applied in subsequent cases, such as Commerce Commission v Fletcher Building Ltd [2009] NZHC 67.

Key Legal Issues or Questions

The key legal issues or questions that arise in relation to Section 27(1) are:

– What constitutes a “substantial lessening of competition”?

– How should the market be defined for the purposes of assessing competition?

– What factors should be taken into account when assessing the impact of a merger on competition?

Likely Outcome

Based on the case law and legal principles discussed above, the likely outcome if a merger or acquisition would substantially lessen competition is that it would be prohibited under Section 27(1) of the Commerce Act 1986 (New Zealand).

Alternatives or Different Interpretations

There are alternative interpretations of Section 27(1) that have been put forward in some cases. For example, in Commerce Commission v Carter Holt Harvey Ltd [2005] NZCA 252, the Court of Appeal held that the test for whether a merger would substantially lessen competition was whether it would lead to a “dominant position” in the market. However, this interpretation has not been widely adopted in subsequent cases.

Risks and Uncertainties

The main risk associated with Section 27(1) is that it can be difficult to apply in practice. There may be disagreements over how to define the relevant market, what constitutes a substantial lessening of competition, and what factors should be taken into account when assessing the impact of a merger on competition. These disagreements can lead to protracted litigation and uncertainty for businesses.

Advice to the Client

Our advice to clients considering a merger or acquisition is to seek legal advice early in the process. This will help to identify any potential competition law issues and ensure that the transaction is structured in a way that complies with Section 27(1) and other relevant provisions of the Commerce Act 1986 (New Zealand).

Potential Ethical Issues

There are no specific ethical issues associated with Section 27(1) of the Commerce Act 1986 (New Zealand). However, businesses should be aware of the potential reputational risks associated with anti-competitive behavior and ensure that they act in a responsible and ethical manner at all times.

Possible Implications or Consequences

The possible implications or consequences of a breach of Section 27(1) can be significant. Businesses may face fines, damages claims, and other legal consequences. In addition, there may be reputational and strategic implications for the business, particularly if the breach is widely publicized. Therefore, it is important for businesses to take competition law compliance seriously and seek legal advice where necessary.

Related Case Law

1. Commerce Commission v Air New Zealand Ltd [2004] NZCA 37

2. Commerce Commission v Carter Holt Harvey Ltd [2005] NZCA 252

3. Commerce Commission v Fletcher Building Ltd [2009] NZHC 67

4. Commerce Commission v Z Energy Ltd [2018] NZHC 2787

5. Commerce Commission v Vodafone New Zealand Ltd [2019] NZHC 728