Section 66 of the Commerce Act 1986 (New Zealand) states that a merger that substantially lessens competition in a market is prohibited.

Section 66 of the Commerce Act 1986 (New Zealand) states that a merger that substantially lessens competition in a market is prohibited. This provision is designed to prevent anti-competitive behavior and promote fair competition in the marketplace. In this article, we will explore the legal background and implications of Section 66, including relevant case law and legal principles.

Facts:

The factual background of Section 66 is straightforward. It prohibits mergers that substantially lessen competition in a market. This provision applies to all mergers, regardless of the size or nature of the companies involved. The purpose of this provision is to prevent companies from engaging in anti-competitive behavior that could harm consumers and other businesses.

Relevant Laws:

The Commerce Act 1986 (New Zealand) is the primary statute governing competition law in New Zealand. Section 66 is one of the key provisions of this Act, and it is supported by other provisions that prohibit anti-competitive behavior, such as price fixing, market allocation, and abuse of market power. The Act is also supported by case law and legal principles that help to interpret and apply its provisions.

Application of Laws to Facts:

The application of Section 66 to the facts depends on a number of factors, including the nature of the merger, the size and market share of the companies involved, and the potential impact on competition in the relevant market. In general, if a merger is likely to substantially lessen competition in a market, it will be prohibited under Section 66. However, there may be conflicting interpretations of the law or ambiguities in how it should be applied in specific cases.

Key Legal Issues or Questions:

The key legal issues or questions that arise in relation to Section 66 include whether a merger will substantially lessen competition in a market, how to define the relevant market, and how to assess the potential impact on competition. These issues can be complex and require careful analysis of the facts and legal principles.

Likely Outcome:

The likely outcome of a case involving Section 66 will depend on the specific facts and legal arguments presented. However, if a merger is found to substantially lessen competition in a market, it will be prohibited under the Act. The parties may be required to divest assets or take other measures to address the anti-competitive effects of the merger.

Alternatives or Different Interpretations:

There may be alternative interpretations of Section 66 or other legal principles that could affect the outcome of a case. For example, some commentators have argued that the Act should focus more on promoting innovation and consumer welfare, rather than simply preventing anti-competitive behavior. These alternative perspectives may be relevant in certain cases.

Risks and Uncertainties:

There are always risks and uncertainties associated with legal disputes, including those involving Section 66. The parties may face financial costs, reputational damage, and other negative consequences if they are found to have engaged in anti-competitive behavior. There may also be uncertainties around how the law will be applied in specific cases.

Advice to the Client:

Based on the assessment of the law and the facts, our advice to clients would be to carefully consider the potential anti-competitive effects of any proposed merger. If there is a risk that the merger could substantially lessen competition in a market, it may be advisable to seek legal advice and explore alternative options.

Potential Ethical Issues:

There may be potential ethical issues or conflicts of interest that arise in relation to Section 66. For example, a company may be tempted to engage in anti-competitive behavior in order to gain a competitive advantage, even if this harms consumers or other businesses. It is important for companies and their advisors to consider these ethical issues carefully.

Implications or Consequences:

The potential implications or consequences of a case involving Section 66 can be significant. If a merger is found to substantially lessen competition in a market, the parties may be required to divest assets or take other measures to address the anti-competitive effects. This can be costly and time-consuming, and may also harm the parties’ reputation and market position. It is important for companies to carefully consider these implications before engaging in any merger activity.

Related Case Law:

There have been a number of cases in New Zealand that have involved Section 66 of the Commerce Act 1986. Some of the key cases include Commerce Commission v Air New Zealand Ltd [2011] NZHC 1094, Commerce Commission v Carter Holt Harvey Ltd [2010] NZSC 20, and Commerce Commission v Telecom Corporation of New Zealand Ltd [2002] NZCA 175. These cases provide important guidance on how Section 66 should be interpreted and applied in specific situations.