|
|
Home
| Databases
| WorldLII
| Search
| Feedback
University of Otago Law Theses and Dissertations |
Last Updated: 11 April 2024
Competition Law and the Environment: Climate Change as a Non-Economic Consideration
Lydia Christensen
A dissertation submitted in partial fulfillment of the degree of Bachelor of Laws (Honours) at the University of Otago - Te Whare Wānanga o Ōtākou
6 October 2023
Acknowledgements
Firstly, I would like to sincerely thank my supervisor, Associate Professor Ed Willis. Thank you for sharing your insight and knowledge with me, inspiring my interest in competition law and your encouragement and reassurance as I tackled this project.
To my friends and flatmates, thank you for all of the support, laughter and tears we have shared along the way. A special thank you to Meredith and Eve, for lots of long conversations, fun times, and barbie movie marathons, it has been an absolute pleasure to live, study and write these dissertations with you both.
To my whānau at Leith Valley Church, thank you for believing in me and praying for me. A particular thank you to the young adults for being a constant source of joy, comfort, and friendship.
Thank you to my wonderful family. To Nat and Fen for being the best friends I could ask for (and having cute babies for me to cuddle when stressed). Thank you to my parents, I would not have made it without your love, prayers, and unwavering support. To Mum for always checking in and providing food, hugs, and encouragement whenever I needed, and Dad for inspiring and prioritising a love of learning and reminding me constantly to not be too hard on myself.
To Jono, thank you for challenging me, encouraging me, and growing with me. Thank you for never failing to remind me of what’s important in life, I truly couldn’t have done this without your love and support.
Table of Contents
(i) Contracts, Arrangements or Understandings that Substantially Lessen Competition 13(ii) Cartel provisions 13
(iii) Misuse of Market Power 13
(iv) Acquiring Market Power through Merger 14
(i) Influences at the Enactment of the Commerce Act 15
(ii) Changing Approach to the Commerce Act 18
(i) The Purpose of the Act 28
(ii) The Key Prohibitions 30
(i) Gas Pipeline Default Price-Quality Path Decision 31
E SUMMARY OF THE LEGAL FRAMEWORK FOR THE CONSIDERATION OF CLIMATE CHANGE FACTORS 33
A THE SCOPE OF THE OBLIGATION ON THE COMMISSION 35
I Introduction
In the midst of a climate emergency, climate change is an issue facing New Zealand that requires urgent action. The nation has committed to several international agreements and set domestic targets for emissions reductions to combat the existential threat that is climate change. However, in order to achieve these goals, there needs to be effective climate action from the whole of society. This dissertation examines the role of climate change mitigation within decisions made under New Zealand’s competition law regime. The framework for this enquiry will be to consider the role that non-economic considerations have within competition law decision-making. ‘Non-economic considerations’ are considerations that do not have the goal of promoting economic efficiency.1
The goal of modern competition law is arguably to be economically literate and strictly apply economic principles to achieve the most efficient outcome.2 However, this dissertation aims to unpack the legal framework for competition law decision-making and determine whether it is legitimate to say that efficiency is the sole goal of competition law in New Zealand. It will make a political claim that the goals of competition law ought to be broader than achieving economic efficiency through also including socio-political objectives.
I will firstly consider the theoretical underpinnings of competition law. Regulation of competition in New Zealand has been heavily influenced by overseas scholarship on the goals of competition, or antitrust, law.3 Therefore, I will begin with a comparison of the two dominant schools of thought on the goals of competition law and consider the implications of each, in particular the way that they each approach non-economic considerations, and the political tensions involved in this debate. This will lead into an analysis of where the New Zealand competition regime sits within this theoretical framework. In doing this I will look at the key legislative provisions and the way they have developed, as well as some key decisions of the
1 Rex Ahdar The Evolution of Competition Law in New Zealand (Online ed, Oxford Academic, Oxford, 2020) at 5.
2 See Discussion in Matt Sumpter New Zealand Competition Law and Policy (CCH New Zeaalnd, Auckland, 2010) at 12-14.
3 Sumpter, above n 2, at 20.
courts.4 This will enable a principle-based understanding of the goals of competition law and which factors should be relevant in competition decision-making.
I will then look at the legal basis for the inclusion of climate change considerations, as a particular kind of non-economic consideration, within competition law. While this field is developing, it is the contention of this dissertation that the legislative framework empowers consideration of climate change factors.5 Finally, I will use this analysis to build an understanding of the scope of the application of climate change considerations to competition law by critiquing the Commerce Commission’s [the Commission] recent engagement with this issue and offering some examples of what genuine engagement with climate change considerations may look like.
4 The Commerce Act 1986 ss 27, 30, 36 and 47; See particularly NZME Ltd v Commerce Commission [2018]
NZCA 389.
5 See the Commerce Act; and The Climate Change Response Act 2002, s 5ZN.
II The Theoretical Basis of Competition Law
A Introduction
Competition law is a field that has been heavily influenced by competing theoretical understandings of its objective throughout its development, particularly through the research and writing of economics scholars. This can be attributed to the inherent tension within competition law with the strict application of economic principles disguising the political nature of the conceptualisation of the goals of competition law.6 This chapter considers the theoretical foundations of competition law and how this explains and contextualises this political tension within competition law. Through this understanding of the political decisions that have historically shaped competition law policy, it is possible to conceptualise the purpose and goals of competition law and form a coherent body of rules.7 In turn, this understanding will enable an exploration of the role that non-economic factors have in competition law decision-making and then, more specifically, the role of climate change considerations within competition law.
B The Development of Competition Law
Internationally, competition law theory has been primarily characterised by the debate between two schools of thought, the Harvard School, and the Chicago School. Modern competition law theorists have developed a post-Chicago School as well as a ‘post-Harvard School’ that is generally known as the neo-Brandeisian approach.8 However, this chapter focusses on the opposing conception of competition law by the Harvard and Chicago Schools as this is the key political tension that has underpinned the development of New Zealand’s competition law regime.9 While the goals and conceptualisations of competition law in New Zealand cannot be directly attributed to these schools of thought themselves, they provide important context for the way New Zealand’s competition law regime has developed. At this point, it must be made clear that neither of these theories fully capture the way that competition law must be understood in New Zealand, and this chapter is not attempting to answer the question of which
6 Auralien Portuese “Beyond Antitrust Populism: Towards Robust Antitrust.” (2020) 40(2) Economic Affairs at 242.
7 Robert H. Bork The Antitrust Paradox: A Policy at War with Itself (Basic Books, New York, 1978) at 20.
8 Lina Khan “The New Brandeis Movement: America’s Antimonopoly Debate” (2018) 9:3 J Eur Compet Law Pract at 131.
9 Ahdar, above n 1, at 65.
theoretical understanding New Zealand is aligned with. The purpose of this analysis is to better understand the major influences on the development of competition law to grasp how ideas around the goals of competition law fit together.
(i) The Harvard School
Traditional competition law theory is characterised by thinking that came out of scholars at Harvard University in the 1930s. This is referred to as the Harvard School of thought, or structuralism.10 Although competition law became prominent in the United States upon the enacted of the Sherman Act at the end of the 19th Century, Harvard School thinking marked the beginning of the extensive use of economics within competition law.11 This school of thought arose in response to the concern that large firms could not be trusted to act in the public interest. This gave rise to a view that unless there were strict controls in place over conduct within a market, large firms would take every opportunity they could to mute their rivalry and exercise their market power in a way that would harm consumers.12
Harvard theorists are generally considered to have the primary goal of promoting ‘competition’ through promoting competitive market structures. This is due to the fact that while this school of thought values efficiency as a substantial end product of strong rivalry within markets, it also values other goals as desirable byproducts of competitive markets.13 Examples of these other goals include the prevention of economically powerful firms from taking advantage of consumers, rivals, employees and supply chain partners who have less economic power. These goals clearly have a sociopolitical dimension that goes beyond pure economic efficiency and aims to promote overall fairness within markets.14
(ii) The Chicago School
In response to the Harvard School movement, another school of thought emerged from the University of Chicago in the early 1980s. This became the dominant understanding of
10 Chris Noonan Competition Law in New Zealand (Thompson Reuters, Wellington, 2017) at 92.
11 The Sherman Antitrust Act 1890 15 USC §§ 1-38; Noonan, above n 10, at 92; Herbert Hovenkamp “The Reckoning of Post-Chicago Antitrust” in Antonio Cucinotta, Roberto Pardolesi and Roger Van den Bergh (eds) Post-Chicago Developments in Antitrust law (Edward Elgar Pub., Cheltenham, 2002) 1 at 2.
12 Jonathan B. Baker “A preface to post-Chicago antitrust” in Antonio Cucinotta, Roberto Pardolesi and Roger Van den Bergh (eds) Post-Chicago Developments in Antitrust law (Edward Elgar Pub., Cheltenham, 2002) 60 at 64.
13 Ahdar, above n 1, at 63.
14 Edward Willis and Lauren Millington “Competition Law and Non-Economic Considerations: The Particular Case of Democracy” (2022) JCIL 9(1) 51 at 56.
competition law in the United States, and substantially influenced the development of competition law throughout the world.15 Chicago School theorists see economic efficiency as the exclusive goal of competition law, with competition merely being the byproduct. The goal of efficiency then leads Chicago School theorists to focus on price theory as a means of putting economic efficiency into quantifiable terms.16 The general justification by Chicago School theorists for this is that the market should operate similarly to the way a business thinks, in that efficiency should be encouraged, while making it unlawful to “remove rivalry through such improper means as cartelisation, monopolistic merger, and deliberate predation”.17 This emphasis on economic efficiency is in part attributable to a concern that the accomodation of multiple goals will require courts to undertake a balancing exercise. According to Chicago School scholars, this means the courts will be far more likely to create rigid rules that are either arbitrary or anticonsumer.18 Furthermore, the Chicago School argues that this balancing role is “fundamentally inconsistent with the proper role of a non-elected judiciary in a democracy.”19
Another key aspect of the Chicago School is a heavy emphasis on the market’s ability to self- correct any competition law issues.20 This is based on a belief that markets tend to arrange themselves in an efficient or fair way without intervention.21 As a result of this, the Chicago School argues that competition law should be slow to intervene in markets, and should only intervene in the most serious of situations. Chicago School theorists depart from orthodox thinking in this area, by arguing that markets are inherently quite robust and would generally work themselves towards a competitive solution without intervention. This could be characterised as a correction, or even over-correction, of the perceived excessive intervention that existed within policy influenced by the Harvard School.22 Furthermore, Chicago School theorists would argue that government intervention actually make markets less rather than more competitive.23 Therefore, the Chicago School marked a shift in the regulatory attitude towards the value of intervention in markets.24 Scholarship from within this school of thought advocates
15 Albert Allen Foer and Arthur Durst “The Multiple Goals of Antitrust” (2018) 63(4) Antitrust Bull 494 at 495.
16 Willis and Millington, above n 14, at 56.
17 Bork, above n 7, at 81.
18 Bork, above n 7, at 86.
19 Stephen F. Ross Principles of Antitrust Law (Foundation Press, Westbury, 1993) at 2; Bork, above n 7.
20 Ahdar, above n 1, at 64.
21 Hovenkamp, above n 11, at 3.
22 Sumpter, above n 2, at 19.
23 Hovenkamp, above n 11.
24 Sumpter, above n 2, at 21.
for competition laws that only intervene in the most serious of cases with egregiously anti- competitive activity such as blatant price fixing or market division.
This all leads to the core understanding of Chicago School theorists, that competition laws should promote allocative economic efficiency within markets, meaning that resources are allocated as efficiently as possible, and should only proscribe conduct that ultimately harms allocative efficiency.25 One of the key places that this school of thought diverges from the Harvard School is that promoting allocative efficiency is not always the same thing as promoting competition.26 This means that in decision-making, Chicago theorists would forego the other benefits of competitive markets in order to achieve the most economically efficient outcome.
(iii) The Post-Chicago School and the Neo-Brandeisian Approach
This scholarship is substantially less well-defined than the Harvard and Chicago Schools, however it appears that the post-Chicago School refers to movement away from the strictly anti-interventionist and efficiency-focussed Chicago School and back towards a more Harvard School way of conceptualising competition law. If we conceptualise Chicago School thinking as a belief in the robustness of market models that have been developed against the idea of perfect competition, post-Chicago School thinking could be characterised by a scepticism as to the usefulness of these models and would instead focus on imperfections in markets and real- world phenomena which cause markets to behave in a way that is different from what would be expected in a market with perfect competition.27 This can be compared with the neo- Brandeisian movement which uses the broader scope of considerations under the Harvard School to focus in on concentration of power as the key issue with which competition law must contend. Scholars within this school of thought would argue that regulation needs to intervene in markets to combat the lack of a competitive dynamic in many markets due to the increasing concentration of power and wealth in the hands of an increasingly smaller group.28
These modern theoretical conceptions of competition law are useful in providing examples of how scholars and regulators continue to grapple with the tension between conceptualisations
25 Ross, above n 19, at 3.
26 Ross, above n 19, at 4.
27 Noonan, above n 10, at 94-95.
28 Ariel Ezrachi and Maurice E Stucke, “The Fight over Antitrust’s Soul” (2017) 9 J Eur Compet Law Prac 1.
of competition law. However, while these new schools of thought focus on different aspects of competition regulation, the crux of the tension continues to be best understood through looking at the traditional Harvard and Chicago School dichotomy. It is for this reason that a thorough understanding of these two key schools of thought is most useful for the purposes of answering the question posed in this dissertation.
While the Harvard and Chicago Schools are distinct, the points of difference have become narrower over time, and they each embrace, to some extent, the idea that welfare is the goal of competition law.29 It is important to be aware that these theories do not simply represent a range of abstract goals of competition law. Rather, they represent a set of beliefs in regard to the way that markets and governments do and should operate.30 This has often been referred to as political economy, which connotes the idea that holding ideology about the goals of competition law in this way is not objective and is instead representative of political beliefs and value judgements.31
C The Place of Non-Economic Considerations Within Competition Law Theory As the primary goal when considering climate change is not economic efficiency, it is a non- economic consideration. These theoretical schools each have a different conception of the place of non-economic considerations within competition law. Therefore to properly consider the place of climate change factors within the regime, it is necessary to understand how non- economic factors fit into the theoretical framework.
The emphasis within the Harvard School of responding to the fact that large firms would create unfair conditions within markets due to the fact that they were not acting in the public interest is evidence that Harvard theorists were accepting of goals beyond economic efficiency. This is contrary to the perspective of the Chicago School theorists who would gladly forego the sociopolitical benefits such as dispersion of power, diffusion of wealth and encouragement of entrepreneurship and small business coming from competitive markets in order to achieve economic efficiency through competition law.32 Therefore, a more Harvard School conceptualisation of competition law would recognise competition law as needing to act in the
29 Noonan, above n 10, at 91.
30 Ross, above n 19, at 1.
31 Noonan, above n 10, at 94.
32 Ahdar, above n 1, at 63-64.
public interest and be more willing to use non-economic considerations within its decision- making in order to get the maximum benefit for the public.
D Conclusion
This description of the theoretical framework underpinning competition law, while brief, is useful in setting the scene to understand how competition law has developed in New Zealand. This, in turn, gives greater insight into the values and objectives of the New Zealand regime, and enables a well-reasoned conclusion to be reached about the scope of the regime to include non-economic considerations and then more specifically, climate change considerations.
III New Zealand’s Competition Law Regime Placed in the Theoretical Context
A New Zealand’s Competition Law Regime Explained
Before placing New Zealand’s competition regime within the broader theoretical context, it is necesssary to have a working understanding of how New Zealand’s competition law regime operates. This will enable an in depth analysis of how competition law is enforced, and therefore will expose how climate change factors can realistically be part of that decision- making process. The legal framework for the regime consists of legislative provisions in the Commerce Act 1986 [the Act], as administered by the Commission and enforced by the courts. There are four key prohibitions within the regime which will be covered in this section.
While the legislative framework is relatively complicated, once two key concepts are understood it is possible to make sense of the regime’s prohibitions. Firstly the concept of a ‘market’ is frequently used throughout the Act. This is defined as a market for goods or services as well as other goods or services that, as a matter of fact and commercial common sense, are substitutable for them.33 This means that in making decisions, the Commission has significant discretion to determine what kinds of goods or services are factually and commercially substitutable for one another.34 Secondly, the standard that applies to most of the prohibitions under the Act is that there is a ‘substantial lessening of competition’ in a market. A lessening of competition is defined in the Act as anything that hinders or prevents competition, and often looks like one firm increasing their market power.35 This is deemed to be substantial when the reduction in competition will be “real or of substance” as reflected by higher prices or lower quality of the goods or service.36 Market definition is important here, as the determination of whether a lessening of competition is substantial will often hinge on how narrowly the market is defined. Using these key concepts as building blocks, the regime can be distilled down to four key prohibited activities.
33 Commerce Act s 3(1A)
34 This will become particularly relevant in my discussion in Chapter IV(D)(ii).
35 Commerce Act s 3(2)
36 Commerce Commission The Commerce Act: Agreements that Substantially Lessen Competition (Fact Sheet, July 2018) at 3.
(i) Contracts, Arrangements or Understandings that Substantially Lessen Competition Section 27 of the Act makes it illegal to enter into or give effect to a contract, arrangement or understanding, or arrive at an understanding, containing a provision that has the purpose, effect, or likely effect of substantially lessening competition.37 This covers a broad range of agreements, both formal and informal and it does not matter whether the agreement is deliberately anti-competitive. The Commission has discretion under s 58 of the Act to grant authorisations for agreements that will substantially lessen competition where it is satifisfied that it is in the public benefit to do so.
(ii) Cartel provisions
Section 30 of the Act prohibits competitors agreeing to not compete with each other in order to increase their profitability. This is done by prohibiting agreements which have the purpose, effect or likely effect of fixing prices, restricting outputs or allocating markets (i.e. cartel provisions).38 Price fixing occurs when competitors agree on a price or part of a price for a particular good or service, whereas restricting output refers to when competitors agree to restrict output of a particular good or service. This allows them to raise and effectively fix the price due to the fact that lower supply of a particular product leads to the price of that product being higher. Finally, competitors allocate markets when they agree to not compete for customers and only buy from or sell to a specified group.39 The Act also contains exceptions where cartel provisions will be acceptable in the case of collaborative acitivies, vertical supply contracts and joint buying agreements.40 While cartel conduct can have pecuniary penalties it is the only kind of contravention of the Act which has criminal sanctions attached to it.41
(iii) Misuse of Market Power
Section 36 prohibits misuse of market power through businesses with a substantial degree of market power being unable to engage in conduct that would substantially lessen competition in a market. The Commission considers that businesses have a substantial degree of market power when they are able to profitably hold prices above the competitive level for a sustained period of time, and these businesses are prohibited from using that dominance to engage in
37 Commerce Commission, above n 33, at 1.
38 Commerce Act s 30A
39 Commerce Commission The Commerce Act: Cartel Conduct (Fact Sheet, May 2022) at 1.
40 Commerce Act ss 31-33.
41 Commerce Act ss 80, 82B.
conduct that harms competition.42 This prohibition does not seek to prohibit competitive behaviours that may harm individual competitors, and it is instead concerned with prohibiting conduct that harms the competitive process. The Commission gives four examples of behaviour by dominant firms that may substantially lessen competition; Refusals to supply, price squeezing, bundling and tying, and predatory pricing.43
(iv) Acquiring Market Power through Merger
Section 47 of the Act creates the control regime for mergers and acquisitions that enables the Commission to review transactions if they will substantially lessen competition. A proposed merger is held to have the potential effect of substantially lessening competition if it would result in higher prices or a reduction of choice for consumers.44 There are two key parts to the Commission’s jurisdiction around merger control. The first is the clearance regime which is an optional pathway which firms seeking to acquire or merge with another firm can choose to take to receive prior approval from the Commission that their proposed transaction is permissible under the Act.45 The Commission will grant clearance if it is satisfied that the proposed transaction will not, or is not likely to, substantially lessen competition within a market.46 A firm is not in breach of the Act if it proceeds with a transaction without receiving clearance form the Commission, however it is open to the Commission to seek an injunction to prevent the transaction or to retrospectively consider the legality of the merger under the competition law regime and enforce conditions or a reversal if it sees fit. Therefore, failing to obtain clearance for a potentially risky transaction has the possibility of being very costly for merging firms.47 The second pathway for the Commission to allow mergers and acquisitions is authorisation.48 This is designed for transactions that are recognised to be likely to have the effect of substantially lessening competition. This pathway allows the Commission to balance the anti-competitive effects of a proposed transactions against its potential benefits, and authorise the transaction if the benefits outweigh the harms and it is in the public benefit to do so.
42 Commerce Commission The Commerce Act: Misuse of Market Power (Fact Sheet, March 2023) at 1.
43 Commerce Commission, above n 39, at 3.
44 Commerce Commission The Commerce Act: Mergers and Acquisitions – Applying for a Clearance (Fact Sheet, August 2019) at 1.
45 Commerce Act 1986 s 66.
46 Ahdar, above n 1, at 200.
47 Commerce Commission, above n 41, at 1.
48 Commerce Act s 67.
B Development of New Zealand’s Competition Law Regime
There is substantial scope within these key prohibitions for the Commission to decide how it will assess particular activities. An understanding of the development of the provisions is necessary to fully ascertain the objectives of competition law in New Zealand and how considerations ought to be valued when making decisions. This will allow the regime to be placed within the established theoretical framework, and contextualise the role of climate change factors.
(i) Influences at the Enactment of the Commerce Act
Between the 1960s and the 1990s, there was substantial disagreement amongst New Zealand scholars about the role of efficiency within competition law. At the enactment of the Act in 1986, two related factors influenced the development of our competition law regime. These were the widespread deregulation of the New Zealand economy in response to the Muldoon government’s active management of the economy, and the peak of the Chicago School movement in the United States.49 The idea of ‘light-handed regulation’ is part of a de-regulatory process that occurred in New Zealand due to dissatisfaction with the performance of New Zealand’s economy, and followed similar action taken in both the United States and the United Kingdom. Largely, this ‘light-handed’ regulation involved the corporatisation and privatisation of state-owned enterprises, abolition of social service obligations on state-owned enterprises and, most notably for these purposes, an exposure of most industries to competition law as opposed to industry-specific regulation.
Throughout the decade following the enactment of the Act, the influence of the Chicago School was apparent within the courts’ reasoning and decision-making, particularly in two areas. These are the test for understanding what kind of conduct constitutes a ‘substantial lessening of competition’, and circumstances where uses of a dominant position may be allowable under s 36 of the Act.50
The key case that demonstrates the influence of the Chicago School on New Zealand decision making in regards to the understanding of a substantial lessening of competition, is Fisher v
49 Sumpter, above n 2, at 20.
50 Ross H Patterson “How the Chicago School Hijacked New Zealand Competition Law and Policy” (1996) 17 NZULR 160 at 172.
Paykel Ltd v Commerce Commission.51 This case was heard in the Court of Appeal after both the Commission and the High Court had determined that an exclusivity clause used by Fisher & Paykel would be a breach of s 27 of the Act. By majority, the Commission had taken a view that is consistent with the Harvard School by determining that anything that interferes with market operation ought to be subject to scrutiny. However, the minority conflated pro- competition and pro-efficiency factors, as the Chicago School would do, and found that the exclusivity clause was actually pro-competitive. The High Court preferred the minority view and therefore, when netting-off benefits and detriments of the restraint in question, the Court established that competition was not substantially lessened in the relevant market. This is an example of a pure application of Chicago School theory in that it had been “urged to draw conclusions from recent trends in the United States said to favour finding vertical restraints to be pro-competitive in all but the most extreme cases”.52 Through this reasoning, it is clear that the Court had interpreted ‘substantial lessening of competition’ to actually mean ‘substantial lessening of efficiency’ and had adopted an understanding strongly influenced by Chicago School thinking.
The Chicago School’s influence can also be seen within a line of cases looking at use of dominant position within s 36 of the Act. This began with Magic Millions v Wrightson Bloodstock. This case concerned auction sales of horses and dealt with a claim that Wrightson Bloodstock was misusing its dominant market position by holding its auction at a time that clashed with Magic Millions’ auction.53 Tipping J held that it is not a breach of s 36 for a firm in a dominant postiion to act in a competitive manner. However in this case there was no economic justification for Wrightson Bloodstock’s behaviour and therefore its conduct was deemed to be for an anticompetitive purpose and in breach of s 36.54 This holding was affirmed in Port Nelson II:55
The section does not prohibit a person dominant in a market from trading in that market. It does not prevent a person dominant in a market from competing in normal fashion. It is an Act designed to encourage competition, not to stifle it.
51 Fisher & Paykel Ltd v Commerce Commission [1990] NZHC 307; [1990] 2 NZLR 731.
52 Patterson, above n 50, at 174.
53 Magic Millions v Wrightson Bloodstock [1989] NZHC 887; [1990] 1 NZLR 731 at 732.
54 At 761.
55 Stevedoring Services Nelson Limited v Port Nelson Limited CP 21/91`Nelson Registry (Port Nelson II) at 30.
In Telecom Corporation of New Zealand Ltd v Clear Communications Ltd, this idea solidified into a test when the Court considered whether it was a breach of s 36 for Telecom to file proceedings against Clear for breaching a compromise to not advertise unfairly.56 Clear claimed that this was deterring it from engaging in competitive conduct which would amount to a breach of s 36. Here the Court held that Telecom had not misused its market power in breach of the Act and created a test:57
“It cannot be said that a person in a dominant position uses that position for the purpose of section 36 [if] he [or she] acts in a way which a person not in a dominant position but otherwise in the same circumstances would have acted”
This test was applied in Port Nelson III when the Court determined whether various fees and discounts involved in the provision of various port services were a breach of s 36.58 Here, the Court framed the decision as whether Port Nelson would have acted in the same way had there been an equal competitor. If they would have acted in the same way in the presence of that competitor, there would be no use of dominance. Through these cases, the law developed in a way that was less concerned with preserving the competitive process and protecting competitors, and more concerned with focusing on market efficiency gains in a way that reflects Chicago School thinking.59 This can be contrasted with the way that these issues were being approached in other jurisdictions outside of the United States. An example is the European Commission where around this time there appeared to be a complete absence of discussions on economic efficiency, with the emphasis being on promoting the competitive process instead.60 This approach was heavily criticised by commentators from the United States as being diametrically opposed to the Chicago School of thought. It is clear that in this area, New Zealand’s courts were significantly influence by the Chicagoan scholars as well as decision made by courts in the United States. As a result, the Chicago School analysis is very apparent in New Zealand case law from the late 20th Century.
Even if the influence of the Chicago School is not obvious as the Act was developed through the legislature, these cases demonstrate that the courts were strongly influenced by Chicago
56 Telecom Corporation of New Zealand Ltd v Clear Communications Ltd [1995] 1 NZLR 385 (PC).
57 Telecom Corporation of New Zealand Ltd v Clear Communications Ltd, above n 56, at 403.
58 Commerce Commission v Port Nelson Ltd [1995] 6 TCLR 406.
59 See Posner J in Olympia Equipment Leasing Company v Western Union Telegraph Compant 797 F 2nd 370 (7th Cir 1986) at 375; Easterbrook J in Ball Memorial Hospital Inc v Mutual Hospital Insurance Inc 1338.
60 See Hoffman-La Roche AG v EC Commission [1979] 3 CMLR 211 as an example.
School thinking when they came to develop New Zealand competition law by applying the Act’s provisions. This was acknowledged by the Commission when considering an authorisation application by New Zealand Kiwifruit Exporters Association in 1988.61 Here, the Commission accepted that the purpose of the Act was not efficiency alone, and that the preamble of the Act requires the Commission to decline an application if competition is unjustifiably harmed, unless efficiencies or public benefits would exceed the detriments from the lessening of competition.62
(ii) Changing Approach to the Commerce Act
The question then becomes whether New Zealand’s competition law regime has moved beyond light-handed regulation and an emphasis on efficiency. In order to answer this question, I will track the key amendments to the Act since its enactment in 1986, considering what was changed and the impact that this had on the competition law regime as a whole and the overall conceptualisation of the role of competition law within New Zealand’s legal system. This directly impacts the place of non-economic considerations within the regime today.
The first key amendment came with the Commerce Amendment Act in 2001. This was drafted in response to the recognition that light-handed regulation had not been successful in New Zealand.63 Changes to the Act within this amendment largely tightened regulations within the areas of trade practices and mergers and acquisitions. This included modifying price control provisions, addressing restrictive judicial interpretations of s 36, remedying difficulties in preventing tacit collusion, and introducing a greater ability to create industry-specific regulation.64 Further to this, the purpose of the Act was amended to make it clear that consumer welfare had a high degree of relevance within competition law decision-making.65 The legislative process is particularly interesting in regard to this purpose section. Originally, the Labour government wished to reform the purpose of the Act because, as it stood, it was overly apparent that the Act’s goal was competition per se, when in actual fact the goal was to promote
61 Re New Zealand Kiwifruit Exporters Association (Inc) – New Zealand Kiwifruit Coolstores Association (Inc)
(1989) 2 NZBLC (Com) 104, 485.
62 Re New Zealand Kiwifruit Exporters Association (Inc) – New Zealand Kiwifruit Coolstores Association (Inc), aobve n 58, at 501.
63 Noonan, above n 10, at 9.
64 Noonan, above n 10, at 9.
65 Ahdar, above n 1, at 72.
competition in order to enable economic efficiency.66 Therefore, the wording of the amended purpose section when the Bill was introduced was “The purpose of this Act is to facilitate the efficient operation of markets through the promotion of competition for the long-term benefit of consumers.” This wording indicates a meaningful swing towards more Chicago School-style thinking within New Zealand’s competition law regime, with a particular focus on efficiency over competition and the benefits that it may bring. However, this wording was changed after the Select Committee process such that the amended purpose of the Act is to “... promote competition in markets for the long-term benefit of consumers within New Zealand”.67 This change was largely to emphasise the importance of a focus on the long-term benefit of consumers in New Zealand.68 The inclusion of ‘long-term benefit’ indicates that even beyond moving away from an efficiency goal, the desirable outcomes under competition law are far broader than the short-term allocative efficiency favoured by Chicago School theorists.69
This appears to be the first step in New Zealand’s competition law regime moving away from the more strictly anti-interventionist and economic efficiency-focussed Act as it was first enacted. This can be characterised as the movement away from very light-handed regulation by enabling industry specific regulation and making provision for greater regulatory intervention in market dynamics. Furthermore, there is a clear rejection of more Chicago School-style thinking through Parliament choosing not to change the purpose of the Act to specify efficiency in favour of promoting competition for the long-term benefit of consumers. While this does not directly speak to the willingness of the competition law regime to take non- economic considerations into account, it does demonstrate the beginning of a shift away from a more Chicago School-style of thinking in the way that the role of competition law is conceptualised.
The second key amendment to note is the Commerce (Cartels and Other Matters) Amendment Act 2017. This amendment underwent a long legislative process, unltimately resulting in the broadening of the range of prohibited cartel conduct, along with the introduction of new exceptions to cartel conduct including a clearance regime for collaborative activity, and a new regime to regulate acquisitions by overseas persons. The effect of the amendment was largely
66 Office of the Acting Minister of Commerce, Commerce Act 1986-Purpose Statement (3 April 2000) [15]- [16].
67 Commerce Act 1986, s 1A.
68 Ahdar, above n 1, at 72.
69 Ross, above n 19, at 4.
to change the old price-fixing proscription into a far broader prohibition of ‘cartel’ conduct which encompasses a broader range of conduct.70 Prior to this amendment, the cartel prohibition was attached to s 27, with s 30 stating that fixing, controlling, or maintaining of the price for goods or services would breach s 27.71 The 2017 amendment added a new s 30 which set a prohibition for cartel conduct more generally as defined in the new s 30A, as well as new exceptions for collaborative activities and vertical supply contracts alongside the existing exception for joint buying.72 Prior to the introduction of the Bill in 2011 in response to the beginning of a process to criminalise cartels in Australia, an Occasional Paper from the Ministry of Economic Development was commissioned.73 This paper concluded that criminalisation would be the most effective way to deter cartel conduct.74 Within the paper, criminalisation was suggested for ‘hard-core’ cartels, which were defined as arrangements which “allow the participants to increase their profits by limiting or removing competition to provide products at competitive prices in order to win customers”.75 Eventually, criminalisation of cartel conduct was removed from the Bill, largely due to concern that it would have a chilling effect on New Zealand’s economy.76
The 2017 amendment was followed by the Commerce (Criminalisation of Cartels) Amendment Act 2019, which added a criminal sanction for individuals engaged in intentional cartel activity, readdressing the 2017 decision not to criminalise cartel conduct. This extension of the competition law regime to include criminal law sanctions for particularly egregious activity provides further evidence of New Zealand’s regime moving away from its more anti- interventionist roots. Within this amendment, “Chicagoan thinking is not readily apparent some three decades on from the enactment of the 1986 Act”.77 There are four key justifications for the criminalisation of cartel conduct which became apparent through the process of drafting and passing the 2019 amendment. They are deterrence; an increase in moral condemnation of egregious cartel conduct; harmonisation with Australia; and a desire for general harmonisation between New Zealand’s competition regime and competition regimes in other jurisdictions.78
70 Ahdar, above n 1, at 88.
71 Simone Lydia Schwoerer “New Zealand and cartel criminalisation” (2018) NZLJ at 219.
72 Commerce Act ss 31-33.
73 Schwoerer, above n 71, at 220.
74 David King Criminalisation of Cartel Behaviour (Ministry of Economic Development, Occasional Paper, January 2010).
75 King, above n 74, at [1]; Debra Wilson “The (lack of a) case for cartel criminalisation” (2012) NZLJ at 173.
76 Schwoerer, above n 71, at 222.
77 Ahdar, above n 1, at 88.
78 Wilson, above n 75, at 176.
When considering the 2017 and the 2019 amendments together, there is a clear indication that New Zealand’s competition law has moved further away from the more Chicagoan conception of competition law that favours efficiency and a lack of intervention in order to allow market dynamics to correct themselves. These amendments indicate an increased role for broad and far-reaching prohibitions within the Act, giving the Commission increased powers to intervene in New Zealand markets. While there is little evidence of an intentional shift towards a more Harvard School-based conceptualisation of the goals of competition law, there is clear evidence that by 2019, New Zealand’s regime had more capacity for intervention than it did at its enactment.
The final amendment that ought to be considered in this line of changes to the Act since its enactment is the Commerce Amendment Act 2022. This amendment created a new misuse of market power test in s 36, repealed IP exceptions, and expanded the cartel provision to land covenants.79 The s 36 amendment removed the ‘purpose-based’ test which required that a firm have an anti-comeptitive purpose and be engaging in conduct that it would not be able to if it did not have substantial market power.80 The purpose of this change was to create better opportunities for the Commission to take enforcement action against misuse of market power.81 The explicit purpose in amending the Act in this way is indicative of the way the Commission’s role within the competition law regime is conceptualised by Parliament. It is clear that the Commission’s purpose is to intervene within market dynamics, indicating a regime that is not concerned with leaving markets to self-correct.
Through tracking these amendments, it is clear that even if the Act, as enacted in 1986, was heavily influenced by a Chicago School conceptualisation of the goals competition law, this is no longer the case. The Act now empowers the Commission to actively intervene within market dynamics in a far broader range of situations than was originally intended. Furthermore, these amendments indicate a conscious choice on behalf of the legislature to move away from a strictly efficiency-based regime towards a regime that is focussed on the broader public benefit that is gained through having competitive markets.
79 Russell McVeagh “significant amendments to New Zealand’s competition law framework imminent” (29 March 2023) Russell McVeagh <https://www.russellmcveagh.com/getmedia/6e7d3d97-0d35-4e7e-b90e- 3d1586fcf641/Competition-law-framework-2023-002.pdf/>.
80 Russell McVeagh, above n 79.
81 Commerce Commission, above n 39.
C NZME Ltd v Commerce Commission: An example of a modern interpretation of the Commerce Act
(i) BackgroundAs demonstrated earlier in this chapter, the courts have played an important role in developing New Zealand’s competition law regime through their interpretation of the Act. Therefore, one of the key ways to determine how the regime is conceptualised, is through considering the way that the Act has been interpreted and the way that Commission decisions have been considered more recently by the courts. While there are earlier examples of the courts being heavily influenced by Chicagoan thinking, that is no longer the case.82 NZME Ltd v Commerce Commission is the courts’ most definitive recent statement on the purpose of competition law in New Zealand and the role of non-economic considerations in competition law decision making.83
This case was heard in the Court of Appeal after the Commission declined to give authorisation for a merger of NZME Ltd and Fairfax New Zealand Ltd upon finding that the transaction would substantially lessen competition in markets for the supply of online national news.84 NZME Ltd owns a range of media outlets, namely the New Zealand Herald, Newstalk ZB and the Sunday Herald, while Fairfax owns The Dominion Post, the [Christchurch] Press, and the Sunday Star-Times. It was determined that were this merger to go ahead, the merged firm would have 90% of the newspaper market.85 This would clearly lead to a substantial lessening of competition, which led to an application for authorisation.
In order to have this transaction authorised, the applicant needed to satisfy the Commission that the public benefit as a result of the transaction would outweigh the likely detriments on competition and the public interest.86 This case is notable because it is the first time where a public good, a non-economic consideration, has “tipped the scales” in an authorisation case.87 The public good argument was that although there would be economic efficiencies flowing from the transaction, it could not be authorised due to the extent that media quality and plurality
82 See Chapter III(B)(i) of this disseration.
83 NZME Ltd v Commerce Commission, above n 4.
84 At [2].
85 Ahdar, above n 1, at 227.
86 NZME Ltd v Commerce Commission, above n 4, at [16].
87 At [5].
would be harmed by the merger.88 The applicant was able to identify and prove quite substantial likely benefits from the transaction, primarily in terms of productive efficiency gains. The net quantifiable benefits were somewhere between $47.5 million to $200 million across a five-year period.89 This quantifiable benefit is particularly interesting for the purposes of this dissertation, because the Court chose to weigh it against substantial but unquantifiable detriments in the form of losses of media quality and plurality. Therefore, this is clear evidence that non-economic considerations have a role within competition law decision-making.
(ii) The Role of Non-Economic Considerations
One of the contentious issues in this case was whether the public benefit test for authorisations contained in s 67 of the Act is limited to economic considerations. The Court of Appeal found that, in practise, public benefit for this purpose has never been limited to purely economic or market considerations, with the judgment going through several cases to prove this point.90 The Court holds that “Parliament cannot have intended to exclude [non-economic] considerations where a proposed transaction is likely to cause them”.91 This is not to say that efficiency is not an important consideration and a factor that the Act places substantial value on, but simply recognising that other factors may be relevant as well. The Court also acknowledges that this reasoning is correct in that it gives effect to Parliament’s desire to embrace the Harvard School approach which is welfare-based and prioritises the interests of the consumer.92
After completing the analysis, it was clear to the Court that the detriment to the public caused by the proposed transaction outweighed the economic efficiency benefits by a considerable margin, and as a result the merger was not authorised. While this is a definitive statement from the Court of Appeal that non-economic considerations play a substantial role in decision- making under the authorisations regime, it is not a definitive statement about the role of non- economic considerations within the rest of the competition law regime. However, this does not mean that there is no broader application of the Court’s approach to non-economic considerations in NZME. This decision confirms that the Act’s application can involve considerations that go beyond strict economic efficiency, and that non-economic
88 At [133]-[134].
89 At [17].
90 At [54]-[68].
91 At [69]. Chris Noonan “The Future of Public Benefit Test Under the Commerce Act: Part 1” (2020) 27 CCLJ 167 at 168.
considerations can play a role.93 This affirms that New Zealand has firmly embraced an understanding of competition law, closely resembling the Harvard School, which values the economic, social and political benefits that come from engaging with economic and non- economic considerations.
(iii) The Competition Law Regime as the Exercise of a Public Function
While not a controversial claim, the other relevance of NZME for the purposes of this dissertation is the Court’s analysis that confirms that the administration of the competition law regime is the exercise of a public function. This is evidenced through the way the Court places the burden of responsibility on the Commission, as an administrative body, to determine what is in the public benefit.94 This establishes the idea that the role of the Commission is not just as an economic body, but that its statutory function is to be discharged in a way that serves the interests of the public as a whole. It is in this respect that the Commission’s role in administering the competition law regime could properly be said to be a public function.95
D Conclusion
Through this analysis, it becomes clear that New Zealand’s competition law regime, while heavily influenced by the Chicago School at the inception of the Act, has moved towards a more Harvard School-style of thinking. This is important due to the difference in the way each treats non-economic considerations. This means that New Zealand’s regime has developed in such a way that it is open to the Commission as decision-maker to take non-economic considerations into account. In NZME the Court of Appeal has clearly affirmed media plurality as an appropriate non-economic consideration, and it is the proposition of this dissertation that climate change is similarly relevant to competition law decision-making. Therefore, it is necessary to analyse the legal framework for the consideration of climate change factors to determine the role that they should play within the competition law regime.
93 At [73]
94 At [72].
95 The relevance of this will become clear in Chapter IV.
IV Legal Basis for Climate Change as a Non-Economic Consideration
I turn to consider the legal basis for the specific consideration of climate change factors. Firstly, I will consider the Commission’s general attitude towards the environment to date. I will then turn to the legislative regime, considering what factors the Act permits and requires be taken into consideration. This will lead into an exploration of wider legislation, considering whether any other statutes could be used to import climate change considerations into decision-making within the competition law regime. After a close analysis of the legislative regime, I will consider and critique some examples of how that regime has been engaged with in relation to climate change.
A The Commission’s Attitude to Climate Change Factors
There is a range of Commission documents and decisions which establishes how climate change issues have been treated in the past. At a broad level, the Commission has accepted that in their administration of the competition law regime as well as while exercising their regulatory powers, they are required to endeavour to meet New Zealand’s climate change objectives.96 In its 2022/2023 priorities document, the Commission has acknowledged that climate change will be a ‘driver of long-term change’ and that it will take the Government’s climate change mitigation commitments into account.97 This obligation has particularly been in reference to decarbonisation, resilience and adaptation. In this regard, the Commission has sought advice from the Climate Change Commission on how the competition regime is best able to engage with climate change considerations, acknowledging that decarbonisation is in the long-term benefit of New Zealand consumers.98 This is clear evidence that the Commission sees the relevance and importance of the competition regime engaging with climate change mitigation. However, it must be determined what the legal framework permits this to look like.
In July 2023, the Commission released its collaboration and sustainability guidelines as a consultation draft.99 As defined by the Commission, ‘sustainability’ encompasses economic, social and environmental considerations and therefore cannot be used interchangeably with
96 Priorities 2022/23: At a Glance (Commerce Commission, 2022).
97 Commerce Commission, above n 96, at 1-2.
98 Sue Begg Submission on Climate Change Commission’s Draft Advice (Commerce Commission, 26 March 2021) at 1.
99 Commerce Commission Collaboration and Sustainability Guidelines (Draft for Consultation, 31 July 2023).
climate change mitigation efforts.100 However, the guidance focuses on environmental sustainability due to the pressing nature of these concerns and specifically considers emissions reduction.101 Therefore, it is clear that while sustainability and climate change considerations are not the same, when the Commission considers sustainability, this incorporates climate change factors.
The guidelines go on to acknowledge that climate change is having and will have a substantial impact on the economy and the only way to combat it and create an appropriate level of resilience over the long-term is through a whole-of-system approach.102 Alongside these economic impacts, it is also clear that the Commission is concerned with the overall public- benefit that will come from climate change mitigation. These statements indicate the Commission is aware that the competition law regime will be required to react in some way to mitigate the effects of climate change, however the Commission seems to view the competition law regime as having a relatively limited role. “Competition law is not the primary policy tool for promoting sustainability in New Zealand, however, it can contribute to sustainability by preventing conduct that unnecessarily undermines competitive innovation”.103 In taking this view, however, the Commission fails to engage with the way that climate change factors exist within the broader legislative landscape that requires the Commission to ensure climate considerations to play a more active role within the competition regime. This is an issue that the Commission engaged with recently in a submission to the OECD, acknowledging that the courts have held that benefits considered by the competition regime can extend to non- economic factors “such as the environment”.104
B Section 5ZN of the Climate Change Response Act 2002
The starting point when considering the broader legislative regime, is to consider whether the Commission is empowered or required by any other legislation to consider climate change factors when administering the prohibitions in the Act.
100 At [11]
101 At [12].
102 At [13].
103 At [17].
104 Advantages and Disadvantages of Competition Welfare Standards – Note by New Zealand
DAF/COMP/WD/(2023)23, 26 May 2023 (Submission to OECD Competition Committee) at 32.
The Climate Change Response Act 2002 [CCRA] was enacted in order to provide a framework that enables New Zealand to develop and implement clear and stable climate change policies to contribute to the global effort under the Paris Agreement, and to prepare for, and adapt to the effects of Climate Change.105 The Act sets a target for emissions reduction by 2050, and sets out a framework in order to achieve this goal.106 This framework includes a requirement for the Minister to set emissions budgets and ensure that they are being met, as well as prepare and make publicly available an emissions reduction plan that sets out the policies and strategies for meeting the relevant emissions budget.107 This means that the CCRA sets out and empowers a framework of specific goals, plans and policies to combat climate change within New Zealand.
This becomes particularly relevant to competition law when looking at s 5ZN: 108
5ZN 2050 target and emissions budget are permissive considerations
If they think fit, a person or body may, in exercising or performing a public function, power, or duty conferred on that person or body by or under law, take into account—
(a) the 2050 target; or(b) an emissions budget; or
(c) an emissions reduction plan.
Having established that in administering the competition law regime, the Commission is exercising a public function, this section clearly applies.109 This means that the CCRA gives the Commission discretion to consider climate change when it is acting as the administrator of competition law. It is, however, important to note that this does not permit the consideration of climate change or environmental factors in the abstract. Instead, it allows the 2050 target, an emissions budget, or an emissions reduction plan to be taken into account. Therefore, this is not conferring a broad discretion for the Commission to consider anything that it may see as related to climate change. Rather, any consideration that is justified by this section must be directly related to these specific government policy documents. These instruments are all in relation to emissions, and New Zealand’s goals around emissions reduction. Therefore, it
105 Climate Change Response Act, s 3(1)(aa).
106 Climate Change Response Act, s 5Q
107 Climate Change Response Act, ss 5X, 5ZG.
108 Note, this is very similar to the wording in s 3(b) of the New Zealand Bill of Rights Act 1990 which could be a very interesting topic for further research but is beyond the scope of this dissertation.
109 See discussion in Chapter III(C)(iii).
would appear that, in order for this section to empower broader considerations within the Commission’s decision making, the considerations would need to be specifically related to lessening emissions in order to reach these targets. However, it is important to note that with the inclusion of the 2050 target as an allowable consideration, it would be a relatively low bar to claim that any activity impacting the environment would also have some impact on emissions.
C The Open Texture of the Prohibitions in the Commerce Act
Since the Commission is given discretion to consider specific climate change factors in exercising its powers, the question then becomes what this looks like when administering the prohibitions contained in the Act. The Act is relatively open-textured in the sense that while it does not explicitly allow for the consideration of non-economic factors such as climate change, it is silent on this issue. This can be seen through a close analysis of the Act, looking at the purpose section, relevant definitions, and the key provisions that form competition law’s legislative regime.
(i) The Purpose of the Act
Firstly, it is clear that there is a very broad purpose to the Act:
1A Purpose
The purpose of this Act is to promote competition in markets for the long-term benefit of consumers within New Zealand.
This indicates what the end goal of the Act is, to benefit New Zealand consumers in the long- term. This is a useful starting point to framing the competition law regime within New Zealand as it creates space for a discussion of what factors contribute to ‘the long-term benefit of consumers within New Zealand’, and how competition in markets can impact those factors. Earlier analysis of the evolution of the Act is particularly relevant to this discussion. This broad purpose can be contrasted with the proposed amendment to the Act in 2001 which would have made the purpose more narrowly focussed on economic efficiency.110 If this purpose were to be understood as referring to the long-term benefit of New Zealand consumers in a broad sense that encompasses well-being across economic, social and cultural dimensions, this creates
110 Commerce Amendment Act 2001.
significant scope for considerations beyond strictly economic factors to be relevant to the interpretation of the provisions within the Act.
To determine the best way to interpret the purpose of the Act, and whether it can properly be interpreted as broadly as I have suggested, it is possible to consider how the Act treats the words contained within the purpose section.111 The key contentious point is how ‘long-term benefit of consumers’ is interpreted. The term ‘consumer’ is not defined within the Act. However, it appears that when Parliament amended the Act in 2001, they were intending to promote the welfare of New Zealanders as a whole.112 While consumers are given special mention in the purpose section as the group of people who immediately benefit, it is clear that the welfare of all New Zealanders is important and the Act does not preclude that wider interest being taken into account. Therefore, it can be assumed that when we talk about a ‘consumer’ we are not talking about the narrow class of persons who end up purchasing and consuming any particular good or service. Instead we are talking about consumers more broadly as the wider public, as people who are consumers within New Zealand markets in a more general sense. This means that a consumer can be interpreted as a class of person that is distinct from producers, meaning that the Act has a purpose of protecting the consumer, or the general public, as opposed to protecting producers. Furthermore, this approach is confirmed through New Zealand’s adoption of the ‘modified total welfare standard’ as seen in NZME.113 This approach means that the public benefit is deemed to be greater if those benefits are being spread through the public more widely rather than being felt by a smaller number of people.114 This is important as it further solidifies the idea that the purpose section of the Act imports a general consideration of the public benefit into the Act’s ambit.
The term ‘benefit’ is also not defined within the Act. The key question that needs to be answered in respect of the interpretation of this word is whether benefit refers exclusively to economic benefits, or can be taken to include a broader range of benefits, for example mitigation of climate change. Again, we can consider the way that this purpose section developed to properly interpret this word. In adopting this phrasing, it is clear that the regime was moving away from the strictly economic efficiency-based goals that had been prevalent at
111 This meaning will be ascertained through the text interpreted in light of its purpose and context as is required by the Legislation Act 2019, s 10.
112 Minister of Commerce the Hon Paul Swain in Parliament (27 February 2001) 590 NZPD 7972.
113 NZME Ltd v Commerce Commission, above n 4, at [75].
114 NZME Ltd v Commerce Commission, above n 4, at [67].
the conception of the Act. This means that ‘benefit’ likely does not refer exclusively to economic benefit. This is exemplified through the way that this term was interpreted in NZME. Here, the Court held that while efficiency is a mandatory consideration, it is a subset of ‘public benefit’, which does not exclude other considerations.115 While this case was specifically about the test for authorisations, the Court’s finding is explicitly relevant to the rest of the Act through the way that public benefit is defined in the purpose section.116 Therefore, the Court of Appeal has held that ‘public benefit’ is not limited to purely economic benefits.
This analysis shows that the purpose section necessarily imports some understanding of broader public benefit, going beyond economic efficiencies, into the general provisions within the Act. We can interpret competition to mean “workable or effective competition for the long- term benefit of consumers”. This means that in assessing whether competition has been affected, it is legitimate to consider how the consumer, the general public, has been or will be impacted in a variety of ways, including how they will be impacted by a failure to mitigate climate change within the context of an activity regulated by the Act.
(ii) The Key Prohibitions
Considering the four key provisions, ss 27, 30, 36 and 47, there is a distinct lack of language that imports (or limits) specific factors to be considered in deciding whether they have been satisfied. Ss 27, 36 and 47 simply describe particular ways in which competitors may engage in conduct that breaches the Act, with the standard for each of these being conduct that ‘substantially lessens competition’ as analysed above. Section 30 however, does not contain the ‘substantially lessens competition’ standard, and instead lists specific ways that competitors may enter into a cartel arrangement that breaches the Act. This does import particular considerations, largely economic factors such as prices and output quantities, in order for the section to be breached. This does appear to narrow the scope of considerations for this particular section, bearing in mind that the overarching purpose section still applies. However, it should be noted that the exemptions to cartel conduct provide an avenue for the Commission to give weight to climate change factors as allowed by s 5ZN of the CCRA.117 This is
115 NZME Ltd v Commerce Commission, above n 4, at [71]. 116 NZME Ltd v Commerce Commission, above n 4, at [72]. 117 Commerce Act ss 31-33.
particularly relevant to collaborative activities in s 31, which is an area that the Commission has engaged with.118
Therefore, the key piece of legislation that governs competition law in New Zealand can be understood to be open-textured, broad and largely silent as to the considerations that ought to be relevant to decisions under the Act. Having established that the CCRA explicitly empowers the Commission to consider climate change factors when exercising its power, it is clear that there is scope for climate change considerations to play a role in competition law decision making.
D Previous Inclusions of Climate Change Considerations in Competition Law Decisions
There is a clear framework for the consideration of climate change as a non-economic factor within competition law decision-making. Having established this, we can look to previous decisions made by the Commission to determine how this framework has been engaged with up until this point. At this point, it is important to note that this is a developing area of competition law. While the Commission may have dealt with aspects of climate change, it has not necessarily considered the issue in full. This means that although previous Commission decisions are useful in that they provide legitimate examples to consider, they are not definitive statements of law and there is significant scope for them to be critiqued and improved on.
(i) Gas Pipeline Default Price-Quality Path Decision
While not in the context of its competition jurisdiction, the Commission engaged with its role in combatting climate change in setting the gas pipeline default price-quality path in May 2022.119 This decision dealt specifically with the relationship between s 5ZN of the CCRA and the other obligations conferred upon the Commission by law. While the gas pipeline default price-quality paths are set by the regulatory branch of the Commission, the analysis is still extremely relevant to competition law decision-making. Part 4 of the Act creates a framework for regulated goods and services, and s 52A sets out the purpose of this part.
118 See Chapter V(C) for this analysis
119 Commerce Commission Default Price Quality Paths for Gas Pipeline Businesses from 1 October 2022 (Final Reasons Paper, 15/01/45240, 31 May 2022).
52A Purpose of Part
(1) The purpose of this Part is to promote the long-term benefit of consumers in markets referred to in section 52 by promoting outcomes that are consistent with outcomes produced in competitive markets such that suppliers of regulated goods or services—
(a) have incentives to innovate and to invest, including in replacement, upgraded, and new assets; and(b) have incentives to improve efficiency and provide services at a quality that reflects consumer demands; and
(c) share with consumers the benefits of efficiency gains in the supply of the regulated goods or services, including through lower prices; and
(d) are limited in their ability to extract excessive profits.
This purpose applies to regulatory activities instead of the purpose in s 1A that applies to the rest of the Act.120 We can, therefore, determine the relevance of the Commission’s reasoning to competition decision-making by comparing the purpose set out in s 52A with the purpose set out in s 1A. Firstly, as referred to in s 52A, the markets set out in s 52 are markets where there is little or no competition and little or no likelihood of a substantial increase in competition. It is on this basis that s 52A sets out goals for regulating markets to function in a way that simulates a competitive market even though little to no competition occurs. The key point here is that both sections have a clear purpose of promoting the long-term benefit of consumers. The two sections diverge, however, with s 1A achieving this goal through promoting competition, and s 52A achieving this through ensuring that particular goals are met in specific markets.121 However, it is clear that the specific goals set out in s 52A are designed to allow a market with little natural competition to function in a way that is similar to a market with workable competition. Therefore, it would be legitimate to say that while these sections impose slightly different requirements on the Commission that are relevant to the specific tasks being undertaken, the overarching purpose is the same. A key difference to note, however, is that the term ‘consumer’ is defined in relation to part 4 of the Act as “a person that consumes or acquires regulated goods or services.”122 'Consumer’, within the context of the rest of the Act, is not defined in this way. While there is no specific definition given in the interpretation section, as analysed earlier, the modified total welfare standard is generally applied when considering who is a ‘consumer’, and therefore who ought to be benefitted by Commission
120 Commerce Act s 52A(2)
121 Commerce Act s 52A(1)(a)-(d).
122 Commerce Act s 52C.
decisions. This means that consumer, within the non-regulatory parts of the Act, is interpreted to be a broader class of persons than ‘a person that consumes or acquires regulated goods or services’.
This means that Commission’s analysis in setting the gas pipeline default price-quality path is highly relevant to the Commission’s approach to its competition law role. There is a small caveat that there may be a slight discrepancy between the definition of ‘consumer’ between the regulatory and the competition arms of the Act, however this is unlikely to be the case or have a substantial impact. This is due to the fact that any distinction between competition and regulation can largely be seen to be based on preconceptions about the proper role of competition law, and is not based on any genuine distinction between the two.123
In this decision, the Commission states that in enacting s 5ZN of the CCRA, Parliament intended to make the 2050 targets influential within broader government decision making, but only when consistent with other legal requirements applying to a decision.124 The Commission also states that this means that s 5ZN of the CCRA makes climate change “a permitted but not mandatory consideration”. This is a claim that I will analyse more fully in chapter V. The paper goes on to accept that s 5ZN applies to the Commission in its decision making, and therefore it is its task to determine how it is to balance those climate change considerations without compromising its overriding statutory duty to promote the purpose contained in Part 4 of the Act.125 While this final reasons paper offers substantive reasoning for how the Commission should balance s 5ZN of the CCRA with the purpose of the Act, which I will engage with in chapter V, it is clear that s 5ZN applies to the Commission’s decision making.
E Summary of the Legal Framework for the Consideration of Climate Change Factors
Due to the open-textured drafting of the Act, room exists within the competition law regime for the consideration of factors such as climate change. This open-texture means that while there is a relatively clear purpose section, the Act is silent as to what ought to be considered in
123 Edward Willis “Competition Law Reimagined? Competition Studies in New Zealand” (2023) NZ Law Rev. 191 at 205; See also Imelda Maher “Regulating Competition” in Christine Parker and others (eds) Regulating Law (Oxford University Press, Oxford, 2004) 187 at 187.
124 Commerce Commission Default Price Quality Paths for Gas Pipeline Businesses, abone n 119, at 27-28.
125 At 28.
fulfilling the Act’s purpose. This means that it is solely up to the decision-maker’s discretion to determine how they are to go about considering and balancing factors unless there are other pieces of legislation that are relevant to competition law decision making. Section 5NZ of the CCRA fills this legislative gap by making specific Government policy documents permissible considerations by bodies exercising a public function. These policy documents are designed to mitigate the effects of climate change within New Zealand, and therefore create an avenue by which climate change considerations become explicitly relevant to competition law decision making. This means that climate change should play some role in influencing competition law. The question then becomes what the scope for this influence is.
V Scope of the Application of Climate Change Considerations in New Zealand Competition Law
The legal framework enables the Commission to consider climate change factors when exercising its powers in administering the competition law regime. Therefore, it is now necessary to determine what this consideration may look like to determine the specific role of climate change considerations within competition law. To do that, I will consider the scope of the obligation on the Commission, how this issue has been approached overseas, and some examples of how climate change considerations may play a role within the regime. This will give relevance to the previous analysis of the legislative regime’s openness to climate change considerations by engaging with what it would look like for the Commission to consider climate change in its decision-making.
A The Scope of the Obligation on the Commission
(i) Relevant ConsiderationsAs the Commission is carrying out a public function, it follows that there are obligations placed upon it in exercising those powers. It is clear through the legislative regime established in Chapter IV that climate change is a relevant consideration that the Commission is empowered to take into account in administering the competition law regime.
There are two classes of relevant considerations, mandatory and permissible. Permissible relevant considerations are those that the decision maker is able to take into account but is under no obligation to consider. Mandatory relevant considerations are those that a decision maker has a legal obligation to take into account, and failing to do so would make a decision reviewable as an error of law.126
(ii) Mandatory vs. Permissible Relevant Considerations
With climate change factors being permissible relevant considerations, there is a question whether climate change factors are elevated to mandatory relevant considerations in certain circumstances. The definitive statement of law for the distinction between these two kinds of
126 Philip A. Joseph on Constitutional and Administrative Law (5th ed, Thomson Reuters, Wellington, 2021) at 1011.
considerations is contained in CREEDNZ Inc v Governor-General where Cook J held that “The more general and the more obviously important the consideration, the readier the Court must be to hold that Parliament must have meant it to be taken into account”.127 This means that in relevant circumstances, the Commission could be required to consider climate change factors, with failing to do so being reviewable as an error of law. While it is beyond the scope of this dissertation to determine exactly what those circumstances are, the more clearly climate change is at issue, or the more relevant climate change factors are to a particular situation, the more likely it is that climate change would be a mandatory relevant consideration.128
Furthermore, looking to the way that this issue has been conceptualised overseas, it is clear that due to the commitments the New Zealand government has made to meet particular climate change targets as specified in the CCRA, the Commission is under an obligation to aid in meeting these targets.129 As an independent Crown entity, the Commission is obligated to give effect to government policy.130 This means that in exercising its powers, the Commission is obligated to take the climate change considerations written into policy within the CCRA into account when these issues are squarely in view of a particular decision, and failing to do so would be failing to adequately fulfil its role.131
B Examples from Overseas Jurisdictions
To understand how climate change considerations may play a role in competition law decision making in New Zealand, we can look to the way these have been considered in other jurisdictions. While there is a wealth of scholarship on sustainability and competition law, some of the most meaningful analysis surrounds the way that the European Commission has engaged with Article 101(3) of the Treaty on the Functioning of the European Union [TFEU]. Article 101(1) of the TFEU creates a prohibition against agreements that have the object or effect of
127 CREEDNZ Inc v Governor-General [1981] 1 NZLR 172 (CA) at [183].
128 CREEDNZ Inc v Governor-General, above n 127, at [183].
129 Giorgio Monti “Four Options for a Greener Competition Law” (2020) 11.3-4 J. Eur. Compet. Law Pract. 124 at 131.
130 Public Service Commission “Crown Entities” (accessed 30 September 2023) Public Service Commission
<https://www.publicservice.govt.nz/system/crown- entities/#:~:text=These%20are%3A,generally%20independent%20of%20government%20policy>.
131 While this is beyond the scope of this dissertation, it should also be noted that there is a line of thinking that obligations relevant to unincorporated International Treaties signed by New Zealand may be elevated to mandatory relevant considerations. This idea has primarily been in relation to Immigration cases and International human rights treaties but could also be more broadly applicable. See Tavita v Minister of Immigration [1993] NZCA 354; [1994] 2 NZLR 257 (CA); Claudia Geiringer “Tavita and All That: Confronting the Confusion Surrounding Unincorporated Treaties and Administrative Law” (2004) 21(1) NZULR 66.
preventing, restricting or distorting competition.132 Article 101(3), however, provides an exemption to Article 101(1) where the prohibition on anti-competitive agreements may be inapplicable where an agreement contributes “to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit”.133 The debate that is of interest here in regard to article 101(3) is looking at the kinds of benefits that are able to justify an exemption under the article, and the way this has been interpreted by the Commission, various national competition authorities, and competition law scholars.
The Article does not define what the nature of the benefits included in the exemption are.134 Cost-efficiencies, innovation and economic growth are seen as benefits that may warrant an exemption, however it is unclear if further public policy benefits may be considered relevant as well. This is particularly interesting within the context of this dissertation as it mirrors the legislative framework and debate around the consideration of non-economic factors in the public benefit test. Furthermore, the Article does not define who the beneficiaries should be, whether ‘consumers’ should be interpreted narrowly, or whether it can be taken to mean society as a whole.135 Again, this mirrors the law in New Zealand as previously discussed, with the consideration of ‘consumer’ as wider than the direct consumer, rather considering the consumer as the public in general to distinguish between suppliers and consumers within a market.136 Therefore, the emergence of sustainability as a consideration within competition law in the European Union has come about within a context that is largely similar to New Zealand’s Commerce Act.
Emerging from this debate has come the ‘green antitrust’ movement, which aims to increase sustainability efforts by allowing for restrictions of competition law when there will be notable sustainability benefits.137 Although it must be noted that this movement is looking at sustainability more generally as opposed to climate change, the analysis that has taken place in
132 Treaty on the Functioning of the European Union OJ L. 326/47-326/390 (signed 25 March 1957, entered into force 1 January 1958), art 101.
133 Or Brook “Struggling with Article 101(3) TFEU: Diverging Approaches of the Commission, EU Courts, and Five Competition Authorities” (2019) 56(1)Common Mark. Law Rev. 121, at 129.
134 Brook, above n 133, at 129.
135 Brook, above n 133, at 130.
136 See Chapter IV(C)(i).
137 Maarten Pieter Schinkel and Leonard Treuren “Green Antitrust: (More) Friendly Fire in the Fight Against Climate Change” (Amsterdam Law School Legal Studies Research Paper No. 2020-72 and Amsterdam Center for Law and Economics Working Paper No. 2020-07) at 1.
this area is still useful in understanding how the issue could be approached in New Zealand, particularly considering the similarities between the two regimes. Most of the literature surrounding green antitrust refers to creating exceptions to cartel conduct that would enable firms to enter agreements with competitors that would ordinarily amount to cartel conduct if it would enable those firms to achieve sustainability goals. The movement holds that if they were allowed to cooperate, competitors would not have to hurdle the “first-mover disadvantage” and would be more likely to be able to transition to more sustainable ways of production.138 Grounding this in the way that Article 101(3) of the TFEU is applied, green antitrust theorists say that a horizontal sustainability agreement that restricts competition can be exempted from the cartel prohibition if the four cumulative conditions set out in Article 101(3) are satisfied. Firstly, that the agreement generates concrete and objectively measurable sustainability benefits; secondly, the consumer receives a ‘fair share’ of the sustainability benefits or the accrued sustainability benefits balance the harm caused by the anticompetitive agreement; thirdly, the restriction of competition must be necessary to achieve the sustainability benefits; and fourthly, the agreement does not eliminate all competition around the product concerned.139
This idea of green antitrust appears to have all the answers to promoting a fast transition to more sustainable markets, however, the economic literature suggests that more competition actually provides a better stimulus for sustainability efforts.140 Scholars have identified two major risks of green antitrust policy.141 Firstly, it incentivises ‘cartel greenwashing’, where firms are incentivised to cooperate in a way that provides minimal sustainability benefits for maximum price increase. This means that allowing anticompetitive cartel conduct to satisfy the exception under Article 101(3), may lead to the maximum amount of harm to competition within a market for the minimal amount of benefit to sustainability. Secondly, it largely removes the incentive placed upon firms to innovate sustainably to differentiate their product based on its status as being ‘more sustainable’. This idea recognises that firms are ultimately driven by profit motives, and the best way to incentivise sustainability changes within a market is for firms to invest in sustainability because it lowers their costs or allows them to stand out to consumers.142
138 Schinkel and Treuren, above n 137, at 2; Johannes Paha “Sustainability Agreements and First Mover Disadvantages” (2023) 00 J. Compet. Law Econ. 1 at 5; The term ‘first-mover disadvantage’ refers to the unprofitability of one firm acting alone in introducing a new sustainability measure.
139 Schinkel and Treuren, above n 137, at 6-7.
140 Schinkel and Treuren, above n 137, at 1.
141 Schinkel and Treuren, above n 137, at 6.
142 Schinkel and Treuren, above n 137, at 10.
C Commission Sustainability Guidelines
European scholarship suggests that there is reason to be sceptical of sustainability considerations overriding general competition objectives. However, it is necessary to consider this within New Zealand’s regime. As discussed earlier, s 31 of the Act allows competitors to collaborate in ways that would otherwise be considered cartel conduct provided that the cartel provisions is necessary for the collaboration and the dominant purpose of the agreement is not to lessen competition. This is comparable to Article 101(3) of the TFEU discussed above.143
This is largely the context within which the Commission has recently engaged with the issue of sustainability and competition law within its draft Collaboration and Sustainability guidelines.144 These guidelines indicate that the Commission’s perspective on this issue is that although sustainability agreements may be a legitimate use of the collaborative activities exemption provided that they do not affect competition between businesses, “the Commission will not tolerate sustainability being used as an excuse for anti-competitive behaviour”.145
(i) Examples from the Commission’s Guidelines
In these guidelines, the Commission covers a series of examples of collaborative activities where sustainability would not be likely to affect competition, as well as examples where there may be an impact on competition.146 The kinds of activities discussed makes it clear that in these guidelines the Commission is simply giving examples of ways that coordinated activities may breach the Act, rather than genuinely engaging with how sustainability considerations may be relevant to the decision-making process. This suggests that there is likely a combination of two factors influencing the Commission. Firstly, that the Commission has adopted the idea that has been shared by critics of movements like the ‘green antitrust’ movement, that competition should not be sacrificed for sustainability gains. Secondly, and perhaps more significantly, is that the Commission has not yet engaged fully with its obligations in this space and needs to reassess the way that it balances sustainability considerations generally, and climate change considerations specifically, when making decisions.
143 See discussion in Chapter III(A)(ii).
144 Commerce Commission, above n 99.
145 Chapman Tripp “Commerce Commission Collaboration and Sustainability Guidance (14 August 2023) Chapman Tripp <https://chapmantripp.com/trends-insights/commerce-commission-collaboration-and- sustainability-guidance/>; Collaboration and Sustainability Guidelines, above n 95, at [18].
146 Collaboration and Sustainability Guidelines, above n 95, at [25]-[26]. Examples of the
While this approach from the Commission ought to be critiqued, there is legitimacy in considering that competition should not be sacrificed by prioritising sustainability above other considerations required under the Act. Economic evidence shows that having workably competitive markets is the best way to stimulate sustainable innovation within a market.147 Therefore, it could be argued that it is for the long-term benefit of the New Zealand consumer for the Commission not to place competition aside in favour of allowing anti-competitive collaborative agreements.148
(ii) A Critique of the Commission’s Examples
However, that is not the only way that sustainability is relevant to competition law decision- making. The Commission is clearly viewing sustainability as external to its obligations as decision-maker under the Act, however that is not the case. This understanding of climate change’s possible role in competition law decision-making does not properly reflect the Commission’s obligations to consider climate change when making decisions under the Act. The decision-making process should not be about determining whether activity is in breach of the Act and then choosing whether to overrule that determination based on sustainability considerations. Rather, the Commission needs to become comfortable with engaging climate change factors as a relevant consideration, or even a mandatory relevant consideration, when determining what activities breach the Act. In this regard, the examples in these draft guidelines released by the Commission are largely unhelpful in establishing the proper role of climate change considerations within competition law as they fail to engage with how the legislative framework requires that climate change factors be weighed against other factors.
More helpfully, there have been several examples of this kind of weighing up of non-economic considerations against economic factors within competition law decision making. As previously considered, the Court of Appeal in NZME v Commerce Commission engages with this balancing of factors well when it considers media plurality as a non-economic factor that ought to be considered against the economic benefits of the merger.149 A similar decision was made by the Commission regarding environmental factors when Nelson City Council and Tasman District Council applied for authorisation of possible restrictive trade practises under
147 Schinkel and Treuren, above n 137, at 1.
148 This is the standard imposed by the purpose of the Act, s 1A
149 See discussion in Chapter IV(C).
s 58 of the Act to create a regional landfill business unit.150 This would enable the two councils to make joint governance, management and operational decisions for the two landfills in the region.151 The question in this case was whether the loss of competition was outweighed by a benefit to the public, and in order to determine this, the Commission engaged in an analysis of what the market would look like with and without the proposed authorisation.152 Here the Commission decided to grant conditional authorisation to the Councils because it was satisfied that the arrangement will result, or be likely to result, in a benefit to the public that outweighs any lessening in competition that would or could occur as a result of the arrangement.153 When weighing up the benefits and detriments, the Commission draws on authority from the Court of Appeal in Godfrey Hirst NZ Ltd v Commerce Commission which holds that the Commission must consider a broad range of benefits and detriments when deciding whether to grant authorisation, including efficiencies and possibly non-economic factors where appropriate.154 The Commission also notes that in weighing these factors, it is not required to engage in a quantitative analysis of qualitative matters and instead ought to make an evaluative judgment on any application.155 In weighing the benefits and detriments in this particular case, the Commission considered that there were significant economic detriments that could occur as a result of the arrangement, with losses to allocative, productive and dynamic efficiency.156 These quantitative detriments were, however, balanced against a range of benefits, including the qualitative consideration of environmental benefits that could occur as a result of the arrangement. The Commission considers waste reduction as consistent with the Waste Minimisation Act, as well as a reduction in greenhouse gas emissions.157 When it came to balancing the benefits and detriments, while the Commission was clear that the unquantified environmental benefits can be considered, they were not determinative in this case.158
Therefore, we can see clear examples of how climate change as a non-economic consideration can be taken into account by the Commission within the framework provided by the Act, rather than setting aside competition goals in favour of climate change considerations. The kind of
150 Nelson City Council and Tasman District Council [2017] NZCC 6.
151 At [1].
152 At [14]-[15].
153 At [1].
154 Godfrey Hirst NZ Ltd v Commerce Commission [2016] NZCA 560 at [24] and [31]; Nelson City Council and Tasman District Council, above n 150, at [80].
155 Godfrey Hirst NZ Ltd v Commerce Commission, above n 154, at [35].
156 Nelson City Council and Tasman District Council, above n 150, at [84]-[100].
157 Waste Minimisation Act 2008.
158 Nelson City Council and Tasman District Council, above n 150, at [118].
engagement that I am suggesting is not beyond the scope of the Commission’s engagement to date. It is this kind of active engagement with relevant factors, both economic and non- economic, that the Commission ought to be undertaking when dealing with decisions involving climate change considerations. It must be noted that these examples deal specifically with decisions made within the scope of the public benefit test within the authorisation regime. This analysis is not imported by all of the relevant provisions under the Act and that must be considered when looking at the possible scope of the consideration of climate change factors within competition law decision-making.
D Proposed Examples
While this consideration will naturally look different in each case, it is possible to consider how climate change factors may be considered in a variety of circumstances. For the purposes of this analysis, it is most effective to do this by assessing the key competition provisions in the Act into two categories: Those which expressly import a public benefit analysis, and those which do not. There is a far greater scope for consideration of non-economic considerations like climate change within the public benefit test. In these instances, due to the explicit inclusion of the broader public interest without reference to competition, climate change considerations as enabled by s 5ZN of the CCRA are far easier to reconcile with the requirements of the Act. However, this does not mean that there is no scope for their consideration within decision-making under other provisions. Rather, their role may be slightly different in these contexts and ought to be considered separately. As the Commission, in its Collaboration and Sustainability Guidelines, has engaged with this issue by way of example, I will do the same.
(i) Provisions with Express Inclusion of Public Benefit
As previously explained, the authorisation provisions within the Act require the Commission to carry out a ‘public benefit test’.159 This means that Parliament has instructed the Commission to expressly consider what is in the best interests of the wider public when determining whether a particular activity will be allowed under the Act. NZME v Commerce Commission established that this public benefit is wider than economic benefit, and consideration of factors that may be beneficial to the public in a socio-political sense are expressly allowed.160 Here, the role of
159 Commerce Act ss 58, 67.
160 See Chapter III(C).
climate change considerations is quite clear. While they should by no means be determinative considerations, it is certainly open to the Commission to consider them. As previously discussed, in relevant circumstances, climate change considerations can be elevated to mandatory relevant considerations.161 Upon considering this finding, it is likely that decisions like this that come before the Commission, with climate change clearly at issue, would require that climate change factors be elevated to mandatory relevant considerations.
The example for these provisions involves two firms, Company A and Company B. Company A is a large company that generates energy from coal and supplies that energy to retailers who ultimately sell it to consumers. Company B is a large competitor in energy generation that has developed technology that enables it to produce clean energy in an efficient way. Company A wishes to acquire Company B and recognises that as a result of the merger, Company A would acquire Company B’s technology. However, all parties agree that there would be a substantial lessening of competition within the market for energy generation if these two large competitors became one firm. Company A is seeking authorisation from the Commission to go ahead with the merger despite the substantial lessening of competition. How should the Commission consider climate change factors in making a decision about whether authorisation should be granted?
This scenario asks a similar question to the ones considered in NZME v Commerce Commission and Nelson City Council and Tasman District Council. Therefore, in this situation it is likely that the Commission would be permitted to consider the climate change implications of granting authorisation and balance them against any detriments that may arise from a decisions to authorise the merger. While it is difficult to engage in a full analysis of how the Commission would make a decision based off these limited hypothetical facts, it is clear that climate change factors are relevant here, particularly greenhouse gas emissions as is relevant to the policy documents within the CCRA. From this merger, there would likely be significant benefits in the form of an increased usage of clean energy generation. However, this does not mean that the Commission would be obligated to grant authorisation. Rather, the Commission would be required to balance that benefit against competition detriments. This is the point that must be emphasised, that while there is no justification for climate change factors being determinative in a scenario like this, the obligations on the Commission are such that, in a situation where
161 CREEDNZ Inc v Governor-General, above n 127, at [183].
climate change is so squarely in view as this, any reasonable decision maker ought to at least take climate change into account. This means that, in fulfilling its public function, the Commission is required to act reasonably when exercising its power. Therefore, I argue this is the precise kind of scenario where climate change factors would be elevated mandatory relevant considerations for the Commission in its decision-making.
(ii) Other Provisions
The provisions that require a more complicated analysis when it comes to the role of climate change considerations are those that do not import an express consideration of the wider public benefit, where the only standard is whether there is a substantial lessening of competition.162 The purpose of the Act clearly does have the long-term benefit of the New Zealand consumer, which we can interpret widely to mean the New Zealand public in general, at the forefront of decision-making under the Act. However, the individual provisions still hold that the standard to breach the Act is that competition in a market will be substantially lessened, and do not provide room for that to be balanced against factors that speak to the broader public interest. Therefore, it could be argued that non-economic considerations such as climate change have no role in decision-making under these provisions. While acknowledging that the role may be more limited than within the public benefit test, it would be incorrect to say that climate change considerations are irrelevant in the absence of an express inclusion of a public benefit analysis. This claim is supported by the earlier analysis of climate change policy as being a broader governmental object that the Commission is required to support. This is where earlier analysis of New Zealand’s theoretical conception of competition law becomes important. The regime relies upon a largely Harvard School understanding of the goals of competition law, and it is because of this that it is clear that is within the mandate of the Commission to consider climate change factors in its decision-making. The question is what the Commission’s mandate allows this to look like.
I propose that one of the key ways the Commission ought to consider climate change factors is through the way that it defines markets. One of Commission’s roles in decision-making is defining markets that firms operate within, and in doing so they have substantial discretion.163 The Act requires that in defining a market the Commission determines what goods or services
162 Commerce Act ss 27, 30, 36 and 47.
163 See discussion in Chapter III(A).
are “as a matter of fact and commercial common sense, [...] substitutable” for the goods or services in question.164 Due to the Commission’s obligations to give effect to broader climate policy, climate change considerations are part of the broader factual matrix surrounding markets. Therefore, it would be consistent with the obligations on the Commission to consider a broad range of factors when defining a market, for example considering how climate change factors impact the way that a market operates. There could be a broad range of ways that this would be relevant within competition decision-making. For example: consumers caring about climate change mitigation in such a way that they view unsustainable products as not being substitutable for sustainable products; or the impact on the environment between two activities being so substantially different that they could not genuinely be considered to be substitutable as a matter of fact.
The example for this kind of provision again involves two companies: Company A and Company B. Both companies compete in the market for energy generation, and also compete in the downstream market supplying that energy directly to consumers. Company A in its energy generation capacity develops an essential input for a new kind of renewable energy generation that will allow them to generate energy more efficiently, emitting fewer greenhouse gases than was previously possible. Company B wishes to acquire this input so that they can also efficiently generate energy in a more environmentally friendly way. However, Company A refuses to supply this input to Company B due to the fact that this would mean they would lose a significant competitive edge in the eyes of retail consumers, and they are the only manufacturer of the input. Evidence shows that were Company B to have access to the input, there would be substantial emissions reductions. Company B has complained to the Commission that this behaviour is a breach of s 36 of the Act in that Company A is misusing its upstream market power to substantially lessen competition in the downstream market. How should the Commission consider the climate change implications of these facts in deciding whether this is a breach of s 36?
This is a more difficult consideration than the previous example, as there is no legislative provision for the public benefit test. However, this is the kind of situation in which the Commission ought to take climate change into account as part of the broader factual matrix that is relevant to defining the market. Here, it is likely that the only way this would be found
164 Commerce Act s 3(1A).
to be a breach of s 36 is if Company A was producing as essential input in order for Company B to compete in the relevant market. While the standard imported by the Act is that there is a substantial lessening of competition in a market, the Commission has significant discretion as to how they define that market. If the Commission were to define the market broadly as ‘energy generation’ it is likely that this input that is only required for a particularly efficient kind of renewable energy generation would not be seen as an ‘essential input’. Therefore, there would be no breach of s 36. However, were the Commission to consider its climate change obligations, it may find that there are substantial differences between generation of renewable energy and the generation of energy from fossil fuels that would make it factually inaccurate to treat the two products as substitutable. This could lead the Commission to define the market more narrowly as ‘renewable energy generation’, within which Company A’s input may be an essential input where a refusal to supply to Company B would lead to a substantial lessening of competition. Using market definition as the means of incorporating climate change considerations, the analysis for whether competition has been substantially lessened remains unchanged. However, this consideration of climate change at the market definition stage means that the Commission is able to engage with its responsibility to work towards New Zealand upholding its climate change obligations. While relatively basic and with little detail, this example demonstrates how the Commission could engage with climate change considerations while maintaining the standard for breach of the Act as a substantial lessening of competition.
E Conclusion
Climate change factors have the potential to be relevant considerations in all kinds of Commission decision-making under the Act. While the application of climate change factors may look different depending on which kind of prohibition a decision is being made under, it is within the mandate of the Commission to consider climate change considerations. Furthermore, this relevant consideration may be elevated to a mandatory relevant consideration when decisions are being made that have climate change as a clear and important issue.
VI Concluding Thoughts
Through considering the influence of theoretical scholarship on the development of competition law in New Zealand, it is clear that the influence of the Chicago School has moved aside to make room for a conception of competition law that is more in line with Harvard School thinking. This means that while efficiency and economic considerations will always be important within competition law, it is not accurate to say that the goals of New Zealand’s competition law regime exclude consideration of non-economic factors that influence the broader benefit of New Zealanders.
In performing a public function the Commission is empowered under s 5ZN of the CCRA to consider particular government policy documents relating to climate change mitigation when exercising its power and making decisions. It is because of this, along with the open-textured drafting of the Act, that the Commission is able to take climate change considerations into account as relevant considerations. Furthermore, in circumstances where climate change is directly at issue, there is evidence that climate change would become a mandatory relevant consideration.
This finding led to an analysis of the way that the Commission has recently engaged with climate change, particularly through its collaboration and sustainability guidelines. Here, I have proposed that the Commission has failed to genuinely engage with climate change factors as non-economic considerations that ought to be balanced against other factors. Such engagement is clearly within the scope of the Commission’s analysis, as evidenced by several examples of the Commission effectively balancing economic and non-economic considerations against each other.165 However, I have argued that the Commission is yet to engage with climate change fully.
At this point, I have suggested examples of how the Commission may be able to genuinely engage with climate change factors in decision making, both in terms of the public-benefit test, as well as decision-making under other provisions. Through these suggestions, the Commission would be able to use its mandate to enable the competition regime to be part of the society- wide response to climate change that is needed in order to meet New Zealand’s international
165 NZME Ltd v Commerce Commission, above n 4; Nelson City Council and Tasman District Council, above n 150.
obligations as well as domestic targets. It is this kind of engagement that is absolutely necessary to help mitigate the effects of a national and global climate emergency.
VII Bibliography
A Legislation
Commerce Act 1986
Commerce Amendment Act 2001. Climate Change Response Act 2002 Legislation Act 2019.
New Zealand Bill of Rights Act 1990. Waste Minimisation Act 2008.
The Sherman Antitrust Act 1890 15 USC §§ 1-38.
B Cases
Commerce Commission v Port Nelson Ltd [1995] 6 TCLR 406. CREEDNZ Inc v Governor-General [1981] 1 NZLR 172 (CA). Fisher & Paykel Ltd v Commerce Commission [1990] NZHC 307; [1990] 2 NZLR 731. Godfrey Hirst NZ Ltd v Commerce Commission [2016] NZCA 560. Magic Millions v Wrightson Bloodstock [1989] NZHC 887; [1990] 1 NZLR 731.
Nelson City Council and Tasman District Council [2017] NZCC 6.
NZME Ltd v Commerce Commission [2018] NZCA 389.
NZME Ltd and Fairfax New Zealand Ltd [2017] NZCC 8.
Re New Zealand Kiwifruit Exporters Association (Inc) – New Zealand Kiwifruit Coolstores Association (Inc) (1989) 2 NZBLC (Com) 104, 485.
Stevedoring Services Nelson Limited v Port Nelson Limited CP 21/91`Nelson Registry (Port Nelson II).
Tavita v Minister of Immigration [1993] NZCA 354; [1994] 2 NZLR 257 (CA).
Telecom Corporation of New Zealand Ltd v Clear Communications Ltd [1995] 1 NZLR 385 (PC).
Ball Memorial Hospital Inc v Mutual Hospital Insurance Inc 1338.
Olympia Equipment Leasing Company v Western Union Telegraph Compant 797 F 2nd 370 (7th Cir 1986) at 375.
Hoffman-La Roche AG v EC Commission [1979] 3 CMLR 211.
C Books
Rex Ahdar The Evolution of Competition Law in New Zealand (Online ed, Oxford Academic, Oxford, 2020)
Robert H. Bork The Antitrust Paradox: A Policy at War with Itself (Basic Books, New York, 1978) Philip A. Joseph on Constitutional and Administrative Law (5th ed, Thomson Reuters, Wellington,
2021).
Chris Noonan Competition Law in New Zealand (Thompson Reuters, Wellington, 2017) Richard A. Posner Antitrust Law (2nd ed, Chicago University Press, Chicago, 2001).
Stephen F. Ross Principles of Antitrust Law (Foundation Press, Westbury, 1993)
Matt Sumpter New Zealand Competition Law and Policy (CCH New Zeaalnd, Auckland, 2010) Richard Whish and David Bailey Competition Law (9th ed, Oxford University Press, Oxford, 2018). D Journal Articles
Or Brook “Struggling with Article 101(3) TFEU: Diverging Approaches of the Commission, EU Courts, and Five Competition Authorities” (2019) 56(1) Common Mark. Law Rev. 121-156
Ariel Ezrachi and Maurice E Stucke, “The Fight over Antitrust’s Soul” (2017) 9 J Eur Compet Law Prac 1-2.
Albert Allen Foer and Arthur Durst “The Multiple Goals of Antitrust” (2018) 63(4) Antitrust Bull 494-508.
Claudia Geiringer “Tavita and All That: Confronting the Confusion Surrounding Unincorporated Treaties and Administrative Law” (2004) 21(1) NZULR 66.
Simon Holmes “Climate Change, Sustainability, and Competition Law” (2020) 8 J.A.E 354. Lina Khan “The New Brandeis Movement: America’s Antimonopoly Debate” (2018) 9:3 J Eur
Compet Law Pract 131-132.
Giorgio Monti “Four Options for a Greener Competition Law” (2020) 11.3-4 J. Eur. Compet. Law Pract. 124-132
Chris Noonan “The Future of Public Benefit Test Under the Commerce Act: Part 1” (2020) 27 CCLJ 167.
Johannes Paha “Sustainability Agreements and First Mover Disadvantages” (2023) 00 J. Compet.
Law Econ. 1-10.
Ross H Patterson “How the Chicago School Hijacked New Zealand Competition Law and Policy” (1996) 17 NZULR 160-192.
Auralien Portuese “Beyond Antitrust Populism: Towards Robust Antitrust.” (2020) 40(2) Economic Affairs 237-258.
Simone Lydia Schwoerer “New Zealand and cartel criminalisation” (2018) NZLJ 219-224 Edward Willis “Competition Law Reimagined? Competition Studies in New Zealand” (2023) NZ
Law Rev. 191-212.
Ed Willis and Lauren Millington “Competition Law and Non-Economic Considerations: The Particular Case of Democracy” (2022) JCIL 9(1) 51-74.
Debra Wilson “The (lack of a) case for cartel criminalisation” (2012) NZLJ 173-178.
E Chapters in Edited Books
Herbert Hovenkamp “The Reckoning of Post-Chicago Antitrust” in Antonio Cucinotta, Roberto Pardolesi and Roger Van den Bergh (eds) Post-Chicago Developments in Antitrust law (Edward Elgar Pub., Cheltenham, 2002) 1-33.
Imelda Maher “Regulating Competition” in Christine Parker and others (eds) Regulating Law
(Oxford University Press, Oxford, 2004) 187-206.
Jonathan B. Baker “A preface to post-Chicago antitrust” in Antonio Cucinotta, Roberto Pardolesi and Roger Van den Bergh (eds) Post-Chicago Developments in Antitrust law (Edward Elgar Pub., Cheltenham, 2002) 60-75.
F Commission Documents
Commerce Commission Advantages and Disadvantages of Competition Welfare Standards – Note by New Zealand (Commerce Commission, Submission to OECD Competition Committee, 26 May 2023) at 32.
Collaboration and Sustainability Guidelines (Commerce Commission, Draft for Consultation, 31 July 2023).
The Commerce Act: Agreements that Substantially Lessen Competition (Commerce Commission, Fact Sheet, July 2018)
The Commerce Act: Cartel Conduct (Commerce Commission, Fact Sheet, May 2022)
The Commerce Act: Mergers and Acquisitions – Applying for a Clearance (Commerce Commission, Fact Sheet, August 2019)
The Commerce Act: Misuse of Market Power (Commerce Commission, Fact Sheet, March 2023)
Priorities 2022/23: At a Glance (Commerce Commission, 2022).
Sue Begg Submission on Climate Change Commission’s Draft Advice (Commerce Commission, Submission, 26 March 2021) at 1.
G Other Sources
Chapman Tripp “Commerce Commission Collaboration and Sustainability Guidance (14 August 2023) Chapman Tripp <https://chapmantripp.com/trends-insights/commerce-commission- collaboration-and-sustainability-guidance/>
David King Criminalisation of Cartel Behaviour (Ministry of Economic Development, Occasional Paper, January 2010).
Minister of Commerce the Hon Paul Swain in Parliament (27 February 2001) 590 NZPD 7972. Office of the Acting Minister of Commerce, Commerce Act 1986-Purpose Statement (3 April 2000)[15]-[16].
Russell McVeagh “significant amendments to New Zealand’s competition law framework imminent” (29 March 2023) Russell McVeagh <https://www.russellmcveagh.com/getmedia/6e7d3d97- 0d35-4e7e-b90e-3d1586fcf641/Competition-law-framework-2023-002.pdf/>.
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/journals/UOtaLawTD/2023/5.html