Australia and New Zealand Competition Law Enforcement and Governance

Australia and New Zealand

Competition Law Enforcement and Governance

Freshfields Bruckhaus Deringer LLPWhy a joint assessment of New

Zealand and Australia?

Politically, economically and culturally very similar.

ANZCERTA:

– Total freedom of movement of people and labour

– (Almost) total freedom of trade and commerce

– Mandate to harmonise business law

Business law harmonisation:

– Synchronising policy

– Reducing regulatory barriers to trans-Tasman commerce (e.g. mutual recognition of filings)

– Ultimate ambition: a single agency exercising equivalent jurisdiction in both countries

Result: convergence between New Zealand and Australian competition policy and institutional arrangements

Freshfields Bruckhaus Deringer LLP

Mandate


Mandate

Competition Per se prohibitions:

– Price fixing/hard core cartels

– Resale price maintenance

– Certain kinds of exclusionary arrangements

Rule of reason:

– Monopolisation

– Cooperation/collusion

– Mergers and acquisitions (which can be cleared or authorised)

Regulation Objective:

– Mimic competitive outcomes

– Reserved for markets with structurally limited competition

Mechanisms:

– Access regulation for essential facilities

– Information disclosure

– Negotiate/arbitrate

– Price/quality investment pathways


Penalties

Maximum (corporate) penalties of:

a) $10,000,000; or

b) Either:

i. Three times the commercial gain attributable to the infringement; or

ii. If the commercial gain cannot be calculated, 10% of worldwide group turnover

Fines vary for individuals: $500,000 - $750,000

Ten years’ imprisonment for hard core cartel conduct in Australia

Institutional structure


Institutional structure


Due process norms


Due process norms

Due process based on civil rather than criminal expectations of fairness

Principles of natural justice:

– Right to be heard

– Right to adequate notice of reasoning and evidence relied upon

Investigations: agencies have substantial latitude, and occasionally use them in an allegedly oppressive manner

Independence: ✔

Proportionality: ✔


Due process norms (continued)

Rights of review and appeal: variable:

– Regulatory appeals on merits severely constrained – typically appeals are limited to questions of law or procedure

– Very difficult to challenge even a manifest error in economic reasoning

Challenges of criminalisation:

– Use of compelled testimony

– Giving appropriate cautions

– Tainted evidence

– Parallel criminal and civil proceedings

– ACCC confident, given support from CDPP, but practitioners convinced the first prosecutions will be problematic


Institutional performance


Public accountability

Accountable to courts, tribunals and ombudsman for day-to-day activities

Accountable to Parliament and government departments for overall performance and budget

Accountable to media

But note deliberate trade off between accountability and independence

A-


Timeliness

Mergers:

– New Zealand: 40-65 days

– Australia: Between two and twelve weeks depending on complexity

Enforcement: traditionally unduly prolonged, but an area of focus under the current administration and improving

Regulatory determinations: extremely prolonged as a result of overly rigorous consultation obligations, to the ultimate dissatisfaction of both the agencies and industry

B+


Expertise

Agencies highly regarded by practitioners, and rated favourably in international comparisons

Both agencies have successfully recruited talent internationally, and contracted consultant expertise for specific workstreams

Weakness is probably in high level economic expertise: comparatively fewer economics PhDs than other sophisticated competition agencies (DOJ, OFT, DG Comp)

New Zealand courts can sit with a lay-member to assist with expert economic evidence. Australian federal courts not similarly equipped, but the ACT sits with two lay-members.

A-


Investigative and sanctioning powers

Maximum penalties float according to size of company and magnitude of commercial gain attributable to the breach

Broad powers to injunct conduct (including on an interim basis through cease and desist orders) and to disqualify directors

Criminal penalties for hard core conduct in Australia (and soon to be introduced in New Zealand)

In practice, significant penalties increasingly imposed

Wide range of investigative tools, and plenty of latitude to use them

Chairs of the agencies reported no concerns with their existing powers A+


Reasonable predictability

Procedure governed either by statute or by guidelines issued by agencies, and hence very predictable (with the exception of investigations)

Merger control predictable given extensive guidelines on substantive assessment and high level of know-how amongst practitioners

Regulatory determinations predictable insofar as final outcomes are signaled well in advance through draft reports and consultation papers

Enforcement increasingly predictable due to enforcement policies and guidelines, with the exception of monopolisation which is completely unpredictable

Also, enforcement depends a lot on the personality of the current chairperson

A-


Transparency

Strong culture of transparency:

– Publicly available annual reports that report on activities and budget

– Press releases announcing significant decisions or actions

– Full text registers of merger clearances and restrictive trade practice authorisation

– Freedom of information legislation

– Wide range of information available on website

However, both agencies are a bit reluctant to publicise decisions or outcomes that reflect poorly on them

Also, ACCC publishes less information on mergers due to its informal merger clearance regime

A


Public consultation

Public invited to participate in policy-making process through consultations on:

– Draft legislation

– Agency guidelines

Public also invited to make submissions regarding merger clearances, RTP authorisations and regulatory determinations

Enforcement proceeds through a private litigant model, so public does not participate in agencies’ litigation strategy or enforcement decisions

A


Documents

Australia and New Zealand Competition Law Enforcement and Governance