I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
For a jurisdiction with both an established competition law legal framework and an active competition authority (the New Zealand Commerce Commission (NZCC)), New Zealand has, relative to other jurisdictions, a limited history of private competition law enforcement.
This may be cultural in part, with New Zealanders generally being less inclined to litigate quickly, or it may be due to the costs of commercial litigation relative to the size of New Zealand businesses. It could be due to the NZCC’s active enforcement role (the regulator having investigative powers that private litigants do not), or the fact that there is currently no developed legal framework for true class actions and commercial litigation funding. It may also, in part, be due to perceived challenges in the enforcement of New Zealand’s unilateral conduct provision as it has been interpreted by the courts.
For whatever reason, private enforcement activity in New Zealand continues to be light.2 That said, trade competitors and other third parties are actively involving themselves in the enforcement of New Zealand’s primary competition legislation, the Commerce Act 1986 (Act) in other ways. For example:
- In 2017, for the first time, a competitor sought an injunction under the Act to prevent the settlement of a merger in respect of which clearance had not been sought. Complete Office Supplies (COS), an office products supplier in Australia, applied for an injunction to prevent Platinum Equity LLC from acquiring OfficeMax’s New Zealand business. Platinum had acquired the Australian and New Zealand businesses of OfficeMax’s closest competitor, Staples, at the beginning of 2017. The NZCC has since filed its own application for an injunction and sought to have it joined with the COS proceeding.
- Third parties have been actively and vocally engaging in the NZCC’s merger clearance and authorisation processes, and getting results. For example:
- Vodafone Europe BV and Sky Network Television Limited’s application was the NZCC’s most contested merger clearance process to date: the NZCC received 65 submissions and expert reports. In addition, before the NZCC’s decision was released, two of Vodafone’s competitors (Spark and 2degrees), and a third party, InternetNZ, sought and obtained urgent interim orders from the High Court to delay the completion of the merger, should clearance be granted, to allow them time to consider the NZCC’s reasons and decide whether to appeal.
- The NZCC received over 50 submissions on NZME Limited and Fairfax New Zealand Limited’s application for authorisation to merge their operations, and held a conference of interested parties after releasing its draft determination.
The NZCC ultimately declined both the Sky/Vodafone and NZME/Fairfax applications. NZME and Fairfax appealed the NZCC’s decision to the High Court. The appeal was heard in October 2017, and a judgment is expected in early 2018.
i Legislative changes
In 2017, the Act was amended by the Commerce (Cartels and Other Matters) Amendment Act 2017 (Cartels Act).
The Bill that became the Cartels Act was first introduced into Parliament in 2011. Initially, the impetus for change was the intended criminalisation of cartel conduct. However, criminalisation was abandoned in late 2015 due to concerns that it might have a chilling effect on pro-competitive behaviour.
The previous prohibition on ‘price fixing’ (which was triggered by conduct that had the purpose, effect or likely effect of fixing, controlling or maintaining a price) has been replaced with a new, broader cartels prohibition. Specifically, the Act now provides that no person may enter into, or give effect to, a contract, arrangement or understanding that contains a ‘cartel provision’. A ‘cartel provision’ is a provision that has the purpose, effect or likely effect of ‘price fixing’, ‘restricting output’ or ‘market allocating’. Each of those forms of conduct is now defined in more detail.
Additional changes to the Act include new exceptions to the cartel prohibition for ‘collaborative activities’ (replacing the previous exemption for joint ventures), vertical supply contracts and joint buying and promotion agreements; and a new clearance regime for collaborative activities, which allows businesses that are or will be involved in collaborative activities to seek clearance for cartel provisions in a proposed contract. Clearance is not available, however, for existing contracts.
The new cartel prohibition applies immediately to all contracts, arrangements and understandings entered into or given effect to after 15 August 2017. However, transitional provisions provide for a nine-month grace period during which the NZCC cannot enforce the prohibition in relation to contracts, arrangements and understandings entered into prior to 15 August 2017.
In addition, the government’s targeted review of the Act, which was commenced in 2015, was concluded in June 2017.
The principal purpose of the review was to test views on whether the misuse of market power provision (a prohibition on the ‘taking advantage’ of a substantial degree of market
power for an anticompetitive purpose, in Section 36 of the Act), should be amended to introduce, in some form, an anticompetitive effects test.
This same question was recently debated in Australia and was considered as part of the Harper Review. In New Zealand, reform of Section 36 was strongly supported by the NZCC and strongly opposed by businesses. Change in the area remains difficult and controversial.
The Cabinet released its decision on the targeted review in May and June 2017. In summary, it decided to:
- invite the Minister of Commerce and Consumer Affairs to report back by 30 June 2018 before making final decisions on whether to proceed to a Section 36 options paper;
- repeal the cease-and-desist regime, which allows the NZCC to seek injunction-like orders from specially appointed cease and desist commissioners. The regime’s procedural requirements were considered cumbersome and lacking practical advantages over the standard approach of seeking an interim injunction from the courts;
- establish a new enforceable undertakings regime, which would allow settlements negotiated by the NZCC to be immediately enforced as if they were court decisions; and
- empower the Minister to direct the NZCC to undertake market studies.
ii GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
New Zealand’s principal competition legislation is the Act. The Act is enforced by the NZCC.
The competition provisions are set out in Parts 2 and 3 of the Act. Part 2 contains the restrictive trade practices provisions, including:
- Section 27, a general prohibition on entering into or giving effect to contracts, arrangements or understandings that have the purpose, effect or likely effect of substantially lessening competition in a market;
- Section 28, a prohibition on requiring or giving covenants in relation to land, which substantially lessens competition;
- Section 30, which prohibits entering into, and giving effect to, contracts, arrangements or understandings that contain cartel provisions;
- Section 36, which prohibits a person with a substantial degree of power in a market from taking advantage of that power for the purpose of restricting entry, preventing or deterring competitive conduct, or eliminating a competitor; and
- Sections 37 to 42, which prohibit suppliers from specifying or enforcing a minimum resale price or restricting the ability of their customers to sell below a specified price (i.e., resale price maintenance).
Part 3 contains Section 47, which prohibits acquisitions that would have the effect or likely effect of substantially lessening competition in a New Zealand market.
The Act confers statutory rights of action for affected persons to sue for damages or other remedies in respect of breaches of any of the above prohibitions. In summary, remedies available to private parties (as well as the NZCC) include:
- injunctions in relation to breach of the restrictive trade practices provisions (Section 81) and mergers (Section 84);
- exemplary damages in relation to breach of the restrictive trade practices provisions (Section 82A);
- declarations that the Crown has breached the Act (Section 5);
- declarations that conduct breaches (or proposed conduct would breach) the Act; and
- orders cancelling a contract, varying a contract, requiring restitution or compensation be paid or such other orders as the court thinks appropriate to compensate a person who has suffered, or is likely to suffer, loss or damage by a contravention of the Act (Section 89).
The High Court has exclusive jurisdiction to hear and determine all applications for damages and injunctions (Sections 75 and 76). The procedure of the High Court is governed primarily by the High Court Rules 2016 (High Court Rules).
An action for damages for an alleged breach of Part 2 must be commenced within three years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered, with a ‘long-stop’ limitation of 10 years (Section 82(2)).
An action for damages for an alleged breach of Part 3 must be commenced within three years from the time when the cause of action arose (Section 84A(2)).
The starting point is that New Zealand courts have subject-matter jurisdiction over, and the Act applies to, conduct engaged in within New Zealand.
In recent years, there have been a number of challenges to the NZCC’s jurisdiction to bring competition law cases against overseas defendants (individuals and companies). There is now a quite substantial body of case law on the jurisdictional reach of the Act, which has established that Section 4 is an exhaustive statement of the Act’s intended scope in relation to overseas conduct.
Section 4(1) extends the application of the Act to conduct engaged in outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand.
A person (person A) engages in conduct in New Zealand if any act or omission forming part of the conduct occurs in New Zealand; or another person (person B) engages in conduct in New Zealand, and the conduct of person B is deemed to be the conduct of person A.
Under Section 90, the conduct of person B is deemed to also be the conduct of person A if person B is a director, employee or agent of person A, acting within the scope of his or her actual or apparent power; or person B was acting on the direction, or with the consent or agreement, of a director, employee or agent of person A who was acting within the scope of the director’s, employee’s or agent’s actual or apparent authority.
Section 4(2) extends Section 36A (which prohibits taking advantage of market power in a trans-Tasman market) to conduct outside New Zealand by any person resident or carrying on business in Australia to the extent that the conduct affects a market in New Zealand, not being a market exclusively for services.
Section 4(3) extends Section 47 (which prohibits anticompetitive mergers and acquisitions) to the acquisition outside New Zealand by a person (whether or not the person is resident or carries on business in New Zealand) of the assets of a business or shares to the extent that the acquisition affects a market in New Zealand.
Any person (whether an individual or a body corporate) who has suffered loss or damage by reason of a breach of the competition provisions of the Act may bring a claim for damages against a party involved in the breach.
v THE PROCESS OF DISCOVERY
Litigants in New Zealand have available to them the usual array, common in common law jurisdictions, of pre-commencement and post-commencement discovery, disclosure, interrogatories, subpoenas and the like.
i Ability of private parties to access information from the NZCC outside of proceedings to which the NZCC is a party
In Australia, there is a specific legislative regime governing the circumstances in which the Australian Competition and Consumer Commission (ACCC) may decide, or be required by the courts, to disclose ‘protected cartel information’ (PCI) (information that was given to the ACCC in confidence, and that relates to a breach or possible breach of cartel offence or civil penalty provisions).3 Specifically, Section 157B of the Competition and Consumer Act 2010 sets out exhaustive lists of factors to be taken into account by the ACCC when deciding whether to disclose PCI and by the court when deciding to order disclosure in circumstances where the ACCC has refused it. The relevant factors include:
- the fact that the PCI was given to the ACCC in confidence;
- the need to avoid disruption to national and international efforts relating to law enforcement, criminal intelligence and criminal investigation; and
- in a case where the PCI was given by an informant the protection or safety of the informant or of persons associated with the informant; and the fact that the production of a document containing PCI, or the disclosure of PCI, may discourage informants from giving PCI in the future.
There is no comparable regime in New Zealand. However, Section 106(7) of the Act does make it clear that no court or person is entitled to require the NZCC to divulge or communicate any information obtained in connection with the operations of the NZCC outside of the context of proceedings to which the NZCC is a party.
In practice, the NZCC is mindful of protecting information that it has obtained pursuant to its cartels leniency policy or received from cooperative third parties affected by, but not implicated in, anticompetitive conduct. It is therefore likely to resist any attempt by a private party with a potential damages claim to obtain access to such information (whether by way of non-party discovery or an application to access the court file in a proceeding brought by the NZCC).
Schenker AG and Schenker (NZ)4 is the only New Zealand case to date on point. The Schenker parties are large international freight forwarders, and customers of several of the airlines alleged by the NZCC to have been involved in price fixing behaviour affecting both in-bound and out-bound air cargo services to and from New Zealand. Schenker sought access to the High Court files in the NZCC’s pecuniary penalty proceedings against certain of the airlines, and specifically:
- copies of any minutes of the Court;
- all the pleadings, including submissions and handed-up documents such as issues lists;
- all affidavits, briefs of evidence and summaries of those documents;
- the agreed bundle of documents;
- the agreed statement of facts, including all schedules; and
- a copy of the transcript.
The reason given for seeking access was that Schenker may have suffered some loss as a result of the conduct alleged by the NZCC, and that there was a possibility that the documents might be relevant to contemplated parallel litigation.
The NZCC, a number of the airlines and a third party opposed Schenker’s request. The NZCC was particularly concerned with restricting access to information it had received from non-parties such as freight forwarders, exporters and importers that had provided commercially sensitive information to the NZCC on a voluntary basis and that had generally cooperated.
Whether to grant the request fell to be determined under Rule 3.16 of the High Court Rules, which sets out a list of factors that a court must consider when deciding whether to exercise the discretion to grant access.5 The High Court declined the request, and Schenker appealed. The Court of Appeal upheld the High Court judgment, finding that:
- Schenker’s reasons for seeking access were broadly cast and vague;
- even if there were contemplated parallel proceedings, these would have undoubtedly have faced limitation issues;
- the High Court had given sufficient weight to the principle of open justice, especially given that Schenker was a private party pursuing a commercial purpose; and
- it was appropriate for the High Court to give significant weight to the need for fair administration of justice and protection of confidential information where:
- the parties had placed the documents Schenker was seeking before the Court on the basis they would treated as confidential and be used for the purposes of that litigation only; and
- the administration of justice is best served by ensuring the NZCC is able to gather evidence and give assurances of confidentiality in appropriate cases (there was evidence from the opposing third party that it would not have provided information to the NZCC voluntarily but for its clear understanding that the information would be protected from examination from competitors like Schenker).
The Court of Appeal considered there might be some sense in allowing Schenker to receive a copy of the pleadings. However, it was hard to see what benefit would be gained that could not be gained from reading the judgments in the proceeding. Schenker’s appeal, and its application for access to this material, failed.
vi USE OF EXPERTS
Expert evidence is an accepted form of opinion evidence in New Zealand.
Economists and other experts from New Zealand and overseas are commonly engaged to give expert evidence in competition law cases. Principally, that has been in the context of NZCC-led enforcement proceedings, or merger clearance and authorisation challenges.
As discussed above, relatively few private enforcement cases have been brought in New Zealand: there have been no successfully concluded follow-on damages claims, and the last time a private party brought proceedings alleging contravention of the misuse of market power prohibition (Section 36) was over five years ago. As a result, there is no jurisprudence on, for example, the use of economic evidence to establish damages for cartel conduct (such as regression analysis).
vii CLASS ACTIONS
New Zealand does not have a codified ‘class actions’ regime. However, under the High Court Rules, a representative plaintiff can bring an action on behalf of, or for the benefit of, all persons with the same interest in the subject matter of a proceeding (the class).6
Representative actions in New Zealand are typically managed on an opt-in rather than an opt-out basis.
Third-party litigation funding is permitted, and several litigation funders are active in New Zealand.
There have been no competition law ‘class actions’ to date.
In 2018, the New Zealand Law Commission will consult on whether a specific legislative regime is needed to address class actions and commercial litigation funding.
viii CALCULATING DAMAGES
Damages for breach of the Act are primarily compensatory in nature: a claimant can only recover the amount of loss or damage suffered by them by reason of the offending conduct. The relevant measure is likely to be the tort measure: damages to restore the plaintiff to the position in which it would have been had the conduct not occurred. However, as damages have never been awarded under the Act, this point is yet to be definitively determined.7
The level of any pecuniary penalty imposed by the court is not relevant to the assessment of compensatory damages.
The High Court also has jurisdiction to award exemplary damages (Section 82A). The Court may award exemplary damages even if it has already made, or may make, an order directing the person to pay a pecuniary penalty for the same conduct. However, when ordering the payment of exemplary damages, the Court must consider whether a pecuniary penalty has been imposed regarding the same conduct, and if so, the amount of that penalty.
Subject to the High Court’s discretion, the general principle is that an unsuccessful party will be required to contribute to the successful party’s costs.
Typically, the costs awarded are calculated on a scale basis, and are significantly less (around one-third) than actual legal costs. In some circumstances, increased or indemnity costs, or both, may also be awarded.
ix PASS-ON DEFENCES
The availability of the ‘passing on’ defence has not been tested by the New Zealand courts in the competition law context.
As more private party cartel litigation makes its way through the courts, a view on the defence will need to be determined. The requirement that a claimant show loss as part of its cause of action may suggest that such a defence would have a good prospect of success.8
x FOLLOW-ON LITIGATION
The NZCC operates a leniency or amnesty policy for cartel conduct in accordance with which the first eligible applicant for leniency can obtain immunity from NZCC enforcement and pecuniary penalties (civil fines). This immunity does not, however, extend to private damages claims.
In New Zealand, there is no difference between follow-on actions and stand-alone actions. In both cases, the plaintiff must establish that the defendant has breached the Act and that the plaintiff has suffered a loss as a result.
New Zealand courts will recognise documents and communications between solicitors and clients as privileged. A document will attract privilege when it is made in the course of, and for the purpose of, obtaining legal advice. Communications and documents that are made in anticipation of litigation proceedings will also be privileged. As a result, these documents and communications do not need to be disclosed to the other party in the proceedings for inspection.
If a document contains both privileged and non-privileged information, the document must be made available for inspection, with the privilege content redacted.9
The NZCC is protective of leniency applications and submissions, and tends to assert litigation privilege or public interest immunity to resist disclosure.
xii SETTLEMENT PROCEDURES
In New Zealand there are no specific procedures for settlement, and parties are free to settle disputes between themselves as they see fit.
However, under the High Court Rules, the court may assist parties in negotiating a settlement at any time before the hearing of a proceeding by convening a conference with the parties in private chambers for that purpose.10 As a general rule, the judge who convened the conference must not assist in the negotiations, but must arrange for another judge to do so.
A judge may, with the consent of the parties, make an order at any time directing the parties to attempt to settle their dispute by the form of mediation or other alternative dispute resolution (ADR) (to be specified in the order) agreed to by the parties.11
In New Zealand there is no requirement that settlements of ‘class actions’ be approved by the court.
The Act does not provide for or otherwise address the resolution of competition law disputes by arbitration or other ADR mechanisms.
In New Zealand, there is no obligation on parties to a dispute to consider ADR before commencing court proceedings.12 However, it is generally open to private parties to agree to resolve a dispute between them in whatever way they see fit.
If parties agree to refer their dispute to arbitration, the Arbitration Act 2012, which sets out the rules applying to arbitrations in New Zealand, applies.
Although there is nothing to suggest that private competition law disputes cannot be arbitrated,13 competition law arbitrations have not been common in New Zealand.
As arbitration requires an agreement to arbitrate (often entered into before a dispute arises), competition law issues are most likely to be arbitrated where they arise in the context of a contractual relationship and relate to the contract. (For example, a dispute as to whether a specific term is unenforceable because it is argued to be inconsistent with a prohibition in the Act, such as the prohibition on resale price maintenance.)
xiv INDEMNIFICATION AND CONTRIBUTION
Please provide a description of any limitations on seeking indemnification or contribution from third parties, co-defendants and cross-defendants.
A private litigant can bring a damages claim under Section 82 or 84A of the Act against any person involved in the contravention of the Act that caused him, her or it loss.
It might be assumed that each person involved in a contravention would be jointly and severally liable for the loss or damage suffered as a result (as is the case with joint tortfeasors). However, in light of New Zealand Bloom Limited v. Cargolux Airlines International SA,14 a 2015 decision of the High Court, it may be possible for a defendant to argue that it only caused, and therefore should only be liable for, a proportion of the loss suffered by the plaintiff.
NZ Bloom brought a damages claim against Cargolux, alleging that it was involved in agreements with other airlines to add security and fuel surcharges to their prices for exporting products from New Zealand.
NZ Bloom claimed to have suffered losses of NZ$340,000 in overcharges as a result of the alleged price fixing. However, only NZ$40,000 of that amount was paid to Cargolux. The High Court was asked to determine, as a preliminary question, whether in those circumstances Cargolux could be liable to NZ Bloom for the full amount claimed.
The Court ruled in favour of Cargolux, and held that Section 82 requires a plaintiff to plead and prove that all of the loss in respect of which damages are claimed was caused by the defendant or defendants. NZ Bloom did not allege that Cargolux’s conduct in particular caused the full loss suffered and did not plead the facts necessary to establish causation on that basis.
Where a plaintiff files proceedings under the Act against only one or some of the potential defendants (for example, one member of a cartel), the defendant can apply to have any other person joined jointly, individually or in the alternative as a defendant.15
A defendant can also issue a third-party notice to bring a third party into the proceeding if it claims that:16
- the defendant is entitled to a contribution or an indemnity from a third party;
- the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party, and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant; or
- a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between:
- the plaintiff, the defendant and the third party;
- the defendant and the third party; or
- the plaintiff and the third party; or
- there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant.
Under the High Court Rules, third-party notices must be filed 10 working days after the expiry of time for filing the defendant’s statement of defence. This time frame can be extended by leave of the court.
xiv FUTURE DEVELOPMENTS AND OUTLOOK
We expect the trend of ‘indirect private enforcement’ through increased third party involvement in the NZCC’s clearance and authorisation application processes to continue.
While the recent legislative changes implemented by the Cartels Act have been aptly described as ‘renovation, not revolution’,17 the new provisions will take some time to be consolidated, and there may be NZCC-led enforcement cases to test them.
In time, the Law Commission’s consultation on class actions and litigation funding could impact on New Zealand’s private competition law enforcement landscape and commercial litigation more generally.
Finally, if a decision is made to follow Australia and, in respect of unilateral conduct, shift from a purpose-based test to an effects-based test, this could have a significant impact on private enforcement litigation. The NZCC has quite prominently promoted the view that the current test, as interpreted by the courts, is flawed and extremely difficult to enforce effectively. However, as noted above, any change in this area is fraught with controversy, and in any event is likely to be some years away.
1 Oliver Meech is a partner and Alisaundre van Ammers is a senior associate at MinterEllisonRuddWatts. The authors wish to thank Madison Edilson and Hester Steevens for their assistance in preparing this chapter.
2 By way of illustration, the last private enforcement proceeding relating to New Zealand’s misuse of market power prohibition was decided by the High Court in 2012 (Integrated Education Software Limited v. Attorney-General CIV-2009-485-1875, 30 April 2012, HC Wellington, Williams J), and we are not aware of any concluded follow-on or stand-alone damages claims in respect of cartel conduct in New Zealand. It is, however, possible that some disputes have settled out of court, but the fact and terms of any settlements are confidential as between the parties.
3 Where the regime does not apply (i.e., in respect of information other than PCI), general legal principles apply.
The relevant provisions were introduced following the decision of the Full Federal Court in ACCC v. Cadbury Schweppes Pty Ltd & Ors  FCAFC 32. The ACCC alleged that Amcor and its competitor Visy had participated in a cartel. Amcor was granted immunity in respect of ACCC enforcement, and its employees provided proofs of evidence for use in the ACCC’s penalty proceedings against Visy. Cadbury brought a damages claim against Amcor in respect of the alleged cartel, and in the context of those proceedings sought access to the proofs of evidence held by the ACCC. The ACCC resisted disclosure on the grounds of legal professional privilege and public interest immunity privilege, and submitted that disclosure would deter whistleblowers from coming forward. The Court disagreed and ordered disclosure.
4 Schenker AG and Schenker (NZ) Limited v. Commerce Commission & Ors  NZCA 114 (17 April
5 Note that the relevant rules are now (since August 2017) contained, with slight amendment, in the Senior Courts (Access to Court Documents) Rules 2017.
6 High Court Rules, Rule 4.24.
7 Matt Sumpter, Competition Law and Policy, 2010 CCH New Zealand Limited, Auckland at .
8 Ibid. at .
9 High Court Rules 2016, Rules 8.28, 8.4.
10 High Court Rules 2016, Rule 7.79(1).
11 High Court Rules 2016, Rule 7.79(3)-(4).
12 Parties may of course be subject to contractual obligations to seek to resolve disputes by agreement or using ADR mechanisms before filing court proceedings.
13 In Attorney-General v. Mobil Oil NZ Ltd  2 NZLR 649 (HC), the Crown sought an injunction to prevent the referral of its dispute with Mobil regarding the legality of a most favoured nation clause. The Crown argued, among other things, that objectives of the Act would be defeated by allowing competition law issues to be determined by private arbitration. Although the Court accepted the importance of the policy objectives of the Act, it refused to grant an injunction, giving more weight to factors such as the importance of upholding the arbitration agreement between the parties.
14 New Zealand Bloom Limited v. Cargolux Airlines International SA  NZHC 109.
15 High Court Rules 2016, Rules 4.3, 4.56.
16 High Court Rules 2016, Rule 4.4.
17 David Blacktop, then Principal Counsel, Competition, NZCC, at stakeholder briefings on draft ‘Collaboration Guidelines’.