Commerce Commission Proposes New Market Study Powers Under Revised Competition Law Framework

The Commerce Commission has released draft proposals for significantly expanded market study powers under New Zealand’s proposed Competition Act reforms, including authority to impose binding remedies and conduct sector-specific investigations. The changes would represent the most substantial overhaul of New Zealand’s competition law framework since the Commerce Act 1986.

At a glance

• Commerce Commission proposes binding remedy powers for market studies, moving beyond current recommendation-only approach
• New sector-specific investigation authority targeting concentrated industries including telecommunications, banking, and fuel
• Mandatory information-gathering powers with penalties up to $500,000 for non-compliance
• Extended timeframes allowing 18-month market studies compared to current 12-month limit
• Public interest test framework enabling intervention in mergers below traditional thresholds

Enhanced Enforcement Mechanisms

The proposed reforms centre on transforming the Commerce Commission from a primarily advisory body into an active market regulator with direct intervention powers. Under the current Commerce Act 1986, market studies can only result in non-binding recommendations to government or industry participants.

The new framework introduces three tiers of enforcement:

• Structural remedies: Authority to order divestiture of assets or business units where market concentration exceeds 60% in relevant markets
• Behavioural remedies: Power to impose specific conduct requirements, pricing constraints, or access obligations lasting up to five years
• Interim measures: Ability to implement temporary restrictions during investigation periods, with judicial review available within 20 working days

Information Gathering and Compliance

Significantly expanded information-gathering powers represent a cornerstone of the reform package. The Commission would gain authority to:

• Compel production of internal documents, communications, and commercial data without court orders
• Interview company directors and senior management under statutory notice requirements
• Access third-party information from suppliers, customers, and industry participants
• Impose civil penalties ranging from $100,000 to $500,000 for information non-compliance

According to Chapman Tripp’s recent analysis, the proposed information powers mirror those used by competition authorities in Australia and the United Kingdom, suggesting New Zealand businesses should prepare for significantly more intensive regulatory scrutiny.

Sector-Specific Investigation Authority

The reforms introduce targeted investigation powers for industries demonstrating persistent competition concerns. Priority sectors identified include:

• Telecommunications: Mobile and broadband services, infrastructure access arrangements
• Banking: Retail banking services, payment systems, lending practices
• Fuel: Wholesale and retail fuel markets, terminal access agreements
• Construction: Building materials supply, trade practices, procurement processes
• Grocery retail: Supplier relationships, private label practices, site acquisition strategies

Each sector study would operate under 18-month timeframes, with mandatory interim reporting at six-month intervals. Industries subject to investigation would face ongoing monitoring requirements and potential follow-up studies within three-year cycles.

Merger Control Modifications

Beyond market studies, the proposed framework introduces a “public interest test” for merger assessments. This mechanism would enable Commerce Commission intervention in transactions falling below traditional revenue or asset thresholds where:

• Strategic assets or critical infrastructure are involved
• Innovation capacity or research and development capabilities would be materially reduced
• Employment levels in regional areas face significant impact
• Consumer choice in essential services would be substantially limited

The public interest test applies automatic review triggers for transactions involving companies with annual New Zealand revenue exceeding $200 million, regardless of traditional merger thresholds.

Implementation Timeline and Transition

Parliamentary passage of the Competition Act amendments is scheduled for late 2026, with phased implementation beginning in early 2027. Key milestones include:

• Phase 1 (March 2027): Enhanced information-gathering powers and extended market study timeframes
• Phase 2 (September 2027): Binding remedy powers and sector-specific investigation authority
• Phase 3 (March 2028): Public interest test framework for merger control

Existing market studies commenced under current legislation will continue under previous frameworks, but new investigations from March 2027 will operate under expanded powers.

Industry Response and Concerns

Business groups have expressed significant concern about potential regulatory overreach and compliance costs. The New Zealand Business Roundtable estimates administrative compliance expenses could increase by 15-25% annually for companies in targeted sectors.

However, consumer advocacy organisations argue the reforms address longstanding market concentration issues that have contributed to high prices and limited innovation across key industries. The Consumers’ Institute has particularly supported enhanced scrutiny of banking and telecommunications sectors.

Impact

The proposed competition law reforms will fundamentally alter the regulatory environment for New Zealand businesses, particularly in concentrated industries. Companies should immediately begin compliance preparation, including document retention policies, internal communication protocols, and legal review processes.

Businesses in priority sectors face the highest immediate impact, with potential for intensive regulatory scrutiny and binding remedy orders. Even companies outside targeted industries should review merger and acquisition strategies, as lowered intervention thresholds and public interest tests will capture previously exempt transactions.

Legal and compliance costs will increase substantially, requiring budget allocation for specialist advice and internal compliance systems. However, the reforms may create opportunities in markets where incumbent advantages are reduced through structural or behavioural remedies.

Most critically, the shift from advisory to enforcement powers represents a permanent change in New Zealand’s competition landscape. Businesses must adapt to a regulator with direct authority to impose commercially significant obligations and penalties.