Updating New Zealand’s competition settings: What directors need to know

In December 2024, the Ministry of Business, Innovation and Employment (MBIE) released a discussion document signalling potential changes to New Zealand’s Commerce Act 1986. This is the first major review of the Act in more than 20 years and directors may want to take note, as the proposed reforms could introduce more scrutiny over mergers and acquisitions, corporate behaviour and compliance requirements.

This review is driven by rising concerns about the impact of market concentration. Recent Commerce Commission market studies – including the 2022 Market Study into the Grocery Sector and 2022 Market Study into Residential Building Supplies – highlighted areas where competition appears limited, contributing to higher prices and reduced choices for consumers. The OECD has recommended changes, citing the need to maintain competitive pressure in New Zealand’s relatively small and isolated market. 

Why now?

Globally, several key trading partners, including Australia, the United Kingdom and the European Union, have recently introduced updates to their competition laws, driven by concerns about declining competition and increasing market power among large firms. These reforms reflect a broader trend towards ensuring markets remain dynamic and competitive, particularly in light of challenges posed by digital platforms and high levels of corporate consolidation.

In Australia, reforms introduced in 2024, take effect from 1 January 2026 and include mandatory notification for certain mergers, as well as enhanced powers for regulators to prevent transactions likely to harm competition. The Australian Competition and Consumer Commission (ACCC) has been given powers to intervene early and block problematic mergers without requiring court approval, and new provisions address creeping acquisitions by large firms.

While New Zealand’s economy is smaller, and its regulatory environment differs, MBIE’s review aims to address similar issues by modernising key provisions of the Commerce Act.

Key competition issues 

1. Merger oversight

Currently, businesses can decide whether to notify the Commerce Commission about a merger. However, MBIE is considering new rules requiring mandatory notification for mergers that meet certain criteria, such as transactions involving large firms in concentrated sectors. Additionally, ‘stay powers’ and ‘call-in powers’ are being explored. Stay powers would allow the Commission to temporarily halt potentially anti-competitive mergers while they are reviewed, while call-in powers would enable the regulator to require notification of mergers it deems risky.

In practice, this could mean organisations planning to acquire a competitor or expand through mergers may face additional regulatory hurdles. This could require earlier engagement with legal advisors and the Commerce Commission to ensure compliance and avoid delays.

2. Preventing excessive market power

One of the key concerns identified is whether current rules adequately prevent firms from gaining significant market power through acquisitions. MBIE is particularly interested in whether cumulative acquisitions – where a business gradually buys smaller competitors over time – should be more closely monitored. Australia has already moved to address this with rules targeting creeping acquisitions.

For businesses, this may mean that strategies involving incremental acquisitions, which previously attracted little attention, could come under greater scrutiny. Directors overseeing growth through acquisitions will need to carefully assess how each transaction fits within the evolving regulatory framework.

3. Anti-competitive conduct

While New Zealand already prohibits cartel behaviour (such as price-fixing), MBIE is considering whether rules should be extended to cover other forms of informal coordination, such as businesses signalling their future pricing intentions to reduce competition. Australia has introduced a prohibition on “concerted practices” to address similar concerns.

If adopted here, businesses engaging in industry collaborations or making public pricing announcements may need to be cautious about how such actions are perceived. Directors overseeing communications, particularly in highly competitive sectors, may need to work closely with legal teams to ensure compliance with any new rules.

4. Industry codes and behavioural remedies

Another area under review is whether the Commerce Commission should have the power to introduce binding industry codes. This could allow the regulator to set sector-specific rules aimed at promoting competition in industries with persistent market issues. Additionally, MBIE is considering whether the Commission should be able to accept behavioural undertakings, where businesses agree to certain conditions in exchange for merger approval.

In practice, this could mean businesses in regulated sectors may face more prescriptive rules governing their behaviour, while mergers in these sectors may require businesses to commit to ongoing behavioural conditions. 

What this means for directors

For directors, these proposed changes could mean greater scrutiny of mergers and acquisitions, as well as a shift in how businesses engage with competitors and operate within regulated sectors. Transactions that previously posed minimal competition concerns could attract closer examination, potentially leading to longer approval times and increased compliance costs.

In sectors already identified as highly concentrated – such as retail, fuel, and building supplies – directors may need to prepare for new rules designed to foster competition. Boards overseeing growth strategies should stay informed about potential changes to ensure they remain compliant and can manage any regulatory risks effectively.

Next steps

MBIE is inviting submissions on the discussion document, with feedback closing on 7 February 2025. Cabinet is expected to make decisions by April 2025. Directors can access the discussion document and submission details on MBIE’s website here.