ComCom keeps red flag over potential collusion through industry associations

Thursday 1st October 2015

The Commerce Commission is still wary about potential collusion through industry associations, which provides an avenue for rival firms to talk about the issues they collectively face and may lead to anti-competitive behaviour.

Participation in industry associations topped the antitrust regulator's list of current issues it faces under the Commerce Act in its 2015 consumer issues report, and was the only factor to attract a 'very high' harm rating, meaning it could have a severe impact on consumers, businesses or markets, and either commonly occurred or was entrenched behaviour. The report, released last month, said industry associations continued to feature in the regulator's cartel investigations, particularly where an external shock had affected its members.

Cartel conduct in general was often a response to some kind of external shock, and industry bodies facilitated ways for an industry-wide response, commission competition manager Katie Rusbatch told BusinessDesk. The global fixing of security surcharges after the 9/11 terrorism attacks through the International Air Transport Association was an example of that, she said.

"That forum facilitates that discussion around what has occurred and how the industry can collectively respond to that," she said. While fixing prices in response to an external shock was a clear-cut breach of antitrust law, sharing information could also break the law if it gave rivals an idea of what their competitors were doing.

"The grey areas you get into is to do with information exchange, and what information you're exchanging," she said. "We have guidance on our website that relates to that and when that can lead to some form of collusion or awareness about what competitors are going to be doing in the market."

Industry association participation was also seen as a risk in 2013, facilitating some price-fixing arrangements or excluding rivals by creating a barrier to entry through initiatives such as medical practitioners' requirements or building industry benchmarking of product standards, according to last year's consumer issues report.

Legislation to criminalise cartel behaviour, while providing an exemption for pro-competitive collaboration between rival firms, has been sitting in Parliament since 2011, passing its second reading in November last year. The bill was later amended to provide a nine-month transition phase.

A Productivity Commission report on competition in service industries last year said criminalising cartel behaviour carried enough risk to harming pro-competitive collaboration to warrant a review within two-to-four years of the legislation's implementation, and was stifling the appetite among smaller firms to work with their rivals for fear of breaching the law.

Despite provisions designed to permit collaborations, "perceptions remain that criminalising certain activities will have a dampening effect on pro-competitive business activities," the report said.

Rusbatch said once the legislation passes that would provide an opportunity for the regulator "to do a bit more proactive advocacy in this area and is something that is on the agenda."

BusinessDesk.co.nz

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