Toothless by design: how New Zealand’s competition law fails consumers — and why it must change
- Grant McLachlan
- 2 hours ago
- 10 min read
Since I was a law student, I have analysed the weaknesses in New Zealand's competition laws. Today, I dusted off a 30-year old law assignment and updated a bill to fix it.
The watchdog that cannot bite
The 2026 Hormuz crisis demonstrated with rare clarity what New Zealanders have long suspected: the Commerce Commission, the body charged with protecting competition and consumers in this country, has no power to compel fuel companies to reduce prices that everyone can see are excessive. It can monitor. It can report. It can “call out” conduct in a press release. And when companies decline to respond — as they have, week after week — it can do precisely nothing further.
This is not a failure of the people who run the Commerce Commission. It is a failure of the law that governs them. The Commerce Act 1986 was a product of its era — the age of Rogernomics, Chicago School economic orthodoxy, and a near-religious faith that markets, left to operate freely, would always discipline corporate behaviour. Nearly four decades on, that faith has been comprehensively disproved. New Zealand sits near the bottom of the developed world for competition enforcement outcomes, not because our regulators are uniquely incompetent, but because they have been given uniquely inadequate tools.
This feature compares New Zealand’s competition law framework with those of Australia, the United Kingdom, and Canada — three comparable common law jurisdictions that have spent the past decade systematically strengthening the powers of their competition regulators. It identifies the structural gaps that allow monopolistic behaviour, price gouging, tacit collusion, and market power abuse to go effectively unchallenged. A companion draft bill proposes the reforms needed to bring New Zealand into line with international practice.
A brief history of deliberate weakness
The Commerce Act 1986 was enacted alongside the deregulation agenda of the Fourth Labour Government. Its stated purpose — “to promote competition in markets for the long-term benefit of consumers” — was sound. Its architecture was not. As economist Geoff Bertram documented in a landmark 2020 analysis in Policy Quarterly, the Act was “inspired by Chicago School doctrines and an anti-state philosophy” that opened the way for “three decades of monopoly profiteering, exploitation of the weakest consumer groups and anti-competitive conduct, while regulation was absent or ineffective.”
The Act’s foundational weakness was section 36, the misuse of market power provision. For most of its operational life, s.36 required the Commission to prove not only that a firm had substantial market power, but that it had taken advantage of that power against a “counterfactual” — essentially proving what a hypothetical firm without market power would have done. The MBIE impact statement on s.36 reform acknowledged this test made enforcement “costly and complex” and reduced “incentives to comply.” The Commission’s last successful s.36 prosecution was the Telecom data tails case in 2012. After that, the provision became — in the words of Auckland barrister Gary Hughes writing in LawNews — “almost redundant in the New Zealand context.”
A 2022 amendment — replacing the “take advantage” test with an effects test — brought New Zealand broadly into line with Australia’s 2017 position. It was a full decade overdue. But it addressed only one of many structural deficiencies. The 2024 MBIE targeted review of the Commerce Act identified further gaps: no prohibition on tacit collusion without formal agreement, inadequate merger controls, and no power for the Commission to impose binding structural remedies following a market investigation.
The six critical gaps
No price gouging prohibition
As demonstrated by the 2026 fuel crisis, New Zealand has no mechanism to prevent a dominant firm or a group of firms behaving in parallel from raising prices to exploitative levels. The Commerce Commission confirms on its own website that “high prices and price increases in and of themselves are not illegal under the Fair Trading Act”. The only available tool is misleading conduct enforcement — requiring proof that a company falsely described the reasons for price increases. A company that simply gouges opportunistically, without making any false statement, is entirely beyond the Commission’s reach.
By contrast: Canada amended its Competition Act in 2023-24 to explicitly include “directly or indirectly imposing excessive and unfair selling prices” as an anti-competitive act by a dominant firm. The UK’s Chapter 2 prohibition on abuse of dominant position has covered exploitative pricing since 1998. Australia’s ACCC has price inquiry powers under Part VIIA of the Competition and Consumer Act, allowing it to investigate specific markets. New Zealand has none of these.
Tacit collusion: the legal blind spot
The Commerce Act requires proof of a “contract, arrangement or understanding” before parallel pricing conduct between competitors can be challenged. This means that “price following” — the well-documented practice of New Zealand fuel retailers raising prices in near-perfect synchrony without communicating — falls outside the Act’s reach unless explicit communication is proven.
The 2024 MBIE review acknowledged that New Zealand “currently lacks a prohibition against anti-competitive concerted practices.” Australia addressed this gap through its 2017 Harper reforms. The UK’s Chapter I prohibition has covered concerted practices since 1998. Canada expanded coverage of non-competitor agreements in December 2024. New Zealand has not acted.
No criminal cartel liability for individuals
In New Zealand, price-fixing and cartel conduct are civil offences. Companies face financial penalties; individuals face no criminal liability. This matters because corporate penalties — however large — are borne by shareholders and can be priced into business strategy. Criminal liability for the executives who actually make the decisions is the most powerful deterrent competition law can deploy.
The UK criminalised cartel conduct in the Enterprise Act 2002 with a maximum sentence of five years. Australia criminalised it in 2009 with a maximum of ten years. Canada criminalised wage-fixing and no-poach agreements in 2023. New Zealand has discussed criminalisation repeatedly and declined to act. New Zealand’s most senior corporate executives face no personal consequences for conduct that would send their equivalents in comparable jurisdictions to prison.
Market investigation powers that stop at recommendations
The Commission’s market study power — introduced in 2018 — allows it to investigate entire markets and make recommendations. It cannot impose them. The 2022 grocery market study found the Foodstuffs/Woolworths duopoly was generating excess profits equivalent to “a million dollars a day.” The Commission’s draft report recommended forcing divestiture of sites to establish a third competitor — the most effective structural remedy available. Under industry pressure, the final report retreated from that recommendation entirely. Academic commentators described the outcome as “gutless capitulation to the supermarket duopoly”.
Three years later, the Commission’s own annual grocery report found “no meaningful improvement in the state of competition.” Consumer NZ described the outcome as “a feather, not a stick.” The duopoly remains intact. The Commission had no power to impose the outcome its own analysis showed was necessary.
Compare the UK’s Competition and Markets Authority, which has statutory power under the Enterprise Act 2002 to conduct market investigations and impose binding structural remedies — including divestiture — without court approval. The CMA ordered British Airports Authority to sell both Gatwick and Stansted airports. Its remedies carry force because Parliament gave them force. New Zealand’s equivalent power stops at a published report.
Inadequate penalties and a defunded regulator
The maximum Commerce Act penalty is $10 million per breach or three times the gain from the conduct. For a major fuel importer with hundreds of millions in annual New Zealand revenue, $10 million is a rounding error in the accounts. More significant than the penalty ceiling is the enforcement budget: the Commerce Commission’s total litigation fund stands at $12.6 million — for all of New Zealand, across every sector. That is less than the legal fees budget of a single major merger or cartel defence. As Bertram observed, “the ability of the powerful to intimidate the organs of governmental authority simply by using their monopolistic gains to fund drawn-out, wasteful litigation has to end.”
Budget 2024 made this worse. The Commerce Commission’s budget was cut by over $3 million — specifically reducing “competition studies” and activities on the fuel regulatory regime. The government chose the onset of a global energy crisis to defund the regulator responsible for ensuring energy markets were not being manipulated.
By comparison: the ACCC’s annual budget runs to several hundred million Australian dollars. The UK’s CMA employs over 800 staff. Canada’s Competition Bureau is systematically expanding capacity through successive legislative reforms. New Zealand’s Commerce Commission has approximately 300–350 staff covering competition, fair trading, consumer credit, and multiple sector regulators combined.
Voluntary merger control and creeping acquisitions
New Zealand’s merger control is voluntary — companies may seek clearance but are not required to. The Commission can challenge a completed merger but has no power to prevent parties from closing before a review is complete. The 2024 MBIE review identified “creeping acquisitions” — where a series of individually innocuous acquisitions collectively eliminate competition — as an unaddressed gap. Australia, the UK, and Canada all operate mandatory pre-notification regimes with anti-avoidance provisions and standstill obligations preventing closure during review.
The international comparison
The following table compares New Zealand’s framework against Australia, the United Kingdom, and Canada across ten key dimensions. New Zealand failures are highlighted in red.
Feature | NZ (Commerce Act 1986) | Australia (CCA 2010) | UK (CA 1998 / EA 2002 / DMCC 2024) | Canada (Competition Act, as amended 2022–2024) |
Price gouging / excessive pricing | No prohibition. High prices not illegal under Fair Trading Act. | ACCC price inquiry powers (Part VIIA). Conduct with SLC effect prohibited. | Chapter 2 abuse of dominance explicitly covers exploitative pricing. | Excessive/unfair selling prices by dominant firms: explicit anti-competitive act since 2024. |
Misuse of market power | Section 36 effects test (from 2023). Historically near-unenforceable — no case won 2012–2023. | s.46: purpose, effect or likely effect of SLC. Criminal cartel offence since 2009. | Chapter 2: wide conduct coverage. Dominance assessed with economic rigour. | Abuse of dominance strengthened 2022–2024; excessive pricing expressly included. |
Tacit collusion / concerted practices | Not prohibited. Must prove formal contract or arrangement. | Concerted practices prohibited since 2017 Harper reforms (s.45). | Chapter I covers concerted practices with anticompetitive object or effect. | Non-competitor agreements covering SLC in force December 2024. |
Criminal liability for individuals | No criminal cartel offence for individuals. | Up to 10 years imprisonment for cartel conduct. | Up to 5 years imprisonment under Enterprise Act 2002. | Criminal cartel provisions; wage-fixing / no-poach criminalised 2023. |
Market investigation & structural remedies | Market studies produce recommendations only. No binding structural remedy powers. | ACCC inquiry powers; Federal Court orders. No direct divestiture without court. | CMA can impose binding divestiture without court approval after market investigation. | Competition Tribunal broad remedy powers; new ministerial market study powers (2022). |
Merger control | Voluntary notification only. Creeping acquisitions not addressed. No standstill obligation. | Mandatory notification above thresholds. Anti-avoidance provisions. Standstill obligation. | CMA call-in powers; mandatory notification under DMCC 2024 thresholds. | Mandatory notification. Efficiencies defence repealed. Market share presumption of harm. |
Drip pricing | No specific provision. Only general FTA misleading conduct. | Australian Consumer Law: misleading conduct. Unit Pricing Code mandatory. | DMCC 2024: CMA can fine up to 10% global turnover for consumer protection breaches. | Explicit criminal and civil prohibition since 2022. Cineplex fined $38.9m in 2024. |
Maximum penalty | $10m or 3× gain. Enforcement litigation fund: $12.6m total. | Up to $50m or 30% of Australian annual turnover (2022 reforms). | Up to 10% of global group turnover (DMCC 2024). | Greater of $25m, 3× benefit derived, or 3% of worldwide revenues. |
Private right of action | Very limited. High cost barrier; rarely used. | Private compensation actions available in Federal Court. | Private enforcement at Competition Appeal Tribunal; representative actions. | New private right of action for civil deceptive marketing and competition breaches (June 2025). |
Case studies
Fuel pricing: New Zealand vs Australia, 2026
Both countries have near-identical fuel supply chains — no domestic crude, refined product from South Korea and Singapore, no refinery capacity. Both experienced sharp pump price increases from late February 2026.
Australia’s ACCC opened a formal investigation into whether prices were rising faster than actual supplier costs. The Commission’s counterpart stated: “We are closely watching market behaviour and if there is conduct that is collusive or misleading or deceptive, we will investigate it and take action where appropriate.” Bloomberg reported that competition authorities were actively examining whether prices were running ahead of costs.
In New Zealand, the Commerce Commission issued warnings, encouraged people to use the Gaspy app, and suspended its own importer margin reporting mechanism at the peak of the crisis. It had no other tools available to it.
Supermarkets: New Zealand vs the UK
In the UK, the CMA’s groceries market investigation resulted in a binding Groceries Supply Code of Practice, directly enforceable with an independent adjudicator empowered to fine retailers up to 1% of UK grocery turnover for breaches. The 2024 DMCC Act further strengthened CMA consumer protection powers to impose fines of up to 10% of global turnover.
In New Zealand, the 2022 grocery market study found the duopoly was earning returns more than double those the Commission considers competitive. Three years later, the Commission’s own annual report found no meaningful improvement. It had recommended change. It could not compel it.
Drip pricing: Canada vs New Zealand
Canada’s Competition Bureau prosecuted Cineplex in 2024 for adding a mandatory booking fee only late in the online ticket purchase process. The Competition Tribunal ordered Cineplex to pay a $38.9 million penalty — the full revenue derived from the conduct. This was possible because Canada specifically legislated against drip pricing in 2022 under both criminal and civil provisions, with disgorgement of the entire benefit as the available remedy.
In New Zealand, drip pricing is addressed only under the Fair Trading Act’s general misleading conduct provisions. No specific provision exists. Maximum penalties bear no relationship to the scale of benefit derived. Companies have a structural incentive to engage in the conduct and settle any eventual complaint for a fraction of what they made from it.
Eight reforms New Zealand must make
The following reforms are necessary to bring New Zealand’s competition law into line with comparable jurisdictions. They are given legislative effect in the companion Commerce (Competition and Consumer Protection Amendment) Bill 2026.
An explicit prohibition on excessive and unfair pricing by dominant firms, with emergency price monitoring and court-ordered price control powers — drawing on Canada’s 2024 amendments and the UK’s Chapter 2 framework.
A prohibition on anti-competitive concerted practices without formal agreement — closing the tacit collusion gap and aligning with Australia (2017), the UK (1998), and Canada (2024).
A criminal cartel offence with a maximum seven-year sentence for individuals who participate in price-fixing, bid-rigging, market allocation, or output restriction.
Binding market investigation powers allowing the Commission to impose enforceable structural remedies including divestiture, without requiring subsequent court proceedings — modelled on the UK CMA’s Enterprise Act 2002 powers.
Mandatory pre-merger notification above defined thresholds, with a standstill obligation, anti-avoidance
provisions, and market share presumptions of competitive harm — removing the efficiencies defence for anti-competitive mergers.
An explicit drip pricing prohibition under both the Fair Trading Act (civil) and Commerce Act (criminal), with a disgorgement remedy allowing courts to order payment of the full benefit derived from the conduct.
Increased maximum civil penalties to the greater of $50 million, three times the benefit, or 10% of annual New Zealand revenue — and a statutory enforcement funding floor set at no less than 0.012% of nominal GDP, indexed to inflation, which cannot be cut by any government.
A private right of action allowing consumer groups and small businesses to bring proceedings before the High Court for competition law breaches, with class action and representative action mechanisms.
