Corporate Reporter - February 2021 by bell-gully

CORPORATE REPORTER 19 February 2021

ITEMS IN THIS ISSUE INCLUDE:

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Supporting regulations for the new financial advice regime in place

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New overseas investor test comes into effect in March

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RBNZ consults on reforms for IPSA

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Recent FMA consultations

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New Privacy Act and Trusts Act in force

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COVID-19 relief measures extended

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Climate Change Commission consults on its first draft advice

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Changes ahead for trade agreements with China and the UK

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Further measures in place for the October 2021 changes to the consumer credit contract regime

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The latest media releases from the New Zealand Commerce Commission and the Australian Competition and Consumer Commission

WELCOME to issue No.66 of Corporate Reporter, Bell Gully’s regular round-up of corporate and general commercial matters, designed to keep you informed on regulatory developments, legislation and cases of interest. For more information on any of the cases, articles and features in Corporate Reporter, please email diane.graham@bellgully.com or call on +64 9 916 8849

C ON TE N TS

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CONTENTS Capital Markets

PAGE

Further legislative changes made to support the new financial advice regime Next steps for the conduct and culture regulation regime Supporting regulations for the licensing of administrators of financial benchmarks Update on the Reserve Bank of New Zealand reforms Reserve Bank consults on reforms for IPSA FMA consults on proposed guidance for advertising offers of financial products FMA consults on the wholesale investor class exemption notice Complying with the FMC Act prohibition on the notice of trusts on product registers FMA releases its targeted review of NZX’s technology capability Report shows audit quality continues to improve New guidance on ‘green’ and ‘responsible’ investment products 2020 FMA Annual Report NZX has a new regulatory model New Trusts Act now in force

Mergers & Acquisitions

Commerce Commission releases updated Authorisation Guidelines New overseas investor test comes into effect in March Temporary Overseas Investment Office notification regime due for review

Commercial

Privacy Act 2020 in force New COVID-19 resurgence support payments scheme New Zealand and China upgrade their FTA UK makes moves to join the CPTPP Climate Change Commission consults on first draft advice to the government Fine-tuning required for new NZ ETS auctions UK Supreme Court hands down judgment on COVID-19 UK business interruption insurance test case Uber delivers another lesson in online terms

Corporate Law

UK Supreme court offers insight to parent company liability Temporary business debt hibernation scheme extended COVID-19 related corporate relief measures extended

Competition and Consumer Law

Further measures for the upcoming changes to the consumer credit regime Court of Appeal sentences company for misleading and deceptive conduct Consultation on draft cartel leniency and immunity policy Investigation underway into the retail grocery sector The latest media releases from the New Zealand Commerce Commission The latest media releases from the Australian Competition and Consumer Commission.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any further action in relation to the matters dealt with in this publication. All rights reserved © Bell Gully 2021.

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Further legislative changes made to support the new financial advice regime After extensive delays, the new financial advice regime starts on 15 March 2021. A further series of regulations are now in place to support the operation of the regime.

What does the new regime change? Under the new regime the Financial Advisers Act 2008 (FAA) will be repealed and, in its place, financial advice will be regulated by the Financial Markets Conduct Act 2013 (FMC Act), as amended by the Financial Services Legislation Amendment Act 2019 (FSLA Act). The key changes include the following: • Requirement for providers of financial advice to be licensed: From 15 March, anyone providing financial advice to retail clients (including robo-advice) must be licensed by the FMA under Part 6 of the FMC Act as a “financial advice provider” (FAP), or be engaged by one. This applies irrespective of whether the adviser provides “personalised” or “class” advice, and irrespective of the type of financial product. However, a licence is not required for firms or individuals who only provide advice to wholesale clients. Licensing is at the firm level, and the FMA can impose conditions under a licence restricting the type of financial advice a FAP can provide. A licensed FAP can also have “authorised bodies” (such as a company or partnership) operating under its licence. There are two phases of licensing under the regime. A transitional licence (available prior to the start of the regime) is valid for up to two years and, along with a transitional competency safe harbour, enables advisers to continue providing the advice they were legally able to provide before 15 March 2021. Full licence applications open on 15 March 2021. All FAPs must have a full licence by 15 March 2023. • New adviser designations: The terms ‘AFAs’, ‘registered financial advisers’, ‘QFEs’ and ‘QFE advisers’ have been replaced with the concepts of a ‘financial advice provider’ (or ‘FAP’) and two classes of individual adviser; ‘financial adviser’ and ‘nominated representative’, who will need to be engaged by a licensed FAP. A financial adviser must be registered on the Financial Service Providers Register (FSPR) individually, and will be responsible for complying with conduct and disclosure obligations. A nominated representative, who will have less discretion than financial advisers, will not need to register and will not be individually accountable (except in limited circumstances). As at 9 February 2021, the FMA reported that it had licensed or authorised 1,467 FAPs and 774 authorised bodies, representing an estimated 9,612 financial advisers and 11,987 nominated representatives. • Modification and simplification of financial product categories and advice types: Unlike the FAA, the FSLA Act is technology-neutral. The requirement for tailored advice to be given by a natural person has been removed to help future-proof the regime for technological developments. The distinctions drawn between ‘class’ and ‘personalised’ advice, and ‘category 1 products’ versus ‘category 2 products’, have also been removed, making it easier for those giving advice to tailor the advice to the client. • New code of conduct: Anyone providing financial advice to a retail client must meet standards of competence, knowledge and skill provided in a new Code of Professional Conduct for Financial Advice Services, as well as any prescribed eligibility requirements for giving the advice. While similar requirements exist under the FAA, they only apply to AFAs who are a small subset of those who give advice. • Additional conduct and disclosure duties: The regime includes new duties to ensure that advisers: -

prioritise the interests of their client if there is a conflict between the interests of the client and the interests of the adviser or any ‘associated person’ of the adviser,

take reasonable steps to ensure retail clients understand the nature and scope of the advice being given, including any limitations on the nature and scope of that advice, and

disclose core information at the time most relevant to their clients’ decision making.

• Oversight role for financial advice providers: FAPs that engage financial advisers and nominated representatives are responsible for ensuring that those advisers comply with their duties. FAPs that engage nominated representatives must also ensure that they have in place effective processes, controls and limitations relating to the advice that may be given by nominated representatives, and do not offer

CO R PO RA TE R E PO RTE R any incentives that would encourage a nominated representative to engage in conduct that would contravene a duty. • Compliance and enforcement: FAPs will be subject to the FMC Act's compliance and enforcement tools such as civil pecuniary penalties for various breaches, and will be subject to licensing actions such as censure and the imposition of action plans.

Supporting regulations A number of supporting regulations are required to give full effect to the FSLA Act, the majority of which are now in place. The table below provides a brief overview of those regulations. Links to new regulations

Amended regulations

Overview of key provisions

Financial Markets Conduct Amendment Regulations 2020

Financial Markets Conduct Regulations 2014

• Replaces terminology in the FMC Regulations from the FAA and the references to financial advisers with references to FAPs • Prescribes eligibility criteria for an entity that wants to be an authorised body under a licence that covers a financial advice service • Prescribes circumstances in which financial advice is not regulated under the new regime • Prescribes requirements for providers of custodial services that relate to financial products. These requirements include duties to provide information to clients, to reconcile records of client money and property, and to obtain assurance engagements • Clarifies when assurance reports for assurance engagements must be obtained by custodians • Clarifies that a custodian that holds scheme property under sections 156 to 160 of the FMC Act is not providing a regulated client money or property service • Prescribes limited circumstances in which a provider of a client money or property service is not required to hold client money and property separate from firm money or property to reflect the effect of existing FMA exemptions (namely, the Financial Advisers (NZX Brokers—Client Money and Client Property) Exemption Notice 2020 and the Financial Advisers (Non-NZX Brokers—Client Money) Exemption Notice 2017) which will be repealed) • Enables FAPs to provide contingency discretionary investment management services (DIMS) without being subject to DIMS licensing requirements • Provides for transitional arrangements that include: o continuing duties imposed by or under the FAA for former authorised financial advisers and qualifying financial entities to retain records o allowing existing exemptions for the temporary management of investment portfolios by financial advisers to continue

Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019

• Provides a new exemption from the licensing requirement for financial advice services. The exemption relates to advice given concerning offers of interests in a foreign passport fund.

Financial Markets Conduct (Unlisted

• Replaces references to approved broker with “approved provider” (as defined in the regulations)

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Links to new regulations

Amended regulations

Overview of key provisions

Market) Regulations 2015 Financial Markets Conduct (Regulated Financial Advice Disclosure) Amendment Regulations 2020

Financial Markets Conduct Regulations 2014

• Prescribes the information that must be provided to retail clients at each of the following stages: o public disclosure on an internet site maintained by or on behalf of the FAP to give retail clients access to information that will help them to find a FAP that meets their needs o disclosure when the nature and scope of the advice a client is seeking becomes known to give retail clients information that will help them make an informed decision about whether to seek advice from a particular person or FAP o disclosure when advice is given to give retail clients information that will help them make an informed decision about whether to act on advice that they have been given o if a complaint is received to provide clients with information regarding their complaints handling processes and dispute resolution arrangements

Financial Service Providers (Exemptions) Amendment Regulations 2020

Financial Service Providers (Exemptions) Regulations 2010

• Revokes an exemption for entities that provide financial adviser or broking services, where there is only one adviser, from being registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSP Act) • Continues an exemption (with some amendments) for a member of an angel organisation in respect of financial advice services provided to other members of angel organisations The regulations also add the following new exemptions: • an exemption for financial service providers who have no place of business in New Zealand and who do not promote their services to persons in New Zealand. The exemption does not apply if the provider is required to be registered by an Act other than the FSP Act. • an exemption for Australian offerors in respect of offers made under the arrangements between Australia and New Zealand for the mutual recognition of securities offerings

Financial Service Providers (Registration) Regulations 2020

Financial Service Providers (Registration) Regulations 2010

• Revokes and replaces the 2010 regulations • Prescribes various matters relating to registration under the FSP Act (which are substantially the same as under the 2010 regulations), including: o information to be provided when applying for registration o information to be contained in the register o circumstances in which access to the register may be refused or its operation suspended o information to be contained in an annual confirmation o circumstances in which the register must be amended • Prescribes new regulations relating to: o circumstances in which registration for certain overlapping services is not required o information that the Registrar may require a person to provide o a threshold for providing certain financial services to persons in New Zealand o a requirement for providers to give a warning about a lack of active regulation in certain circumstances 5

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Links to new regulations

Amended regulations

Overview of key provisions

Financial Markets Conduct (Fees) Amendment Regulations 2020

Financial Markets Conduct (Fees) Regulations 2014

• Amends the fee for an application for a market services licence to cover acting as a provider of a financial advice service. The amount of the fee depends on whether the service is within certain categories. • Expands category 2 to cover a FAP that is an entity that engages only one financial adviser if— o the financial adviser is not a director of the entity, or o the FAP has more than two directors

Financial Markets Authority (Levies) Amendment Regulations (No 2) 2020

Financial Markets Authority (Levies) Regulations 2012

• Changes the way levies are calculated for managers of registered schemes and providers of discretionary investment management services. The levy that a market service licence holder pays is now based on the total service provided under the licence (whether the service is provided by the licence holder itself or by an authorised body) • Authorised bodies that provide services under a licence will pay a new levy under new class 6F in Schedule 2 of the 2012 regulations. That levy applies instead of paying a levy under other classes as a provider of a service • New levies are added for financial advisers and licensed financial advice providers • Sets out the increases in levies that come into force on 1 July 2021 and 1 July 2022

Non-bank Deposit Takers (Declared-out Entities) Amendment Regulations 2020

Non-bank Deposit Takers (Declaredout Entities) Regulations 2015

• Replaces the definition of call debt security to refer to the definition in the FMC Act, rather than the FAA

Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Amendment Regulations 2020

Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Regulations 2011

• Declares certain financial advice providers to be reporting entities for the purposes of the AML/CFT regime

Fair Trading (Uninvited Direct Sales—Financial Products) Amendment Regulations 2020

Fair Trading (Uninvited Direct Sales—Financial Products) Regulations 2014

• Amends the existing exemption on financial advice, which will now apply to agreements for the issue or sale of financial products that result from offers through FAPs that are acting in the ordinary course of business

Financial Markets Conduct (Shares in Investment Companies) Designation Amendment Notice 2020

Financial Markets Conduct (Shares in Investment Companies) Designation Notice 2017

• Replaces the definition of financial advice in the 2017 notice, with the definition in section 431C of the FMC Act

Financial Markets Conduct (Overseas

• Amends the definition of simple debt products to update a cross-reference to the definition of call debt securities in the

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Links to new regulations

Amended regulations

Banks Offering Simple Debt Products) Exemption Amendment Notice 2020

Banks Offering Simple Debt Products) Exemption Notice 2016

Overview of key provisions

FAA. From 15 March 2021, the FMC Regulations will contain a definition of call debt security.

Exemption support The FMA has also continued relief provided under the FAA regime to certain Australian financial services licensees and overseas custodians. Under the Financial Markets Conduct (Australian Licensees) Exemption Notice 2020: • Australian licensees are not required to hold a New Zealand market services licence to act as a provider of financial advice services, • Australian licensees’ representatives are not subject to the restrictions on who can give regulated financial advice to retail clients on behalf of a FAP in relation to providing financial advice services, and • Australian licensees and their representatives are exempt from: o the duty to meet standards of competence, knowledge, and skill provided in the new code of conduct, o the duty to comply with the other standards in the code of conduct, and o the duty to make prescribed information available. The exemptions relate to providing financial advice services to New Zealand retail clients from offshore (where there is no solicitation or inducement of those clients by the Australian licensees or their representatives), and are subject to a number of conditions. This includes a requirement to give a disclosure statement to a retail client in New Zealand before any financial advice services are provided to the client. Australian licensees are also required to be registered on the FSPR and to be members of a New Zealand dispute resolution scheme. The exemptions under the notice do not apply to regulated financial advice that is given to a retail client in New Zealand through a digital advice facility. The Financial Markets Conduct (Overseas Providers of Custodial Services – Assurance Engagement) Exemption Notice 2020 exempts certain overseas providers of custodial services from getting an assurance engagement with a New Zealand auditor that complies with requirements in the amended FMC Regulations. Assurance engagements can instead be obtained with auditors in certain overseas jurisdictions and comply with overseas requirements. Both of these notices will come into effect on 15 March 2021 along with the new financial advice regime.

Next steps for the conduct and culture regulation regime The Financial Markets (Conduct of Institutions) Amendment Bill (COFI) is awaiting its second reading. The COFI proposes a new conduct and culture regime for banks, insurers, non-bank deposit takers, and some intermediaries. For more detail on the regime and how financial service providers can best prepare, see our publication The Big Picture: Financial Markets – Greater detail on the conduct regulation regime. The FMA is currently working closely with MBIE on developing the regulations needed to support the Bill. Industry feedback on COFI has identified concern regarding the absence of prescriptive guidance on the requirements of the new conduct regime. It remains to be seen whether the parliamentary process addresses these concerns. In the meantime, the FMA has said that it plans to publish a refresh of its Guide to Good Conduct in the first quarter of 2021.

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Supporting regulations for the licensing of administrators of financial benchmarks All remaining provisions of the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 come into force on 14 March 2021. This includes amendments to the FMC Act that establish a new licensing regime for administrators of financial benchmarks. This regulatory regime is intended to align New Zealand with recent EU financial markets reforms. The FMA anticipates that the New Zealand Financial Markets Association, administrator of the Bank Bill Benchmark Rate (the main interest rate benchmark in New Zealand) will be the only administrator seeking a license. The Financial Markets Conduct (Licensing of Administrators of Financial Benchmarks) Amendment Regulations 2020 amend the Financial Markets Conduct Regulations 2014 to provide for: • additional eligibility criteria that administrators must meet in order to be eligible for a market services licence, and • additional conditions that apply to a market services licence for the service of acting as an administrator

of a financial benchmark.

Update on the Reserve Bank of New Zealand reforms Submissions have closed on the Reserve Bank of New Zealand Bill, which is now before the Finance and Expenditure Committee. The committee is required to report back to Parliament by 8 June 2021. The written submissions on the Bill have been published here. The Bill is the first part of the Phase 2 reforms arising from the review of the Reserve Bank of New Zealand Act 1989 to be legislated. The focus of the Bill is on reforming the overall governance and accountability arrangements of the Reserve Bank while retaining the Phase 1 reforms made through the Reserve Bank of New Zealand (Monetary Policy) Amendment Act 2018, which introduced maximum sustainable employment as an objective of monetary policy alongside price stability, and created the monetary policy committee. The Bill repeals and replaces the parts of the 1989 Act that provide for the institutional form, governance and accountability arrangements, and central bank powers of the Reserve Bank. The remainder of the 1989 Act, which creates a framework for the registration and supervision of banks, remains in force but will be renamed the Banking (Prudential Supervision) Act 1989. RBNZ expects the Bill to pass through its remaining stages to receive Royal Assent this year, becoming effective from 1 July 2022. RBNZ is also working with Treasury to progress the Deposit Takers Act. Consultation closed in October 2020 and it is anticipated that Cabinet will make final policy decisions in the second quarter of 2021, with legislative drafting to follow. The Deposit Takers Act is expected to combine the regulation of banks and non-bank deposit takers under the same overall regime by: • providing the Reserve Bank, as the regulator, with new supervision and enforcement tools, • imposing statutory accountability duties upon directors, and • introducing crisis management mechanisms to protect vulnerable depositors and resolve deposit taker failures.

Reserve Bank consults on reforms for IPSA The Reserve Bank released two consultation papers as part of its review of the Insurance (Prudential Supervision) Act 2010 (IPSA). The first is an Options Paper concerning the scope of IPSA and the regulatory regime for overseas insurers. The second is a consultation paper which explores the minimum solvency capital requirements for insurers. Submissions received on this paper will inform the development of interim solvency standards later in 2021. The consultation on the Options Paper is the first in a planned series of five consultations on specific options for reforming IPSA, which will take place over the next two years. The submissions for this paper

CO R PO RA TE R E PO RTE R were originally due on 18 February 2021, but the consultation has been extended for a further month and will now end on 19 March 2021. The feedback from these consultations will be factored into the Reserve Bank's final policy decisions on any legislative changes, alongside the findings of recent external reports, such as the 2016 IMF review of New Zealand's insurance sector and John Trowbridge and Mary Scholtens QC's review of the supervision of CBL Insurance. New legislation is expected in 2023-2024. For further details, see our earlier update here.

FMA consults on proposed guidance for advertising offers of financial products The proposed guidance is applicable to all advertising and promotion of offers of financial products, including advertising relating to offers subject to an exclusion in Schedule 1 of the Financial Markets Conduct Act 2013 (the FMC Act), and including all financial product types. The guidance focuses on the specific application of the fair dealing provisions of the FMC Act, advertising standards and guidelines, and enforcement. It also consolidates much of the case law that has been developed by the courts around misleading and deceptive conduct, and in misrepresentation cases. If issued, we expect it will be a helpful resource for market participants when determining whether advertising contravenes the fair dealing provisions of the FMC Act. Much of the information expressed in the guidance is also noted as being applicable to the advertising of financial services. We highlighted some of the key points from the guidance in an earlier client update here.

FMA consults on the wholesale investor class exemption notice The FMA is consulting on the Financial Markets Conduct (Wholesale Investor Exclusion - $750,000 Minimum Investment) Exemption Notice 2017 with a view to rolling it over in February 2022 if market participants confirm that the relief is still warranted. The 2017 notice modifies the conditions applicable to the statutory disclosure exclusion in clause 3(3)(b) of Schedule 1 of the FMC Act that applies to wholesale investors where the minimum investment is at least $750,000. It: • exempts offerors of Kauri bonds from both warning and investor acknowledgement requirements (without conditions), and • exempts offerors of other unsubordinated debt securities from the investor acknowledgement requirement provided they include a warning statement only in the principal terms sheet (which must be given to the investor). The FMA is interested in feedback on how the exemptions in the notice are being used, whether the exemptions have been effective in removing unnecessary compliance costs, and whether any amendments are needed to the notice if it is renewed. Submissions close on 26 February 2021.

Complying with the FMC Act prohibition on the notice of trusts on product registers The FMA has released an information sheet explaining its expectations on compliance with the FMC Act’s requirement for issuers to keep a register of regulated products (product register), and the prohibition on the notice of trusts being entered on those registers. The advice has been issued following uncertainty over the extent the prohibition in the FMC Act applies to trusts named on registry systems built before the FMC Act register requirements came into force, given the high costs involved in updating existing systems. The Information Sheet proposes a number of solutions. In particular, the FMA confirms that a market participant would not be in breach of the prohibition when existing operational registry systems continue to have trusts named, if that market participant:

CO R PO RA TE R E PO RTE R • keeps a separate product register that is subject to the annual register audit under section 218 of the FMC Act, and • that register meets all the register requirements under Part 4 of the Act, including the prohibition.

FMA releases its targeted review of NZX’s technology capability The NZX is required to develop a formal action plan to address a number of issues identified in the FMA’s recent review of NZX’s technology resources. Overall, the FMA review found NZX did not have adequate technology capability across its people, processes and platform to comply with market operator obligations and especially in the context of its systemic importance. The report on the review includes discussion on the recent Distributed Denial of Service attacks on NZX. The FMA will report on NZX’s progress in the annual NZX Obligations Review, to be released in June 2021.

Report shows audit quality continues to improve The FMA has released its 2020 Audit Quality Monitoring Report. The annual review scrutinises selected audit files for listed companies and other entities that report under the FMC Act. The FMA review also checks progress against action plans provided by audit firms from previous reviews.

New guidance on ‘green’ and ‘responsible’ investment products The FMA has released guidance on financial products that incorporate non-financial factors, such as ‘green’ bonds and ‘socially responsible’ managed funds. The guidance sets out how 'fair dealing' provisions in the FMC Act apply to integrated financial products, the type of disclosure the FMA expects from issuers of such products, and the FMA’s enforcement options in this area The FMA has also updated its information sheet 'Green bonds – same class exclusion' to clarify the application of same class exclusion for vanilla bonds that have undergone a 'greening' process.

2020 FMA Annual Report The report highlights key work for the year ended 30 June 2020, including the FMA’s response to the COVID-19 crisis, a range of enforcement activity and preparing for expansions to its remit.

NZX has a new regulatory model NZX’s new regulatory arm – NZ RegCo – began operations on 10 December 2020. This also marked the end of NZX Regulation, with resulting changes required to be made to NZX’s market rules and the NZCDC settlement system rules. The NZX Board has adopted a new regulatory operating and governance model, under which the Exchange's commercial and regulatory roles have been structurally separated. The NZ RegCo model was shaped from a full review of NZX’s regulatory operating model completed in 2019, which was prompted by the increasing complexity of governance arrangements. The latest version of the NZX Listing Rules (10 December 2020) are available here Various NZX Guidance Notes and NZX’s 25 Practice Notes have also been updated for the new regulatory body.

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New Trusts Act now in force New Zealand's new Trusts Act came into force on 30 January 2021. The Trusts Act 2019 restates and reforms New Zealand's trust laws by setting out core principles and trustees' duties, and providing mechanisms to resolve disputes. The Act applies to all express trusts governed by New Zealand law, which encompasses trusts used in a broad range of commercial transactions, including trading trusts, commercial trusts and security trusts, as well as retail and wholesale investment funds, securitisation trusts, bond trusts and other trusts used in capital markets transactions. Among other duties and obligations on trustees, the Act specifies mandatory duties, which can't be modified or excluded, and default duties, which can be. There are two schedules to the Act that specify which duties may be modified or excluded. Specified commercial trusts The Act recognises the use of trust structures in commercial contexts by establishing the concept of a ‘specified commercial trust’. These include qualifying: • commercial/trading trusts, • wholesale investment trusts (including securitisation trusts), and • security trusts.

Existing specified commercial trusts The Act automatically dis-applies some of the duties in relation to specified commercial trusts created before 30 January in Schedule 3. For all other duties that can be modified or excluded, this can be done expressly or impliedly by parties. New specified commercial trusts With respect to specified commercial trusts created after 30 January 2021, our expectation is that wholesale exclusion of those provisions that can be modified or excluded will become industry standard. This is consistent with current market practice which is moving towards the development of standard provisions to affect modifications and exclusions. In addition, because the Act specifically prohibits trustees from being indemnified for dishonesty (as well as wilful misconduct) we are also seeing dishonesty being added to the exclusions from indemnities in trust deeds. Additional exclusions for trusts relating to portfolio investment entity (PIE) call fund units and PIE term fund units The Financial Markets Conduct Amendment Regulations 2020 also provide for certain provisions of the Trusts Act 2019 to not apply to trusts relating to PIE call fund units and PIE term fund units. These trusts are instead subject to governance requirements under clause 28 of Schedule 8 of the Financial Markets Conduct Regulations 2014. For more information on the new legislation, read our toolkit for trustees The Big Picture: New Rules for Trusts.

Commerce Commission releases updated Authorisation Guidelines At the end of last year the Commerce Commission released its updated Authorisation Guidelines that explain the Commission’s approach to assessing applications to authorise agreements or mergers in the public interest. The revised Guidelines include some process changes and further clarify the Commission's approach to assessing when benefits and detriments are likely to arise. The revisions also recognise the Court of Appeal's comments in NZME v Commerce Commission, confirming that it is open to the Commission to adopt a modified total welfare approach in its analysis of public benefits. The revised section 58 authorisation application form and section 67 authorisation form reflect the same developments in the Commission's approach. 11

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New overseas investor test comes into effect in March The Overseas Investment (Urgent Measures) Amendment Act Commencement Order 2021 brings the new “investor test”, introduced as part of a range of measures in the Overseas Investment (Urgent Measures) Amendment Act 2020, into effect on 22 March 2021. The purpose of the new investor test is to determine whether investors are “unsuitable” to own or control any sensitive New Zealand assets, by assessing whether they are likely to pose risks to New Zealand against 12 prescribed character and capability factors. Investors “pass” the new test when none of the 12 factors are established or, if a factor is met, the decision-maker is satisfied that this does not make an investor “unsuitable” to own or control a sensitive New Zealand asset. The new test is a welcome move given the current open-ended regime often results in the Overseas Investment Office and investors spending a significant amount of time identifying and considering irrelevant matters and unsubstantiated allegations. This results in disproportionate compliance costs, particularly in large, corporate transactions. However, a few aspects of the new investor test could still cause investors some unnecessary difficulties. For details on the new investor test see our article here.

Temporary Overseas Investment Office notification regime due for review The temporary emergency notification regime in the Overseas Investment Act 2005 (OIA) is up for review by 24 February 2021. Since 16 June 2020, overseas investors have needed to notify the Overseas Investment Office (OIO) of most acquisitions of New Zealand business assets or shares (directly or indirectly) that are not already subject to screening under the OIA, irrespective of the value of the transaction. In particular, an overseas person must notify any transactions that result in the overseas person: • acquiring an interest in a New Zealand business of more than 25%, • increasing an existing interest up to or beyond (as applicable) the thresholds of 50%, 75% or 100%, or • acquiring more than 25% of the value of the seller's New Zealand business assets (where the transaction is an asset acquisition, rather than an acquisition of securities). Where notification is required under the temporary emergency notification regime, the relevant minister will assess whether the proposed transaction is in New Zealand's national interest, which can include consideration of whether: • the target is in financial distress, and • the value attached to the target is fundamentally lower than would be the case absent the COVID-19 pandemic. Ministers are required to review the temporary emergency notification regime at intervals of no more than 90 days to assess whether the effects of the COVID-19 pandemic justify the regime remaining in force. The last review was in November 2020. Once ministers are satisfied that the notification regime should no longer remain in force, it will be replaced by a narrower national security and public order 'call-in' regime. This will only apply to investments in strategically important businesses, such as military technology and critical national infrastructure that do not normally require consent under the OIA. What has been happening? While it has been an additional burden for investors to have to notify their transaction to the OIO under the emergency notification regime, with rare exceptions, this requirement has had no adverse impact on transaction timing. As of 6 December 2020, overseas investors had lodged 250 emergency pathway notifications; only 23 of which were either rejected or withdrawn and six were called in by the relevant minister.

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Privacy Act 2020 in force The long-awaited Privacy Act 2020 came into force on 1 December 2020. The updates in the new Privacy Act are intended to reflect changes in technology and the ways in which personal information is collected, stored and shared. The three key changes that you should be aware of are: • It is now mandatory to notify the Privacy Commissioner and affected individuals of a privacy breach that is likely to cause serious harm. Failure to notify the Privacy Commissioner of a notifiable privacy breach, without reasonable excuse, is an offence with a fine of up to NZ$10,000. • The new Privacy Act introduces a new Information Privacy Principle 12, which provides stronger protections for the transfer of personal information outside New Zealand to a foreign person or entity (other than a foreign person or entity that is an agent, such as a service provider). • Businesses located outside New Zealand should be aware that the Privacy Act now applies to any action that it takes, in respect of personal information, in the course of “carrying on business in New Zealand". This means that the Privacy Act 2020 is likely to apply to platforms that target New Zealand customers, even if they do not have premises or employees here. Please refer to Bell Gully's Guide to the Privacy Act 2020 for a list of all changes in the Privacy Act 2020.

New COVID-19 resurgence support payments scheme The Government has introduced a new scheme as part of its suite of support packages to assist with the Government’s response to COVID-19. The scheme is being established under the Taxation (COVID-19 Resurgence Support Payments and Other Matters) Bill and will be administered by Inland Revenue. The new COVID-19 resurgence support payments (CRSP) scheme will provide financial support to businesses in the event of alert level escalations following further outbreaks of COVID-19 in the community. When is it triggered? The scheme can be activated in the event of an increase in alert levels from Alert Level 1 to Alert Level 2 or higher, and after remaining at an alert level higher than Alert Level 1 for seven days or more. Who is eligible? The scheme will be available to all businesses in New Zealand each time it activates. The scheme will not be restricted to a particular region even in the event of a regional increase in alert levels. This acknowledges that even a regional public health restriction may impact businesses across New Zealand. To be eligible for the grant, applicants must have suffered a decline in revenue of 30% or more. This is calculated by comparing a seven-day period at Alert Level 2 or higher with a typical weekly revenue in the six weeks preceding the move from Alert Level 1. In addition, applicants must have been in business for at least six months. What relief is available? The CRSP scheme introduces a one-off support payment to businesses in the form of a grant. The payment will comprise a base amount of $1,500 per applicant plus $400 per full-time equivalent (FTE) up to a cap of 50 FTEs. Although the payment is capped at 50 FTEs, businesses with more than 50 FTEs may still apply. The amount an applicant may receive under the scheme is further capped by the amount their revenue has declined by. The amount an applicant may therefore receive will be the lower of the amount calculated using the formula ($1,500 plus $400 per FTE), and four times the amount their revenue has declined by as declared by the applicant as part of their application.

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New Zealand and China upgrade their FTA Trade Minister Damien O’Connor and Chinese Commerce Minister Wang Wentao signed an upgrade to the free-trade agreement between New Zealand and China (FTA) in a virtual signing ceremony on 26 January 2020. The upgrade improves upon the FTA’s existing commitments and adds to the 2008 Agreement in a number of areas. In a press statement, O’Connor said key outcomes from the upgrade included: • New rules to make exporting to China easier and to reduce compliance costs. This includes simplifying documentation requirements and appointing dedicated contacts for New Zealand businesses at key Chinese ports. • Expanded market access for services exporters to China and most-favoured nation commitments to protect their competitive advantage in the future. • The introduction of commitments, including one to not lower environmental standards for a trade or investment advantage, while ensuring that environmental standards are not used as trade protectionist measures. • Further improvements to New Zealand's goods market access into China, through tariff elimination on a dozen additional wood and paper products worth NZ$35 million in trade to China. Existing conditions for dairy exports also have been maintained, which means by 2024 all dairy exports to China will be tariff free. The FTA upgrade now goes to Parliament where it will be considered (along with legislation required to implement the upgrade), and ratified before coming into effect. Full details on the FTA are available here.

UK makes moves to join the CPTPP New Zealand’s Trade and Export Growth Minister, Damien O’Connor, has welcomed the United Kingdom’s intention to accede to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). The United Kingdom presented a letter to New Zealand on 1 February 2021, as Depositary for the CPTPP, formally expressing its interest in joining the 11-member trade agreement involving New Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, and Viet Nam. Before formally applying, the UK engaged with all 11 countries at both ministerial and official level to explore UK accession to CPTPP. Under the CPTPP accession process rules, the next step will be for the CPTPP Commission to determine whether to commence the accession process. If agreement is reached, the Commission will establish a working group to negotiate the UK’s accession to the CPTPP. The UK Government has issued a public statement setting out its next steps towards accession, and outlining in detail why it aims to join the CPTPP. The statement notes that the UK’s CPTPP membership would complement the bilateral FTA it is currently negotiating with New Zealand.

Climate Change Commission consults on first draft advice to the government The Climate Change Commission is consulting on a draft of its first package of advice to government on the actions it must take to reach net-zero emissions for long-lived gases by 2050, as outlined in the Climate Change Response (Zero Carbon) Amendment Act 2019. Specifically, this advice report is made up of: • The proposed first three emissions budgets and guidance on the first emissions reduction plan, advising the government on how the emissions budgets could be met. • A review that finds the first Nationally Determined Contribution for New Zealand is not compatible with the country’s responsibilities under the Paris Agreement to contribute to global efforts to limit warming to 1.5°C above pre-industrial level. The Commission was also asked by the Minister for Climate Change to provide advice on the eventual reductions needed in biogenic methane emissions by 2100. This advice is provided in Part B of the report. 14

CO R PO RA TE R E PO RTE R An evidence report accompanies the Commission’s draft advice report. This sets out the detailed evidence that the Commission has drawn upon to support the development of its recommendations and advice, and has been released to support and facilitate informed feedback on the draft advice report. Following consultation, the Commission will incorporate submissions before finalising its proposals and presenting them to the government by 31 May this year. The government then has until 31 December to decide whether to accept the recommendations. If you would like to make a submission, you can do so here through responding to a survey or making a separate written submission. Submissions close on 14 March 2021.

Fine-tuning required for new NZ ETS auctions The Climate Change Response (Auction Price) Amendment Bill is being considered by Parliament under a tight timeframe in order to ensure that the changes it introduces are in place for the first New Zealand Emissions Trading Scheme (NZ ETS) auction on 17 March 2021. The auctioning of New Zealand units (NZUs) is part of the practical implementation of the Climate Change Response (Emission Trading Reform) Amendment Act, which passed in June 2020. Auctions have been introduced to align the supply of emissions units in the NZ ETS with New Zealand's emission reduction target and five-yearly budgets, with the intent of reducing supply over time to meet budgeted levels. Although the fixed price option of NZ$35 in lieu of a NZU can be used to meet surrender obligations up to 31 May 2021 for the 2020 compliance year, auctioning and secondary trading of units will be the primary means for participants to purchase units to meet their surrender obligations after that date. The Bill amends the Climate Change Response Act 2002 and the Climate Change (Auctions, Limits, and Price Controls for Units) Regulations 2020 to introduce a mechanism for NZUs to be held back from sale if, at the end of the auction, the clearing price for a unit is lower than what is known as "a confidential reserve price". The confidential reserve price will be based on the secondary market price for NZUs, in addition to the two existing auction price controls. In practice, the confidential reserve price only applies to auctions whose clearing price is between the price controls already set by the regulations, because it only applies to auctions that are operating in normal circumstances. Therefore, the confidential reserve price will never be higher than the lowest cost containment reserve trigger price for the auction (set at NZ$50 for 2021). It is expected that the confidential reserve price would ensure the primary auction does not significantly influence prices in the secondary market and would protect against the risk of a windfall gain for successful auction bidders (if auction prices are significantly below the prevailing secondary market price). For a more detailed explanation on the NZ ETS auctions, see our article here.

UK Supreme Court hands down judgment on COVID-19 UK business interruption insurance test case A recent UK test case on business interruption insurance coverage in the context of the COVID-19 pandemic provides useful guidance for the New Zealand market. The UK Financial Conduct Authority (FCA) brought the test case before the English High Court in June 2020, in an attempt to achieve clarity for policyholders and insurers on whether certain business interruption (BI) policies and wordings respond to the Covid-19 pandemic. The proceedings were extremely quick. The hearing of the test case took place in July 2020 and the ruling, which upheld many of the arguments made by the FCA on behalf of policyholders, was published on 15 September 2020 (see our article here). Subsequently, both sides appealed aspects of this ruling to the UK Supreme Court, which has now also decided the case in favour of the FCA. The test case served to determine issues of principle in relation to policy coverage under various specimen wordings underwritten by the eight insurance companies who had agreed to be part of the test case in respect of BI insurance in the context of the COVID-19 pandemic and the advice of, and restrictions imposed by, the UK Government in consequence. Although the Supreme Court’s decision is not binding in New Zealand, there are key issues arising from the case that insurers and insureds should consider when assessing cover under BI policies in New Zealand. You can read our commentary on the Supreme Court’s decision here. For further information on the UK test case, visit the FCA’s website here. 15

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Uber delivers another lesson in online terms In the US, Uber's online terms have been examined in a series of leading decisions over the past few years. Most recently, in Kauders v Uber (2021), the Supreme Judicial Court of Massachusetts considered whether Uber could rely on its online terms to enforce an arbitration clause and so avoid a Court proceeding. The case highlights the importance of presenting online terms clearly to consumers, a principle which will apply similarly in New Zealand as it does in the US. Kauders v Uber provides the following valuable takeaways for any consumer-facing organisation: • Terms should be transparently and conspicuously presented, particularly where consumers may not readily assume they are entering into a contract (e.g. signing up for an account without simultaneously acquiring any goods or services). • Any links to the terms should be explained by text which, with equal prominence to the link itself, explains how the terms become binding (i.e. that by creating an account, or by clicking a button, the customer accepts the terms). • Links to consumer terms should be at least as conspicuously presented as terms used in other channels (e.g. supplier terms). If consumer terms are presented less clearly than for other channels, a Court could (as in Kauders v Uber) infer that the business has deliberately sought to exploit consumers' willingness to agree online contracts without reading the terms. • Where multiple screens are used during a sign-up process, the terms should be presented early on (ideally on the first screen) and in a prominent central position. For full details on this decision see our article here.

UK Supreme court offers insight to parent company liability An important judgment issued by the UK Supreme Court last Friday (Okpabi & Ors v Royal Dutch Shell Plc & Anor [2021] UKSC 3) sheds light on the issue of when a parent company may be liable for damage caused by a subsidiary. The judgment raises important issues which will be relevant to corporate groups in New Zealand, particularly where the parent company plays an active role in the running of a subsidiary's business. For more details read our article on the judgment here.

Temporary business debt hibernation scheme extended The government has extended the date entities can enter into a Business Debt Hibernation (BDH) scheme from 24 December 2020 to the close of 31 October 2021 under the Companies (COVID-19—Business Debt Hibernation) Regulations 2020. The BDH scheme was introduced last year under the COVID-19 Response (Further Management Measures) Legislation Act 2020 to provide a pathway for otherwise profitable businesses to re-open once the COVID-19 crisis passes. The legislation provides for most companies, partnerships, and other trading entities that were registered or existed prior to 3 April 2020 to propose to creditors that most debts of the business should be put into a form of ‘hibernation’ for up to six months, as long as the entity can meet certain conditions. The introduction of the BDH scheme reflects the fact that none of New Zealand's existing insolvency processes provide an effective ‘standstill’ mechanism for businesses with short term liquidity problems. The scheme will sit alongside the existing regimes, including voluntary administrations, creditors' compromises, schemes of arrangements, and private arrangements. We provided commentary on the BDH scheme in our article COVID-19 Insolvency law relief: What’s in the Bill, and how to use it. General information on the scheme is also available on MBIE’s website which includes links to the relevant BDH forms required by the Companies Office.

CO R PO RA TE R E PO RTE R The BDH scheme does not extend to registered banks, licensed insurers, non-bank deposit takers, licensed derivatives issuers, operators of designated settlement systems or sole traders. FMA regulated entities that enter a BDH scheme will be subject to some additional notification requirements and expectations as outlined by the FMA.

COVID-19 related corporate relief measures extended The Companies Registrar has granted new exemptions under the COVID-19 Response (Requirements For Entities-Modifications and Exemptions) Act 2020. The COVID-19 Response (Requirements For Entities—Modifications and Exemptions) (Exemptions from Companies Act 1993) Notice 2021 exempts companies from complying with various obligations under the Companies Act regarding timeframe requirements. These include timing requirements relating to: • holding annual meetings of shareholders, preparing annual reports, and sending annual reports to shareholders, • the financial reporting requirements under sections 201, 202, 204, and 207E of the Act, and • certain meeting, voting, and notice requirements for creditors’ meetings in sections 239AK, 239AL, 239AO, and 239AU of the Act that do not clearly provide for holding meetings remotely, voting electronically, and giving notices electronically. These extensions do not allow the time for compliance to be extended beyond 31 March 2021, and some extensions are limited to a defined period. The exemptions only apply: • in respect of acts or omissions that occurred during the period that started on 21 March 2020 (that is, when many companies ceased or reduced operations as part of New Zealand’s COVID-19 public health response) and that end on 31 March 2021, • if the majority of directors or the administrator of the company or overseas company believes, on reasonable grounds, that: o complying with the relevant provision is unduly onerous or burdensome because of the effects of COVID-19, or o the relevant provision is not reasonably capable of being complied with because of the effects of COVID-19, and o if the affected person:  notifies the Registrar of Companies that it is relying on the exemption (in a prescribed form), and  complies with the specified conditions. The Companies Office has provided details on the notification requirement for relying in these exemptions on its website here.

Further measures for the upcoming changes to the consumer credit regime On 1 October 2021 the remaining measures introduced under the Credit Contracts Legislation Amendment Act (Amendment Act) 2019 will come into force. The measures include requirements for lenders to make reasonable inquiries before entering into, or making any material changes to agreements, so as to be satisfied that it is likely that the credit or finance provided under the agreement will meet the borrower's requirements and objectives and that the borrower will make the payments under the agreement without suffering substantial hardship. The Credit Contracts and Consumer Finance (Lender Inquiries into Suitability and Affordability) Amendment Regulations 2020 support these requirements by setting out: • the inquiries that must be made, • the processes, practices, and procedures that a lender should follow when making reasonable inquiries, • the way in which the results of the inquiries must be taken into account, and 17

CO R PO RA TE R E PO RTE R • the circumstances that would prevent a lender from being satisfied as to a matter. The requirements also will be complemented by the updated Responsible Lending Code published last week, which provides non-binding guidelines for lenders on their obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCFA). The Responsible Lending Code has been updated to reflect the changes introduced to the CCCFA, and to better reflect existing good practice among lenders, when borrowers are having repayment difficulties. This includes outlining what lenders should do when people miss payments, exceed their credit limit, or experience unforeseen financial hardship. Other changes to the Code include guidance on new legal requirements about: • advertisements, loans and other consumer credit contracts • record-keeping requirements for lenders around how they check whether it is likely a loan is suitable and affordable for a borrower • helping borrowers to make informed decisions when taking on a new loan online. Most of the updated Code will come into effect on 1 October 2021, at the same time as the law changes to the CCCFA regime. The new Chapter 12, which contains guidance on missed payments and repayment difficulties, will come into force four months later. We highlight some of the key changes to the Code here.

Court of Appeal sentences company for misleading and deceptive conduct Commerce Commission v Steel and Tube Holdings Ltd is the first appeal considered by the Court of

Appeal on the approach to sentencing for misleading and deceptive conduct under the Fair Trading Act 1986 (FTA). The Court helpfully confirmed what has become the standard two-step approach to sentencing in the lower courts, but also broke new ground on how the knowledge of employees involved in misleading and deceptive conduct should be attributed to the company. In particular, the Court's judgment highlights that a failure to adequately monitor employees who are responsible for misleading conduct can lead to higher fines. To read more on this case, see our article here.

Consultation on a draft cartel leniency and immunity policy The Commerce Commission’s consultation on its revised cartel leniency and immunity policy guidelines has now closed. The Commission is updating its cartel leniency and immunity policy guidelines to reflect the introduction of the new law criminalising cartels under the Commerce Act, which comes into effect on 8 April 2021. Any cartel entered into after 8 April 2021 will be subject to the new law, which includes substantial penalties, and up to seven years’ imprisonment for individuals. Under the new law a person or business involved in cartel conduct can apply for immunity from criminal prosecution. The Solicitor-General will be responsible for deciding whether to grant immunity from criminal prosecution, based on the Commission’s recommendation. The draft policy guidelines outline how the Commission will approach applications for recommending that the Solicitor-General should grant a cartel participant criminal immunity. The guidelines also have been updated so that applicants understand how the civil leniency and criminal immunity processes will work alongside each other. The Solicitor-General has released separate draft Guidelines on immunity from prosecution for cartel offences, which set out the criteria the Solicitor-General will consider in deciding whether to grant immunity. A summary of the key changes proposed to the Commission's cartel leniency policy is on the Commission's website. Submissions on the draft leniency and immunity policy closed on 10 February 2021. The Commission intends to publish its updated leniency and immunity policy in April 2021.

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Investigation underway into the retail grocery sector Submissions have now closed on the Commerce Commission’s consultation paper outlining the preliminary issues for its market study into the grocery sector. The Commission was asked to undertake the study by the Minister of Commerce and Consumer Affairs due to concerns regarding the level of competition in New Zealand’s grocery sector. Under the terms of reference matters which must be considered in the study include, but are not restricted to, the: • structure of the grocery industry at the wholesale and retail levels, • nature of competition at the wholesale and retail levels of the grocery industry, • pricing practices of the major grocery retailers, • grocery procurement practices of the major grocery retailers, and • price, quality, product range and service offerings for retail customers. The Commerce Commission is required to make its final report for this study publicly available by 23 November 2021.

Industry regulation and regulatory control New report highlights electricity lines companies; financial performance and service quality The NZCC has published a report and dashboard on the trends in performance of local lines companies to help New Zealanders better understand how and why the prices and service quality of their local electricity lines companies have changed over time. The report presents analysis of revenue, profitability and reliability trends between 2008 and 2020 at an industry and individual lines company level. The NZCC intends to develop a suite of trends in local lines company performance reports that focus on a different aspect of the lines sector each year. NZCC publishes final report on Fonterra’s 2020/21 Milk Price Manual The NZCC published its final report on its annual review of Fonterra’s Farmgate Milk Price Manual for the 2020/21 dairy season (the Manual) which contains Fonterra’s methodology for calculating its base milk price. This year’s review focused on the changes Fonterra has made to the Manual since last year. Changes include moving the responsibility to independently review certain aspects of the milk price calculation to the Milk Price Group, and the introduction of the ability to apply the outcome of a ‘Within-Period Review’ to the year in which the review is undertaken. NZCC seeks feedback on funding to improve work in regulated sectors The NZCC is seeking feedback on the level of funding needed over the next five years to help deliver its regulation of the telecommunications, electricity and gas sectors. The NZCC’s regulatory functions are funded through levies recovered from the businesses it regulates. These levies were last reviewed for telecommunications in 2012 and for electricity lines and gas pipelines in 2014. NZCC finalises Wellington Electricity’s allowable revenue from April 2021 The NZCC has released its final decision on how it will move Wellington Electricity Lines Limited from a customised price-quality path (CPP) to a default price-quality path (DPP) from 1 April 2021 to 31 March 2025, following industry feedback on its draft decision. The key change is that there will be a 0.6% reduction in net allowable revenue for Wellington Electricity relative to the current year’s CPP value. It is now up to Wellington Electricity to inform consumers of changes to their lines charges that will take place from 1 April 2021. NZCC consults on approving $36 million investment to maintain reliable electricity supply in South Auckland The NZCC has released its draft decision allowing Transpower to invest $36 million to replace ageing infrastructure and cater for increasing electricity demand in South Auckland. Transpower, which owns and 19

CO R PO RA TE R E PO RTE R operates the national electricity grid, applied to the NZCC in May 2020 to spend $36 million to invest in its Bombay-Otahuhu regional network by June 2023. Transpower is currently developing its understanding of the likely costs of the conductor replacement. It intends to complete and recover the cost of the replacement by seeking an amendment to the NZCC’s decision. NZCC proposes Aurora can spend $523m to fix its network The NZCC has released for consultation a package of measures in response to Aurora Energy’s plan to fix its electricity lines network in Dunedin, Central Otago and Queenstown Lakes. In June 2020, Aurora filed its application for a path CPP in which it forecast it would need $383 million over three years, or $609 million over five years, to replace failing infrastructure and run its network. In its proposal, Aurora indicated its customers could expect their electricity bills in 2024 to rise by roughly $20 to $30 a month compared to 2020/21 prices and that it would need to apply for a second CPP with further price rises required through to 2029.

Mergers and acquisitions NZCC publishes revised Authorisation Guidelines and application forms The NZCC has released its updated Authorisation Guidelines that explain its approach to assessing applications to authorise agreements or mergers in the public interest. The Guidelines were last updated in 2013, and since then the NZCC has considered several authorisations, some of which have been before the courts. The revised Guidelines include some process changes and further clarify our approach to assessing when benefits and detriments are likely to arise. The revisions also recognise the Court of Appeal’s comments in NZME v Commerce Commission, confirming that it is open to the NZCC to adopt a modified total welfare approach in its analysis of public benefits. Statement of Preliminary Issues released for Can Plan/Nelmac clearance application The NZCC has published a statement of preliminary issues relating to an application from Can Plan Nelson Limited (Can Plan) to acquire certain assets of Nelmac Limited’s waste collection business, which trades as Betta Bins. The proposed transaction does not involve the Betta Bins recycling business. The Statement of Preliminary Issues and a public version of the application can be found on the NZCC’s case register. NZCC closes investigation into Beijer acquisitions The NZCC has closed its investigation into Beijer Ref AB’s 2018 acquisition of Heatcraft New Zealand Limited and its 2019 acquisition (via its subsidiary Kirby NZ Limited) of a right to import hydrofluorobcarbons (HFCs) into New Zealand. The NZCC opened an investigation in July 2020 into Beijer’s acquisition of Heatcraft due to concerns the acquisitions may have substantially lessened competition for the supply of HCFs in New Zealand. The NZCC concluded that there was insufficient evidence to establish that either acquisition has substantially lessened competition. Statement of Issues released for Aon/Willis Towers Watson clearance application The NZCC has published a Statement of Issues relating to an application from Aon plc seeking clearance to acquire Willis Towers Watson Public Limited Company as part of a global transaction. At this stage, the NZCC has said that it is testing the potential for the proposed acquisition to substantially lessen competition due to (i) horizontal unilateral effects resulting from a loss of competition in the supply of broking and associated services for commercial insurance, reinsurance and/or group health and welfare benefits; and/or (ii) horizontal coordinated effects resulting from a change in market conditions making coordination more likely, more complete, or more sustainable. The Statement of Issues can be found on the NZCC’s case register. NZCC grants clearance for Pact to acquire Flight The NZCC has granted clearance to Pact Group Holdings Limited (Pact) to acquire the assets and business of Flight Plastics Limited in New Zealand and the packaging-related assets of Flight Extruded Plastics LP in Adelaide (together, Flight). The NZCC concluded that, although Pact and Flight are two of the largest suppliers of PET packaging in New Zealand, the merged entity is likely to be constrained in its ability to raise prices or reduce service quality. The merged entity will face competition from a number of New Zealand-based manufacturers and importers of PET products, several of which have the ability to expand. NZCC grants clearance for NEP to acquire Sky’s outside broadcasting assets The NZCC has granted clearance for NEP Broadcast Services New Zealand Limited to acquire from Sky Network Television Limited the assets of its outside broadcasting business (OSB). The NZCC concluded that it was satisfied that there was no realistic prospect that OSB would continue to provide outside 20

CO R PO RA TE R E PO RTE R broadcasting services if the proposed transaction did not proceed. Rather, the NZCC considered that OSB would seek to outsource those services to a third party, most likely NEP.

Consumer issues Stop Now letter issued to promoter of Lion’s Share scheme The NZCC has issued a Stop Now letter to Shelly Cullen, promoter of Lion’s Share, which the NZCC believes is likely a pyramid selling scheme. Pyramid selling schemes are prohibited under the Fair Trading Act 1986. The NZCC is currently investigating the Lion’s Share scheme and Ms Cullen’s promotion of it and other potential pyramid selling schemes. Noel Leeming Group warned for making delivery representations without reasonable grounds during COVID-19 lockdown The Noel Leeming Group (Noel Leeming) has been warned by the NZCC for making delivery representations about two products, which, in the NZCC’s view, it did not have reasonable grounds for at the time the representations were made. The warning follows a NZCC investigation after receiving over 100 consumer enquiries about Noel Leeming. Papakura vehicle dealer fined $67,500 over “as is, where is” claims Auckland motor vehicle trader BNZ JP Euro Auto Parts Limited has been fined $67,500 for misrepresenting consumers’ rights under the Consumer Guarantees Act 1993 (CGA) and for failing to provide Consumer Information Notices. BNZ JP Euro offered vehicles for sale on an ‘as is, where is’ basis and asked purchasers to sign an agreement acknowledging there was ‘no warranty implied or given within it’. These statements were misleading as it suggested that customers had no rights if something went wrong with the vehicle when in fact the CGA applies to used motor vehicles. Accordingly, any attempt by traders to mislead consumers about their rights under the CGA is likely to breach the FTA. NZCC to investigate Safety Warehouse “The Drop” event The NZCC has opened an investigation into representations made by Greenback Ecommerce Limited (trading as The Safety Warehouse) in relation to the “The Drop” event of 5 December 2020. In particular, the NZCC is looking into whether any representations about the event breached the FTA (which prohibits misleading and deceptive conduct). NZCC urges caution over toy and bike purchases as four companies warned The NZCC is urging consumers to take a second look at the toys and bikes they purchase, as four companies are warned over product safety. The four companies warned are HMH International Limited (trading as Gift House), Jay International Limited (trading as 123 Dollar Store Huntly), Mighty Ape Limited and Southern Gold Limited (trading as Just Incredible) (In Liquidation). The NZCC has completed 24 product safety prosecutions (including for products other than toys) since the start of 2017, with fines totalling more than $1.5million. Former high-cost lender warned over failure to adhere to responsible lending requirements The NZCC has issued a warning to Superloans Napier Limited and Superloans Porirua Liimted that they are likely to have failed to comply with the lender responsibility principles set out in the Credit Contracts and Consumer Finance Act 2003 (CCCF). An investigation into the Superloans Group, including Superloans Napier and Superloans Porirua, was opened following a number of complaints, including complaints from financial mentors, which raised concerns about the Superloans Group’s compliance with the responsible lending provisions of the CCCF Act.

Telecommunications Consultation open on Chorus’ proposal to spend $1.6 billion during first period of new fibre regulatory regime The NZCC is consulting on Chorus’ proposal to spend $1.6 billion over the first three years of the new fibre regulatory regime. Under the new regime, Chorus will be subject to price-quality regulation. This means the NZCC sets the maximum revenue Chorus can earn from its customers and the minimum quality standards it must meet. In its proposal for its first regulatory period from 1 January 2022 to 31 December 2024, Chorus is seeking approval to invest $983 million on network extensions, installations and to sustain service quality. The company is also proposing to spend $599 million to operate its network over the same period. The NZCC proposes to assess Chorus’ proposal against the Chorus capex input methodologies set by the Commission in 2020, which underpin how the regulatory regime treats capital spending. A copy of 21

CO R PO RA TE R E PO RTE R Chorus’ proposal documentation and the Commission’s consultation document are available here. Submissions close on 12 March 2021. The Commission will make its draft decision in May and its final decision in September. Suvey launched to help NZCC to promote competition in telecommunications markets The NZCC has launched an online survey to help telecommunications stakeholders have their say on the next phase of regulation for fibre service providers. It follows the NZCC finalising the key regulatory rules, requirements and processes (known as input methodologies) for the new regulatory regime. These rules apply to Chorus and local fibre companies Enable Networks, Northpower Fibre and Ultrafast Fibre which supply wholesale inputs to retailers. The NZCC expects the survey will give it a better-informed view on the extent to which the promotion of workable competition in telecommunications markets is relevant to setting the revenue cap and minimum quality standards for Chorus and information disclosure requirements for all providers. This will assist the NZCC to set the next phase of regulation consistent with its obligations under the Telecommunications Act. Performance of Fibre Max improves thanks to broadband testing programme The NZCC’s Measuring Broadband New Zealand programme has helped to identify and fix network problems that were preventing premium Fibre Max broadband products from performing at advertised speeds. To help identify the cause of the inconsistent performance, a working group of retailers and fibre wholesalers worked with the NZCC and independent testing partner, SamKnows. NZCC finalises consumer protections for withdrawal of copper phone and broadband services by Chorus The NZCC has finalised its Copper Withdrawal Code that sets out requirements Chorus, the provider of New Zealand’s copper telecommunications network, must meet before it can stop providing wholesale copper phone and broadband services (such as ADSL and VDSL). The NZCC has designed the Copper Withdrawal Code to protect consumers during the transition from copper to faster and more reliable technologies such as fibre. Final decision on allocation of $10 million Telecommunications Development Levy The NZCC has released its final determination on the allocation of payments for the Government’s $10 million Telecommunications Development Levy for 2019/20. The Government uses the funds collected by this levy to pay for telecommunications infrastructure and services that are not commercially viable, including the relay service of the deaf and hearing-impaired, broadband for rural areas, and improvements to the 111 emergency service. Collectively Spark, Vodafone, Chorus and 2degrees will pay approximately 90% of the $10 million levy. The remainder of the levy is divided among other liable providers. NZCC finalises emergency calling protections for consumers in power cuts The NZCC has finalised its 111 Contact Code to protect consumers who rely on their home phones to contact 111 emergency services in a power cut. Under the Code, telecommunications service providers must tell new customers, and remind existing customers at least once a year, that their home phone may not work in a power cut. Providers must also tell their customers how they can protect themselves and where to go for further support. Customers can complain to the Telecommunications Dispute Resolution Service, which provides independent resolution of customer disputes with telecommunications providers, if their provider does not comply with the Code.

Mergers and acquisitions ACCC rejects Google behavioural undertakings for Fitbit acquisition The ACCC has announced that it will not accept a long-term behavioural undertaking offered by Google that sought to address competition concerns about its proposed acquisition of wearables supplier and manufacturer Fitbit. The ACCC will therefore continue its investigation into Google’s proposed acquisition of Fitbit and has set a new decision date of 25 March 2021. Preliminary competition concerns over Woolworths’ PFD acquisition The ACCC has outlined preliminary competition concerns with Woolworths’ (ASX:WOW) proposal to acquire 65 per cent of PFD Food Services. Woolworths and PFD both acquire food and groceries from suppliers such as frozen food manufacturers, dairy processors and manufacturers of pasta and sauces. The 22

CO R PO RA TE R E PO RTE R ACCC is concerned that the proposed acquisition would remove PFD as an alternative customer in the food sector, reducing the number of buyers and increasing Woolworths’ relative size as a customer of food manufacturers and suppliers. The ACCC is also considering whether the proposed acquisition could affect downstream competition.

Market behaviour Lack of competition in ad tech affecting publishers, advertisers and consumers A lack of competition and transparency in the digital advertising technology supply chain is impacting publishers, advertisers and consumers. While there are many tech providers in Australia, Google is by far the largest provider of all of the key ad tech services, and is the only provider across the full ad tech supply chain that also sells ad inventory. The ACCC estimates that Google’s share of the revenue or ads traded in each of the required services in Australia ranges from 50-60 per cent to between 90-100 per cent, depending on the service. The ACCC has also heard concerns about the competitive effect of Google’s restrictions on rivals’ access to different types of data (e.g. its move to block access to the DoubleClick ID and its proposal to block third-party cookies on Chrome). Criminal cartel charges laid against pharmaceutical ingredient company and its former export manager Alkaloids of Australia Pty Ltd and its former export manager have each been charged with 33 criminal cartel offences, contrary to the Competition and Consumer Act 2010, following a criminal investigation by the ACCC. The ACCC alleges that Alkaloids of Australia and other overseas suppliers of SNBB made and gave effect to arrangements to fix prices, restrict supply, allocate customers and/or geographical markets, and/or to rig bids for the supply of SNBB to international manufacturers of generic antispasmodic medications.

Consumer issues ACCC alleges Facebook misled consumers when promoting app to ‘protect’ users’ data The ACCC has instituted proceedings in the Federal Court against Facebook, Inc. and two of its subsidiaries for false, misleading or deceptive conduct when promoting Facebook’s Onavo Protect mobile app to Australian consumers. Onavo Protect was a free downloadable software application providing a virtual private network (VPN) service. The ACCC alleges Onavo Protect collected, aggregated and used significant amounts of users’ personal activity data for Facebook’s commercial benefit. This included details about Onavo Protect users’ internet and app activity, such as records of every app they accessed and the number of seconds each day they spent using those apps. ACCC takes Lorna Jane to court over ‘Anti-virus Activewear’ claims The ACCC has instituted proceedings in the Federal Court against Lorna Jane Pty Ltd for alleged false or misleading claims about its ‘Anti-virus Activewear’, in breach of Australian Consumer Law. In July 2020, Lorna Jane claimed that its ‘Anti-virus Activewear’, which was sprayed with a substance called ‘LJ Shield’, eliminated and stopped the spread of COVID-19 and provided protection against viruses and pathogens, including COVID-19, when this was not the case. The ACCC is seeking declarations, penalties, injunctions, corrective notices and an order to implement a compliance program.

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