Corporate Reporter Issue No. 67 by bell-gully

CORPORATE REPORTER 14 May 2021

ITEMS IN THIS ISSUE INCLUDE:

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Consultation on regulations for the proposed conduct and culture regime for financial institutions

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Submissions called for on new mandatory financial sector climaterelated disclosure

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Government releases further details on the proposed Deposit Takers Bill

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Recent FMA guidance and consultations

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Overseas investment developments

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Submissions called for on the Incorporated Societies Bill

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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.67 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

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Financial Market Infrastructures Act passes Consultation on regulations for the conduct and culture regime for financial institutions Submissions called for on new mandatory financial sector climate-related disclosure Government releases further details on the proposed Deposit Takers Bill Government announces its decision on KiwiSaver default providers Reserve Bank launches new enforcement department Reserve Bank publishes cyber resilience guidance FATF reports on New Zealand’s AML/CFT regime Review of approved financial dispute resolution scheme rules FMA provides update on its review of FMC Act class exemption notices FMA guidance on reviewing fund manager fees and value for money FMA monitoring fund management industry for promoting strong returns FMA consults on proposed class exemption for restricted schemes New FMA templates for licensed DI, MIS managers and DIMS providers’ regulatory returns FMA guidance note on exemption for Australian financial advice businesses Recognition of Australian adviser qualifications under new regime for financial advice

Mergers & Acquisitions

Changes made to the Overseas Investment Bill (No.3) New overseas investment cases illustrate increased enforcement activity by the OIO Consultation on third party funding for the OIO Review of forestry measures introduced by the 2018 overseas investment amendments Temporary OIO notification regime due for review Increase to overseas investment threshold for Australian investments

Commercial

Consultation on “tweaks” to the NZ ETS Climate change and what lies ahead in 2021 Further amendments to the AML/CFT principal class exemption notice Terminating a business relationship under the AML/CFT Act

Corporate Law

Submissions called for on the Incorporated Societies Bill Expired COVID-19 relief measures for business entity compliance matters

Competition and Consumer Law

Submissions close on the Commerce Amendment Bill Further measures for the upcoming changes to the consumer credit regime Australian Federal Court offers guidance on “unconscionable conduct” 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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Financial Market Infrastructures Act passes After an eight-year journey the Financial Market Infrastructures Act 2021 has been enacted. The Financial Market Infrastructures Act (FMI Act) substantially rewrites the law in New Zealand governing payment systems, securities settlement systems, central counterparties, trade repositories, and other financial market infrastructures. It will replace the more narrowly-focused Parts 5B and 5C of the Reserve Bank of New Zealand Act 1989 (RBNZ Act), which currently regulate payment and settlement systems. The next step is for the Reserve Bank and the FMA to identify which FMIs are “systemically important". The significance of this is that systemically important FMIs can be 'called in' to what is otherwise an 'opt in' designation regime. It is expected that the list of “systemically important" FMIs will include all five of the settlement systems currently designated under the RBNZ Act: • the Exchange Settlement Account System operated by the Reserve Bank, which provides central bank accounts to registered banks and others, • the CLS System operated by CLS Bank International, which settles US$5.5 trillion of FX transactions (including those with an NZD leg) globally every day, • the NZCDC settlement system operated by New Zealand Clearing and Depository Corporation Limited, which is NZX's settlement system, • the NZClear settlement system operated by the Reserve Bank, which settles wholesale securities trades in New Zealand, and • the ASXCF settlement system operated by ASXClear (Futures) Pty Limited, which clears futures and options traded on the ASX market. There will be a transitional phase of about 18 months under the new regulatory framework. Public consultation will also occur during this period on implementation matters such as the design of standards to be made under the new regime. For further information read our article here.

Consultation on regulations for the conduct and culture regime for financial institutions The Financial Markets (Conduct of Institutions) Amendment Bill (COFI Bill) is awaiting its second reading. In the meantime, the Ministry of Business Innovation and Employment (MBIE) is pressing ahead with consultations on regulations to support the operation of the Bill. The COFI Bill proposes a new conduct and culture regime for banks, insurers, non-bank deposit takers, and some intermediaries. MBIE has released a discussion document titled ‘Regulations to support the new regime for the conduct of financial institutions’, which seeks feedback on a number of proposed areas of regulations, particularly: • additional or more detailed requirements for fair conduct programmes, • the regulation of sales incentives offered or provided by financial institutions and intermediaries, • the requirement to publish information about fair conduct programmes, • exclusions of certain occupations from the definition of “intermediary”, and • calling in contracts of insurance as financial products under the ‘fair dealing’ provisions of the Financial Markets Conduct Act 2013. A second discussion document Treatment of intermediaries under the new regime for the conduct of financial institutions seeks feedback on possible amendments to the COFI Bill to address concerns raised on the requirements placed on financial institutions to oversee and train any intermediaries distributing or managing their products to ensure good outcomes for consumers. This includes proposals to: • amend the current definition of “intermediary” in the Bill to capture only persons involved in the sale or distribution of a financial institution’s relevant service or associated products, and 3

CO R PO RA TE RE PO RTE R • narrow the obligations that apply to financial institutions in respect of “intermediaries” and in respect of

“employees and agents” to minimise compliance cost and duplication of regulation while still ensuring financial institutions take appropriate responsibility for consumer outcomes.

Submissions on both consultations close on 4 June 2021. Further details on the consultations are available below: • •

Conduct of financial institutions treatment of intermediaries Conduct of financial institutions regulations

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.

Submissions called for on new mandatory financial sector climate-related disclosure The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill is now with the Economic Development, Science and Innovation Committee and is open for submissions. The Bill will amend the Financial Markets Conduct Act 2013, the Financial Reporting Act 2013 and the Public Audit Act 2013 to require and support the making of climate-related disclosure by certain “climate reporting entities”. These are FMC reporting entities that are considered to have a higher level of public accountability, such as: • NZX listed issuers, • All registered banks, credit unions, and building societies with total assets of more than NZ$1 billion, • All managers of registered investment schemes with greater than NZ$1 billion in total assets under management, and • All licensed insurers with greater than NZ$1 billion in total assets under management or annual premium income greater than NZ$250 million. As Hon Dr David Clark stated in the first reading of the Bill, the main aim of the new law is to “move to a position where the effects of climate change become routinely considered as a part of business investment decisions". The legislation will achieve this aim by requiring businesses participating in New Zealand's financial markets to “disclose clear, comparable, and consistent information about the risks and opportunities presented by climate change". The Bill also provides for the External Reporting Board to issue “guidance” that can be applied on a voluntary basis on a wider range of matters: • environmental, • social, • governance, and • other non-financial matters. If the Bill is passed by Parliament, financial entities would be required to make disclosures for the financial years commencing in 2022, with the first disclosures expected to be delivered in 2023. Climate reporting entities may therefore need to maintain records of the information required to be disclosed under the Bill from early next year. Submissions on the Bill close on 28 May 2021. The Committee must report back on the Bill by 16 August 2021. For further details refer to our articles: • •

Mandatory financial sector climate-related disclosure: new law introduced to Parliament. The Big Picture: Climate Change – what lies ahead in 2021?

Government releases further details on the proposed Deposit Takers Bill In April the Government released a suite of Cabinet papers detailing decisions on a new prudential framework for deposit taking institutions alongside a strengthened crisis management regime, and the introduction of a deposit insurance scheme. 4

CO R PO RA TE RE PO RTE R These decisions conclude Phase 2 of the Reserve Bank Act Review and will see drafting commence for new legislation to be known as the Deposit Takers Act. The high-level features of the proposed regime include: • A single regime for all deposit takers (being defined as firms in the business of “borrowing and lending"). • An ability to tailor requirements to different classes of entities and for RBNZ to manage entities close to the boundary. • A new deposit insurance scheme (expected to be funded by levies on deposit takers with a Crown backstop). The Government had initially proposed a limit of NZ$50,000 per depositor per deposit taker, but has agreed to lift the cap to NZ$100,000 after a number of submissions called for the increase. • The introduction of standards (to be set by the Reserve Bank within the general framework under the Act or determined by the Minister of Finance) to impose prudential requirements. • A duty on directors to ensure that there are “adequate systems, processes and policies in place to ensure the deposit taker complies with its prudential requirements and obligations". A breach of this duty will only attract civil penalties (and not the criminal liability originally proposed). • A possible requirement on all licensed entities to report breaches of their obligations to the Reserve Bank. • “On-site inspection" powers by the Reserve Bank of deposit takers (and all other licensed entities such as insurers) to ensure compliance with the standards and duties. The next step is for an exposure draft bill to be released for consultation later this year. The Government has indicated that a bill will be introduced into Parliament before the end of 2021, with an expectation that the deposit insurance scheme will come into force in 2023. The implementation of the rest of the regime will follow. For further details refer to our article here.

Government announces its decision on KiwiSaver default providers The Government has announced the new KiwiSaver default provider arrangements, which will take effect once the terms of the current default providers end on 30 November 2021. The nine current default providers (appointed in 2014) are AMP, ANZ, ASB, BNZ, BT Funds Management (Westpac), Fisher Funds, Booster, Kiwi Wealth (KiwiBank) and Mercer. In December, the number of default providers will be reduced from nine to six, with the appointment of BNZ, Booster, BT Funds Management (Westpac), Kiwi Wealth, Simplicity and Smartshares (NZX) as the next set of KiwiSaver default providers for the next seven years. The Government changed the default provider settings following consultation in 2020, and used the procurement process to ensure applicants would meet the new settings. This includes: •

switching default fund settings from a ‘conservative’ investment mandate to a ‘balanced’ investment mandate,

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imposing member engagement obligations,

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reducing fees for default members, and

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imposing responsible investment obligations on providers, including sector exclusions (such as illegal weapons and fossil fuel production), environmental, social and governance (ESG) obligations, and disclosure requirements.

For further details, see the Government’s press release here.

Reserve Bank launches new enforcement department The Reserve Bank has established a new standalone enforcement department to promote confidence in compliance across regulated sectors. The enforcement department will be tasked with transforming the Reserve Bank into a “flexible and proactive regulator" that reflects its “evolving responsibilities, legislative powers and expectations". The department will be operationally separate from the Reserve Bank's existing supervision team. It will be led by the former senior manager of the Australian Prudential Regulation Authority's litigation team. 5

CO R PO RA TE RE PO RTE R The Reserve Bank's desire for dedicated enforcement capability is not surprising. The Bank's regulatory remit is steadily expanding (see our update of the year ahead) and its existing supervisory and enforcement responsibilities are coming under increased scrutiny. For more detail, see the Reserve Bank’s media release.

Reserve Bank publishes cyber resilience guidance The Reserve Bank has finalised its guidance on what regulated entities should consider when building their cyber resilience. The guidance applies to all entities the Reserve Bank regulates, including registered banks, licensed nonbank deposit takers, licensed insurers and designated financial market infrastructures. The guidance, which is based on leading international and national cybersecurity standards and guidelines, primarily serves as an overarching framework for the governance and management of cyber risk, which entities can tailor to their own specific needs and technologies, rather than as an explicitly detailed or technical set of instructions.

FATF reports on New Zealand’s AML/CFT regime On 29 April 2021, the Financial Action Task Force (FATF) released its Mutual Evaluation report on the effectiveness of New Zealand's anti-money laundering and countering financing of terrorism (AML/CFT) regime. The FATF report, which totals 260 pages, was long awaited by New Zealand government agencies and reporting entities – our controls were last reviewed in 2013, only a few months after the AML/CFT Act had come into force. Overall, New Zealand received a solid report card, the FATF finding our system to be “effective in many respects" and observing its strengths in confiscating proceeds of crime, and investigating and prosecuting money laundering. As we anticipated in our Big Picture last year, the FATF found room for improvement, in areas such as corporate transparency, supervision and financial sanctions. We expect the New Zealand Police, three AML supervisors, and Government to take careful note of the FATF's recommendations, which arrive in time for the imminent statutory review of the AML/CFT Act. For more information see our article, where we highlight the key AML/CFT risks facing New Zealand, the FATF's evaluation of compliance by reporting entities, and three priority actions for New Zealand that may prompt regulatory change in 2021.

Review of approved financial dispute resolution scheme rules MBIE is consulting on the objective and criteria for its proposed review of the jurisdictional rules of dispute resolution schemes governed by the Financial Service Providers (Registration and Dispute Resolution) Act 2008 that impact on access to redress, and access to justice. All financial service providers with retail clients are required to belong to a scheme under the Act. There are currently four schemes – the Banking Ombudsman Scheme, the Insurance and Financial Services Ombudsman Scheme, Financial Services Complaints Limited, and Financial Dispute Resolution Service. The schemes are independent entities and set their own sets of rules which govern how they resolve disputes. This has resulted in various inconsistencies between schemes. The discussion paper and consumer summary focus on three key areas, which MBIE says due to inconsistencies in these areas impact consumers’ ability to access the schemes: 1.

the financial caps for hearing a claim and the limits on compensation that can be awarded,

jurisdictional timeframes for being a scheme member, and

3. the applicable time periods which impact when and how a scheme can hear a complaint.

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FMA provides update on its review of FMC Act class exemption notices Last year the FMA consulted on its review of 16 class exemption notices which are due to expire between August and December 2021. These notices, which were put in place to support the regime under the Financial Markets Conduct Act 2013 (FMC Act) when it was first implemented, provide solutions to various FMC Act regime compliance issues that are unique to particular classes of market participants. After considering submissions, the FMA has announced that it will grant continued exemption relief for five years for the matters addressed by the following current class exemptions: • Financial Markets Conduct (Employee Share Purchase Schemes) Exemption Notice 2016. • Financial Markets Conduct (Licensed Independent Trustees of Restricted Schemes) Exemption Notice 2016. • Financial Markets Conduct (Overseas Subsidiary Balance Date Alignment) Exemption Notice 2016. • Financial Markets Conduct (Communal Facilities in Real Property Developments) Exemption Notice 2016. • Financial Markets Conduct (Equine Bloodstock) Exemption Notice 2016. • Financial Markets Conduct (Forestry Schemes) Exemption Notice 2016. • Financial Markets Conduct (Employee Share Purchase Scheme Shares Offered under Securities Act 1978) Exemption Notice 2016. • Financial Markets Conduct (Employee Share Purchase Scheme Shares Offered under Securities Act 1978) Exemption Notice 2016. The FMA will also renew the Financial Markets Conduct (Small Co-operatives) Exemption Notice 2016 for one year to enable it to be reviewed together with the Financial Markets Conduct (Irrigation Companies) Exemption Notice 2018 that expires in December 2022. The FMA is still considering the following class exemptions, and is aiming to announce decisions on these by the middle of the year: • Financial Markets Conduct (Disclosure using Overseas GAAP) Exemption Notice 2016. • Financial Markets Conduct (Overseas FMC Reporting Entities) Exemption Notice 2016. • Financial Markets Conduct (Overseas Registered Banks and Licensed Insurers) Exemption Notice 2020. • Financial Markets Conduct (Incidental Offers) Exemption Notice 2016. • Financial Markets Conduct (Recognised Exchanges) Exemption Notice 2016. • Financial Markets Conduct (Securities Offered under Securities Act 1978 Exemptions Recognising Overseas Regimes) Exemption Notice 2016. • Financial Markets Conduct (Overseas Banks Offering Simple Debt Products) Exemption Notice 2016.

FMA guidance on reviewing fund manager fees and value for money Following new guidance from the FMA, fund managers of KiwiSaver schemes and other managed investment schemes are expected to annually review their fees and value for money with their licensed supervisors and be able to prove to the FMA the review has happened. A similar review is also expected at any time the manager updates the Statement of Investment Policies and Objectives or other governing document because of a change that materially affects cost (such as changes of strategy, asset allocation or underlying investment managers). The FMA also “strongly encourages” schemes to report the results of the reviews to their members in an appropriate form. The FMA hopes that this will help schemes to “highlight where they need to improve their products’ value for money, for instance by reducing fees, enhancing the value provided, or ceasing to offer poor-value products” and will enable scheme members to make more informed decisions about who they invest with.

CO R PO RA TE RE PO RTE R The guidance is based on four key principles for conducting a review: 1. How well the manager’s process and capabilities appropriately minimise investment risk that members experience; and members’ return after fees. 2. The financial value of investment management must be shared appropriately between the manager and the member. 3. Advice and service is received, not just offered. 4. Review yourself as you review others. While specific parts apply only to KiwiSaver schemes, most of the guidance is applicable to all managed schemes, including schemes closed to new members. The guidance also clarifies: • the statutory duties of managers and supervisors in relation to fees and value for money, and • the FMA’s role and enforcement options (which include stop orders, direction orders, action plans and court action.

FMA monitoring fund management industry for promoting strong returns The FMA has issued a press release warning the funds management industry to avoid advertising large investment returns for the 12-month period to 31 March 2021, as a result of concerns that doing so could breach the “fair dealing” provisions in the Financial Markets Conduct Act 2013. In particular, KiwiSaver providers, other fund managers and financial advisers are being asked to: • avoid advertising performance for the 12-month period to 31 March 2021 (or, where promotion has already happened, withdrawing advertisements and promotions) through any channels, including period-specific promotion on websites; and • ensure the content and tone of required or otherwise regular investor and customer communications, does not place undue emphasis on, or commentary equating to promotion of, performance over the 12month period. This includes written or verbal communications. The "fair dealing" provisions prohibit both misleading or deceptive conduct (including conduct which is likely to mislead or deceive) and the making of false, misleading or unsubstantiated representations.

FMA consults on proposed class exemption for restricted schemes The FMA is considering exempting restricted schemes from certain disclosure and reporting obligations under the Financial Markets Conduct Regulations 2014. If granted, the exemption would provide relief for certain defined benefit restricted schemes in respect of annual fund updates and confirmation information, and for all restricted schemes in respect of quarterly reporting requirements. However, alternate disclosure and reporting conditions would apply. For details see FMA’s consultation paper here.

New FMA templates for licensed DI, MIS managers and DIMS providers regulatory returns The standard conditions for all types of market service licences issued under the Financial Markets Conduct Act 2013 include a regulatory returns condition to gain updated information about a licensee’s business and give the FMA an indication of the size and nature of their business, compliance performance and potential risks. Following consultation on the content of the regulatory returns in June 2018 the FMA has released its final regulatory returns questions for licensed Derivatives Issuers (DI), Discretionary Investment Management Service (DIMS) providers and Managed Investment Scheme (MIS) managers. These are set out in the following templates: • DI provider regulatory returns data template • DIMS provider regulatory returns data template 8

CO R PO RA TE RE PO RTE R • MIS manager regulatory returns data template The questions in the templates include brief guidance on how to answer them, along with the rationale for requiring the information. The questions have been designed to provide: • insight into the operations of licensees that will enable the FMA to evaluate the risk of material issues, • a better understanding of the key stakeholders in the business and where there may be risk concentrations within the industry, and • a better understanding of the methods used to consider client needs in the operation of the business. Licensees will be required to complete their first annual regulatory return for the period 1 July 2021 to 30 June 2022, and then submit the completed return by 30 September 2022.

FMA guidance note on exemption for Australian financial advice businesses The FMA has published a guidance note on the Financial Markets Conduct (Australian Licensees) Exemption Notice 2020, which replaced the Financial Advisers (Australian Licensees) Exemption Notice 2011 in March this year. The guidance note provides an overview of the exemption notice relating to Australian financial advice businesses giving advice to New Zealand retail clients, and the circumstances in which a business may be able to rely on it.

Recognition of Australian adviser qualifications under new regime for financial advice The FMA has confirmed that individual Australian advisers demonstrate the competence, knowledge and skill standards set by the new Code of Professional Conduct for Financial Advice Services if they hold certain Australian adviser qualifications as outlined in its publication Australian qualifications or experience to give financial advice in New Zealand. The FMA has also released a submissions report on the consultation on this publication.

Changes made to the Overseas Investment Bill (No.3) Parliament’s Finance and Expenditure Committee recommended some positive and pragmatic changes to the Overseas Investment Amendment Bill (No 3) for foreign investors, which have been incorporated into the Bill following its second reading. The changes include: • Removing consent requirements for investors making additional, incremental investments that do not result in a material change in ownership or control. A material change in ownership or control would be a change that results in an investor's ownership or control interest meeting or exceeding 25%, 50%, 75% or 100%. • Simplifying the consent process for passive foreign government investors, such as pension funds, looking to invest in New Zealand, by o

increasing the threshold from 10% to 25% (although aggregating all foreign government entities from the same country), and

exempting passive foreign government investors, with the criteria for such exemptions to be set by regulations.

• Minimising barriers to productive development in farmland by removing the more stringent benefit test where an overseas investor is acquiring non-productive farmland for commercial, industrial or large residential developments; and allowing the relevant Ministers to exempt non-productive farmland from the farmland advertising requirements.

CO R PO RA TE RE PO RTE R • Providing a standing consent for managed investment schemes that are New Zealand listed issuers (as that is defined in the legislation) to avoid the need for New Zealand listed managed investment schemes (which are fundamentally New Zealand entities) to apply for consent to buy sensitive New Zealand assets. Read more on these changes in our article here. The Bill is currently at the Committee of whole House stage.

New overseas investment cases illustrate increased enforcement activity by the OIO Over the last month, the High Court has imposed civil pecuniary penalties in three separate cases involving breaches of the Overseas Investment Act. In the latest case, the Court imposed a civil penalty for the first time on an overseas investor who leased (rather than purchased) land in New Zealand in breach of the Act. The three recent High Court judgments reflect a growing increase in enforcement activity by the OIO over recent years. Following amendments to the Act last year, which increased the maximum penalties and expanded the OIO's enforcement powers, we expect this trend to continue. All three cases were determined under the old penalty regime, which provided for a maximum penalty per breach of NZ$300,000 or three times the quantifiable gain. Last year, the NZ$300,000 limit was increased to a maximum of NZ$500,000 for an individual (or NZ$10 million in any other case). It remains to be seen how the courts will approach these increased penalties and the extent to which the previous case law will continue to be used as guidance. For details on all three cases refer to our article here.

Consultation on third party funding for the OIO Land Information New Zealand (LINZ) has consulted on proposals for a new Overseas Investment Office (OIO) fee structure and fee levels. The consultation document notes that the review of the OIO application fee levels and the fee framework found the cost of operating the overseas investment regime was not fully recovered from fees under the current structure. In summary, the proposals include: • a shift away from the current system of a single fee for applications for each investment pathway, • a differentiated fee structure including lodgement, assessment and monitoring compliance fees for most investment pathways, and • different fee levels for standard and complex applications. The proposals, which are intended to take effect later this year, could result in substantial increases in application fees (in some instances more than double), particularly where the OIO considers an application to be more complex.

Review of forestry measures introduced by the 2018 overseas investment amendments The Treasury has released the Terms of Reference for the Overseas Investment Act 2005: Forestry Review. In 2018 the Overseas Investment Amendment Act changed the way overseas investments in forestry are screened under the Overseas Investment Act 2005 by: • streamlining consent pathways for forestry investment and introducing standing consents for repeat investors in forestry, in order to facilitate overseas investment in forestry, and • bringing forestry rights into the screening regime, in order to improve the regime’s coherence. The Review will assess the operation and effectiveness of these amendments. The Treasury is aiming for public consultation on proposed policy options to take place in late 2021. A report will be presented to the Minister in 2022, with a view to legislating any reforms by late 2022. 10

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Temporary OIO notification regime due for review The next mandatory review date for the temporary emergency notification regime in the Overseas Investment Act 2005 (OIA) is due on 25 May 2021. Since 16 June 2020, overseas investors have needed to notify the Overseas Investment Office 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. A third review was completed on 24 February 2021, with Ministers deciding to retain the notification regime until 25 May 2021. 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.

Increase to overseas investment threshold for Australian investments Australian investors currently have the benefit of an exemption from the requirement for Overseas Investment Office (OIO) consent if they are investing in significant business assets in New Zealand, and the value of the transaction is below certain thresholds. These thresholds may be adjusted each year according to formulae set out in the Overseas Investment Regulations 2005. The OIO has notified that, from 1 January to 31 December 2021, the thresholds will be: • NZ$552 million (previously NZ$537 million), if the investor is an Australian non-government investor, and • NZ$116 million (previously NZ$113 million), if the investor is an Australian government investor. The threshold for Australian non-government investors is higher than the NZ$200 million threshold that applies to certain investors from the 10 other Comprehensive and Progressive Agreement for Trans-Pacific Partnership member nations and from certain other nations with which New Zealand has "most favoured nation" obligations under existing trade agreements, such as the People's Republic of China and Hong Kong. The higher threshold for Australian non-government investors is likely to provide them with a competitive advantage in sale situations where the Australian investor can put in a bid that is not conditional on OIO consent. The definition of non-government investor is complex, and some transaction structures can render the investor ineligible for the higher threshold. Overseas investment in sensitive land still requires OIO consent, regardless of the value of the transaction, unless the investor can rely on an exemption.

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Consultation on “tweaks” to the NZ ETS The Ministry for the Environment is consulting on a wide range of “regulation tweaks” to the New Zealand Emissions Trading Scheme (NZ ETS) and Synthetic Greenhouse Gas (SGG) Levy regulations for 2021. The consultation closes on 28 May 2021. The proposed changes include: • updating the unit limits available by auction and auction price control settings (which are a mechanism to prevent New Zealand unit (NZU) prices from selling at unacceptably low or high prices at Government auctions) • updating the default emissions factors (DEFs) for waste and natural gas fields, and update other DEFs and reference data to reflect new global warming potentials • updating the electricity allocation factor used in industrial allocation to more accurately reflect wholesale electricity pricing • improving the methodology that accounts for waste in the NZ ETS - these amendments present options to manage the increasing risks to closed landfills from flooding and erosion and the need for some such landfills to be excavated and waste disposed of elsewhere to address these risks • updating the schedule of goods covered by the SGG levy to capture imported goods containing currently unlevied SGG blends • implementing new regulations for an NZ ETS auction monitor Further details are available here.

Climate change and what lies ahead in 2021 The steady diet of climate-related regulation put in place since the 2019 passing of the Zero Carbon Act has started New Zealand on its vital shift toward a lower-carbon economy. In Bell Gully’s publication “The Big Picture: Climate Change - what lies ahead in 2021?” we discuss why we think the upcoming mandatory financial reporting on climate-related risks, in conjunction with recommended emissions budgets from He Pou a Rangi – the Climate Change Commission, will prove the tipping point. The publication also discusses the proposed changes to the New Zealand Emissions Trading Scheme, the new NZU auctions system, the implications for government and businesses from recent climate litigation cases, insuring climate-related risks, and the rise of sustainable financing.

Further amendments to the AML/CFT principal class exemption notice Further amendments have been made to the Anti-Money Laundering and Countering Financing of Terrorism (Class Exemptions) Notice 2018 (the principal notice). The Anti-Money Laundering and Countering Financing of Terrorism (Class Exemptions) Amendment Notice 2021 has amended the Parts 5 and 8 of the Schedule to the principal notice. This relates to the class exemptions for reporting entities whose customers are licensed managing intermediaries and financial advice providers arranging for relevant services to be provided for retirement schemes, and reflect the commencement of certain provisions of the Financial Services Legislation Amendment Act 2019. The new provisions update terminology. The Anti-Money Laundering and Countering Financing of Terrorism (Class Exemptions) Amendment Notice (No 2) 2021 inserted new Parts 14 and 15 into the Schedule of the principal notice. New Part 14 relates to transactions of tax pooling intermediaries. New Part 15 exempts barristers who take instructions from solicitors (other than in-house solicitors) or from the Crown from certain requirements of the Act.

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Terminating a business relationship under the AML/CFT Act A recent High Court judgment has provided guidance on the requirements of terminating a business relationship when an AML/CFT reporting entity is required to do so under the AML/CFT Act. The judgment, Arjang v NF Global Limited [2021] NZHC 395, is likely to be of considerable practical assistance to any reporting entity in New Zealand or overseas that has to terminate a business relationship under the AML/CFT Act or equivalent legislation. The Court noted that termination of a business relationship means that a reporting entity cannot continue to carry out transactions or other services for the customer, or charge them fees. However, past transactions do not need to be unwound. The customer retains their enforceable rights to any funds in their account, and the reporting entity must return those funds to the customer (or a source that they nominate). Further details on this decision and the guidance the High Court provided on termination of a business relationship are published in our article here.

Submissions called for on the Incorporated Societies Bill Following an earlier exposure draft of the Incorporated Societies Bill released in 2015, the Bill has finally been introduced to Parliament and is now before the Economic Development, Science and Innovation Committee. The Incorporated Societies Bill 2021 provides for the eventual repeal and replacement of the Incorporated Societies Act 1908 to put in place a modern framework of basic legal, governance, and accountability obligations for incorporated societies and those who run them. Some of the key problems with the 1908 Act which will be addressed through the passage of the Bill include: • inclusion of duties for persons involved in the management or administration of the society so that those persons have a clear understanding of what they have to do to comply with the law, • conflict of interest disclosure rules, and • provision for the amalgamations of two or more societies. Submissions on the Bill close on 28 May 2021.

Expired COVID-19 relief measures for business entity compliance matters The COVID-19 Response (Requirements For Entities — Modifications and Exemptions) Act 2020 contains various measures which enabled businesses to manage some of the practical impacts of complying with statutory obligations and obligations contained in the entity’s rules or constitution amid the COVID-19 pandemic. A number of those provisions have now expired. Provisions that expired on 31 March 2021 included: •

The powers for Registrars and Ministers to issue exemption notices concerning compliance with statutory obligations (such as calling or holding meetings and auditing, assurance, or financial reporting or review requirements),

•

certain requirements and restrictions in an entity’s constitution or rules (for example, in relation to holding meetings, methods of voting, deferral of financial reporting and other procedural or administrative processes) which were able to be modified by a majority of the entity’s governing officers rather than in accordance with its constitution or rules (and the procedures for amending the constitution or rules in any enactment), and

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enabling the use of electronic means, including electronic voting and the use of electronic signatures, when an entity’s constitution or rules did not permit this. 13

CO R PO RA TE RE PO RTE R The provisions applied to building societies, charitable trust boards, companies, credit unions, firms, friendly societies, incorporated societies, industrial and provident societies, limited partnerships, and certain Māori governance entities.

Submissions close on the Commerce Amendment Bill Submissions on the Commerce Amendment Bill have closed, with written submissions now available on Parliament’s website here. The select committee’s report on the Bill is due on 16 September 2021. The Bill proposes a number of significant changes to the Commerce Act. The two key changes make amendments to New Zealand’s misuse of market power law in section 36 of the Act and amendments to competition law treatment of IP rights. Misuse of market power amendments Section 36 of the Commerce Act currently prevents businesses with a substantial degree of market power from taking advantage of such power for certain, proscribed, anti-competitive purposes. To address concerns over the operation of this provision, the Bill amends section 36 to make it explicit that conduct by persons with substantial market power that has the purpose, effect, or likely effect of substantially lessening competition in markets is prohibited. This change aligns the prohibition with the equivalent prohibition in Australian competition law. On application, the Commerce Commission is also empowered to grant authorisation for conduct to which section 36 would or might apply if that conduct is in the public interest. Repeal of safe harbours for IP rights The Commerce Act shields some conduct related to protection of IP from examination under section 36 as well as the sections of the Commerce Act on cartels and anti-competitive agreements. The Bill removes these provisions so that the Commission can consider IP-related conduct as it does any other conduct. Improving the function of the Commerce Act The Bill also provides for a range of matters to improve the functioning of the Commerce Act. These include: • increasing penalties for businesses engaging in anti-competitive mergers (which are currently lower than for breaches of other sections of the Commerce Act), • changes to the treatment of anti-competitive covenants relating to land. When the cartel prohibition replaced the earlier price fixing prohibition in 2017, covenants were inadvertently excluded from the 'automatic' prohibition. These changes would ensure covenants relating to land have equivalent treatment to other arrangements under the Commerce Act, • increasing the maximum number of Commerce Commissioners from six to eight to reflect the Commission's growing responsibilities in recent years (including the market studies regime and the expansion of the Commission's role in regulating consumer finance), and • making it easier for the Commission to cooperate with other domestic agencies by sharing the information it holds, subject to appropriate safeguards.

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. Fit and proper person certification The remaining measures include requiring creditors under consumer credit contracts to hold a certification from the Commerce Commission that their directors and senior managers are fit and proper persons (see new Part 5A of the Credit Contracts and Consumer Finance Act 2003 (the CCCFA). Part 5A commences on 1 June 2021, and creditors are able to start applying to the Commerce Commission after that date. However, the certification requirement does not apply until 1 October 2021, and creditors that are already registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSP Act) have until their next annual confirmation date to become certified under the CCCFA.

CO R PO RA TE RE PO RTE R The Credit Contracts and Consumer Finance (Certification) Amendment Regulations 2021 support the certification requirements by: • introducing the new fee for certification applications and notifications of changes in circumstances of certified persons, and • setting out the changes in circumstances requiring notification for the purpose of new section 131R of the Credit Contracts and Consumer Finance Act 2003 (which requires a certified person to notify the Commerce Commission about prescribed matters). To assist creditors with the new certification regime, the Commerce Commission has published “Fit and Proper Person certification guidance”. The Financial Service Providers (Registration) Amendment Regulations 2021 also extend the information that creditors and mobile traders must supply under the FSP Act to include information on whether they are certified under the CCCFA. Due diligence guidance The Commerce Commission has also consulted on draft due diligence guidance for directors and senior managers of consumer credit providers and mobile traders on how to comply with new section 59B of the CCCFA which comes into force on 21 October 2021. This requires that all directors and senior managers of a creditor under a consumer credit contract exercise due diligence to ensure that the creditor complies with its duties and obligations under the CCCFA.

Australian Federal Court offers guidance on “unconscionable conduct” The Full Federal Court of Australia in ACCC v Quantum Housing Group Pty Ltd [2021] FCAFC 40 has shed partial light on the scope of the prohibition against “unconscionable conduct" under Australia's consumer protection law. While the Court offered no concrete definition of the term, it held that it does not require establishing the exploitation of some disadvantage or vulnerability (although this may often be the case) and could arise even where no such vulnerability exists. The ACCC, which brought the claim, has described the result as “an extremely important decision for all Australian consumers and businesses." The judgment may also be significant for businesses in New Zealand, given that an equivalent prohibition on unconscionable conduct has been proposed under the Fair Trading Amendment Bill. The case will therefore be of interest to those looking to understand the potential impact of the proposed amendments. The Bill is currently awaiting its second reading (after being discharged from the Select Committee in August 2020 without amendment, despite extensive submissions). Bell Gully is closely monitoring the legislative process, including calls for the Bill to be referred back to Select Committee in order to further consider the extensive submissions received. For details on the Federal Court’s decision click here.

Industry regulation and regulatory control NZCC approves Transpower's $36 million electricity investment for South Auckland The NZCC has released its final decision allowing Transpower to invest $36 million to replace ageing infrastructure and cater for increasing electricity demand in South Auckland. The decision allows Transpower to recover the cost from consumers of purchasing and commissioning two new transformers at the Bombay grid exit point, as well as undertaking preparatory work to replace conductors on the Otahuhu to Wiri line. NZCC publishes tools for assessing 2020 performance of local electricity lines companies The NZCC recently published performance information for regulated local lines companies for the year to 31 March 2020 as part of a suite of resources created to support the understanding of supplier performance. Tools published include one-page performance summaries which provide high level statistics

CO R PO RA TE RE PO RTE R on each lines company’s performance, such as profitability, capital and operating spending, asset condition, line charge revenue and network reliability. NZCC decides on Aurora’s investment plan, proposes additional accountability measures The NZCC has released its final decision in response to Aurora Energy’s (Aurora) proposal to fix its electricity lines network in Dunedin, Central Otago, and Queenstown Lakes. The NZCC has decided Aurora has made the case that significant investment is needed to make its network safer and more reliable. NZCC seeks views on regulatory priorities for energy networks and airports The NZCC has published an open letter canvassing views on how it should prioritise its regulatory work programme to help the energy and airport sectors address upcoming issues including New Zealand’s transition to a low-carbon economy and managing any continuing impact of COVID-19. The NZCC is seeking feedback from those with an interest in the energy and airports sectors to ensure their regulation is fit for the future. Submissions close on 28 May 2021.

Authorisation applications Statement of Preliminary Issues released for HP New Zealand’s application seeking authorisation for resale price maintenance in relation to its HP online stores The NZCC has published a statement of preliminary issues relating to an application from HP New Zealand (HP) seeking authorisation to engage in resale price maintenance in relation to its proposed arrangements for its HP online store and prospective HP online marketplace stores. HP applied for authorisation to enable it to control product and marketing strategies, and to specify the prices for which their third party distributor will sell HP’s products to consumers.

Mergers and acquisitions Statement of Issues released for Trade Me’s application to acquire homes.co.nz The NZCC has released a statement of issues relating to Trade Me Limited’s application for clearance to acquire PropertyNZ Limited, which owns and operates the homes.co.nz website. The NZCC is currently scheduled to make a decision on the application by 4 June 2021. Statement of Preliminary Issues released for Taranaki By-Products’ application to increase its shareholdings in Lowe joint ventures The NZCC has published a statement of preliminary issues relating to the clearance application from Taranaki By-Products Limited for it, or a related company, to increase its shareholdings in three joint ventures with the Lowe Corporation. The NZCC is currently scheduled to make a decision on the application by 24 June 2021. Statement of Issues released for Can Plan/Nelmac clearance application The NZCC has released a Statement of Issues relating to an application from Can Plan Nelson Limited seeking clearance to acquire certain assets of Nelmac Limited’s waste collection business, which trades as Betta Bins. The assets include two Side Loader trucks, one Rear Loader truck, pre-paid wheelie bins, large bins and “pay-as-you go” rubbish bags currently in circulation. The NZCC is currently scheduled to make a decision on the application by 14 May 2021. Assa Abloy New Zealand Limited seeks clearance to acquire shares of NZ Fire Doors Limited The NZCC has received a clearance application from ASSA ABLOY New Zealand Limited (Assa Abloy NZ) to acquire all of the shares in NZ Fire Doors Limited (NZFD). Both Assa Abloy NZ and NZFD manufacture and supply fire-rated doors and windows to the construction industry. Concrete Group subsidiary seeks clearance to acquire Drymix The NZCC has received a clearance application from Dunlop Drymix Limited, a subsidiary of the Concrete Group Limited, seeking clearance to acquire the assets and business of six companies that collectively trade in New Zealand as Drymix. Drymix has continued to trade since each of the Drymix companies were placed into receivership in mid-2020. Concrete Group Limited (under the ‘Cemix’ brand) and Drymix both manufacture and supply a range of bagged concrete and mortar products.

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Market behaviour Cartel conduct now punishable by up to seven years’ jail time Cartel conduct can now be punished with a term of imprisonment of up to seven years, after the Commerce (Criminalisation of Cartels) Amendment Act 2019 came into effect on 8 April 2021. The financial penalties for cartel conduct were already significant: individuals can be fined up to $500,000 and companies can be fined up to $10 million, three times the commercial gain arising from the breach, or 10% of annual group New Zealand turnover per breach. Now, businesses and individuals can be liable for criminal conviction and individuals convicted of engaging in cartel conduct could face a term of imprisonment. NZCC issues updated cartel leniency policy The NZCC has issued its revised cartel leniency and immunity policy and revised template leniency agreement to reflect the changes resulting from the introduction of the new criminal cartel offence. The Solicitor-General has revised its Guidelines on immunity from prosecution for cartel offences, which set out the criteria the Solicitor-General will consider in deciding whether to grant immunity. NZCC files proceedings against alleged taxi cartel The NZCC has filed proceedings at the High Court in Wellington against Hutt and City Taxis Limited (Hutt & City) for alleged price fixing. The NZCC alleges Hutt & City contravened the Commerce Act by reaching a price-fixing agreement with two competing taxi companies to implement a minimum charge of $25 for pick-up taxi trips from the on-demand taxi rank at Wellington Airport. The NZCC also alleges Hutt & City attempted to reach the same price-fixing agreement with a third taxi company. The NZCC is seeking a declaration that Hutt & City contravened, and attempted to contravene, the Commerce Act, along with financial penalties and costs.

Consumer issues Auckland Council warned over lending failures Auckland Council has been warned by the NZCC for potential breaches of the Credit Contracts and Consumer Finance Act in relation to its Retrofit Your Home Programme (RYH Programme). Auckland Council reported the matter to the NZCC and has co-operated fully with their investigation. It has advised the NZCC that it intends to credit all interest charges and rate penalties charged to affected borrowers; totalling more than $10 million. The RYH Programme, which ratepayers could join from 2011 until 2020, involved Auckland Council offering financial assistance to ratepayers who wished to improve their property with insulation, heating, ventilation and/or energy efficiency measures. $400,000 fine for "carefully crafted" Home Funding Group scheme Home Funding Group Limited (HFG), which falsely claimed to offer a savings scheme to assist low-income families buy a home, has been fined $400,000 following a NZCC investigation. HFG was convicted on two charges under the Fair Trading Act 1986 . HFG offered services to prospective home buyers who found it difficult to save for a deposit or qualify for bank finance. It claimed to operate a savings scheme which could assist customers to purchase a home with a deposit as low as 5%. However, customers’ payments were not paid into or treated as being in any form of savings scheme. Online lender Moola in $2.8 million settlement with NZCC over fees High cost short term lender moola.co.nz Limited (Moola) has agreed a settlement with the NZCC where it is required to credit or refund approximately $2.8 million to current and former borrowers, after acknowledging the NZCC’s view that it charged unreasonable credit and default fees. Moola offers loans to borrowers via its website www.moola.co.nz. Prior to the introduction of a daily rate of charge cap in June 2020, it offered loans with interest rates as high as 620.5% per annum. Separately the NZCC has taken High Court proceedings against Moola alleging irresponsible lending. That matter is unaffected by the settlement relating to unreasonable fees. Lenders and mobile traders must be certified to operate from 1 October From 1 October 2021 lenders providing consumer credit and mobile traders selling on credit must be certified by the NZCC or face penalties, unless they are licensed or registered by the Financial Markets Authority or Reserve Bank of New Zealand. In order to give certification, the NZCC will need to be satisfied that directors and senior managers of lenders providing consumer credit and mobile traders are ‘fit and proper’ to perform their role (i.e., that they are financially sound, honest, reputable, reliable and competent

CO R PO RA TE RE PO RTE R to do their job). Lending without being certified could result in penalties of up to $600,000 for a company or $200,000 for an individual. Latest product safety cases from Oamaru to Otahuhu The New Hub Furniture Warehouse Limited and Y&Y Century Limited have been fined a total of $87,600 and Galaxy Gifts Limited has been warned in the latest NZCC product safety cases. The businesses operated in various locations from Oamaru to Otahuhu and all supplied toys which were unsafe because they did not comply with the product safety Standard for toys for small children. ASB admits responsible lending failures and agrees to pay customers $8.1m following an NZCC investigation ASB Bank Limited (ASB) has entered into an $8.1m settlement agreement with the NZCC after admitting it failed to ensure its systems and processes were sufficient to ensure that required information was given to more than 73,000 home and personal loan customers who made certain changes to their loans. The selfreported error occurred when the bank’s standard operating procedure was not consistently followed for customers making changes to the relevant repayment date, amount and frequency of their existing loan agreements either in branch or over the phone. UDC settlement with NZCC on unreasonable fees Finance company UDC Finance Limited (UDC) has entered into a settlement with the NZCC, acknowledging that it charged unreasonable default fees and agreeing to compensate borrowers. UDC provided loans of typically $10,000 or more for the purchase of motor vehicles. Between June 2015 and September the following year it charged a $45 dishonour fee when a borrower failed to make a scheduled loan repayment. If the borrower remained in default seven days after the scheduled payment was missed, UDC then charged a late payment fee. Between June 2015 and February 2021, the late payment fee charged varied between $45 and $73. UDC will compensate borrowers accordingly, and will pay $50,000 towards the NZCC’s legal costs. NZCC warns Genesis over business billing errors The NZCC has issued a warning letter to Genesis Energy Limited about billing errors concerning electricity line charges to business customers. Genesis reported the errors to the NZCC. Genesis is crediting or refunding the 1,576 customers who overpaid $1,138,943 in total. It will not seek to recover charges from the 1,356 customers who underpaid more than $2,400,000 in total.

Telecommunications Commission maintains regulation of three telco services to protect consumers The NZCC has announced that it will keep regulation in place for three wholesale telecommunications services to continue to promote competition and protect consumers. The three wholesale services are number portability, interconnection with a fixed public switched telephone network (PSTN), and mobile co-location. The final decision is available here. Telcos step up to support consumer choice Vodafone, Spark and 2Degrees have agreed to provide more information and tools to support consumer choice. Under commitments outlined in an open letter published by the NZCC, the three mobile operators will provide at least 12 months’ usage and spend information to their customers, an annual usage and spending summary to their customers including a prompt to consider whether they are on the right plan and promote the development of comparison tools including a prospective consumer data right to make it easier for customers to compare plans and providers. Plan B Group warned over failure to comply with levy requirements The NZCC has warned telecommunications company Plan B Group over its failure to meet statutory obligations to provide information needed to calculate the 2019/20 Telecommunications Development Levy (TDL). The government uses the annual TDL to pay for telecommunications infrastructure including the relay service for the deaf and hearing-impaired, broadband for rural areas, and improvements to the 111 emergency service. Plan B was liable to pay the TDL for the first time in 2019/20 but failed to provide specified financial information and an assurance or audit report within the required timeframe. First COVID-19 lockdown accelerated data usage trends The NZCC’s Annual Telecommunications Monitoring Report shows that the initial COVID-19 lockdown accelerated the growth in fixed broadband data with a 37% surge in usage for the year ending 30 June 2020. The initial lockdown highlighted that while most broadband technologies held up well, with average 18

CO R PO RA TE RE PO RTE R download speeds remaining steady despite significant increases in usage, fixed wireless broadband speeds dropped by 25%. The report also looks at market shares for the industry. Overall, smaller telecommunications providers continue to grow their market share in the fixed-broadband market. Smaller retailers’ market share grew from 11% to 13% in 2020. Key issues identified for first review of Telco Dispute Resolution Scheme The NZCC has published a paper outlining the key issues it intends to focus on for its first review of the Telecommunications Dispute Resolution Scheme. The review will focus on consumer awareness of the scheme, the scheme’s ability to address systemic issues to improve outcomes for consumers and the complaint handling process. The NZCC will release a draft report for consultation around September, before publishing a final report in November. Next steps to address pain points for telecommunications consumers The NZCC has published a paper outlining the next steps towards improving consumer experience with providers of internet, landline and mobile phone services. Telecommunications Dispute Resolution Scheme figures show customer complaints about their providers continued to increase in the year to June 2020. The NZCC intends to publish a final paper on what pain points it will prioritise in mid-October before moving to address and test potential solutions in late 2021 and early 2022. NZCC reconfirms fibre input methodology for cost of capital The NZCC has issued a letter to the telecommunications industry setting out its reasons for not reopening the fibre input methodology (IM) for cost of capital in light of the Covid-19 pandemic. The IMs are the upfront rules, requirements and processes underpinning the new regulatory regime for fibre providers. In light of the economic uncertainty around the impact of the Covid-19 pandemic, in July 2020 the NZCC committed to reviewing whether it should re-examine the cost of capital IM due to the impacts of the pandemic, before April 2021. The NZCC’s review did not find evidence to support a need to re-examine the cost of capital IM and notes the New Zealand economy is in a stronger position than anticipated at the outset of the pandemic. NZCC completes review of consumer mobile phone bills The NZCC has published a letter confirming it has completed its review of consumer mobile phone bills along with updated analysis addressing feedback from the telecommunications industry. In September 2020, the NZCC published an open letter to Spark, Vodafone and 2degrees asking them to share their plans for providing their customers with more meaningful product and service comparisons and to guard against overspending. This was accompanied by a report from Schiff Consulting, aspects of which were later contested by the industry. On 9 March 2021, mobile network operators and the Telecommunications Forum agreed to implement a range of measures to provide consumers with greater access to and transparency of spend and usage information. Latest broadband report confirms improved performance of premium fibre plans The latest report from the NZCC’s Measuring Broadband New Zealand programme shows that the performance of Fibre Max plans has improved substantially. This follows a collaboration between the NZCC, its independent testing partner, SamKnows, and the industry, to identify and fix performance issues with premium fibre plans. The report shows the average download speed of Fibre Max plans has increased by more than 200 Mbps, or 35%, since the previous report, to around 840 Mbps. The latest report and a new online dashboard to explore the results in more detail is available on the NZCC’s website. Vodafone found guilty of misleading conduct over “FibreX” service Vodafone NZ Limited has been found guilty of engaging in conduct that was liable to mislead consumers in relation to its FibreX branded broadband service. In a case brought by the NZCC and heard last year, Judge Sinclair found Vodafone’s branding and advertising was liable to mislead consumers into thinking that the FibreX branded service was delivered over a fibre-to-the-home network (like those services delivered over the Government-subsidised Ultra-Fast Broadband networks), when it was not. A full version of the judgment is available here. Revised process for implementing new regulatory regime for Chorus The NZCC has released papers outlining its approach to determining Chorus’ initial price-quality regulatory asset base (PQ RAB) and price-quality path under the new regulatory regime for fibre providers. Chorus’ PQ RAB is the value of its regulated fibre network, including an allowance for the financial losses made during the initial period of operating Ultra-Fast Broadband networks. It is used to set the maximum revenue Chorus can earn from its customers when supplying regulated services. The process update

CO R PO RA TE RE PO RTE R paper, Chorus’ initial PQ RAB proposal consultation paper and notices of intention for potential input methodology (IM) amendments the NZCC plans to make are available here.

Mergers and acquisitions Preliminary competition concerns over Aon's proposed merger of Willis Towers Watson The ACCC has preliminary competition concerns with Aon plc’s (Aon) proposed merger with Willis Towers Watson plc (WTW). Aon and WTW are two of the three largest providers of commercial risk, reinsurance and employee benefits broking and advisory services globally, including in Australia. The ACCC is concerned that the proposed merger will significantly lessen competition in the supply of these services in Australia.

Market behaviour TasPorts declared to have misused its market power The Federal Court has declared by consent that Tasmanian Ports Corporation Pty Ltd engaged in conduct that had the likely effect of substantially lessening competition in the markets for towage and pilotage services in northern Tasmania, in proceedings brought by the ACCC. The Court declared that TasPorts had breached section 46 of the Competition and Consumer Act (CCA) by imposing a new port access charge on one of its customers, Grange Resources Ltd, after Grange notified TasPorts that it was going to switch to Engage Marine Tasmania Pty Ltd, a new provider of towage and pilotage services. This is the first finding of a contravention of section 46 of the CCA since it was amended in 2017 in response to the Harper Review of Australia’s competition laws. TasPorts’ undertaking is available at Tasmanian Ports Corporation Pty Limited.

Consumer issues Visa undertakes to address competition concerns over debit card payments The ACCC has accepted a court-enforceable undertaking from Visa AP (Australia) Pty Ltd and Visa Worldwide Pte Limited (Visa) in relation to concerns that Visa may have limited competition in relation to debit card acceptance through its dealings with large merchants. ACCC Chair Rod Sims cited his concern that Visa’s strong market position in the credit card acceptance market could “be leveraged to limit competition in the debit card acceptance market by tying the offer of cheaper strategic merchant rates for credit card transactions to a commitment from the merchant to process Visa branded dual network debit card transactions via the Visa network and not through eftpos.” Visa’s undertaking ensures it cannot offer strategic merchant rates for credit card payments to merchants on condition that the merchant processes debit card payments through the Visa network. Federal Court finds Google misled consumers about the collection and use of location data The Federal Court has found that Google LLC and Google Australia Pty Ltd (Google) misled consumers about personal location data collected through Android mobile devices between January 2017 and December 2018, in a world-first enforcement action brought by the ACCC. The Court ruled that when consumers created a new Google Account during the initial set-up process of their Android device, Google misrepresented that the ‘Location History’ setting was the only Google Account setting that affected whether Google collected, kept or used personally identifiable data about their location. The ACCC is seeking declarations, pecuniary penalties, publications orders, and compliance orders. This will be determined at a later date. Full Court dismisses Volkswagen $125 million penalty appeal The Full Federal Court today dismissed an appeal by Volkswagen AG against the penalties handed down earlier for making false representations about compliance with Australian diesel emissions standards. In dismissing the appeal, the Full Court upheld the $125 million penalty imposed by the Federal Court, and held that the $125 million penalty ‘was not excessive, let alone manifestly excessive’. The Federal Court imposed penalties of $125 million in December 2019, and Volkswagen appealed this decision, seeking

CO R PO RA TE RE PO RTE R orders that the Court instead impose the $75 million penalty amount which had been jointly put to the Court by Volkswagen and the ACCC.

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