Commission says get legal advice before forming alliances
Published15 Sep 1997
The Commerce Commission today strongly advised any companies considering alliances between telecommunications and utilities to get legal advice and, where appropriate, clearance or authorisation from the Commission.
The Commission's Commerce Act Manager, Jo Bransgrove, made the comments in a speech to the Strategic Alliances and Joint Ventures in Telecommunications and Utilities Conference in Auckland today.
Ms Bransgrove said that the issues surrounding convergence of telecommunications, media, entertainment and other electronic industries are of particular interest to the Commission. The key is how new technology is quickly making these separate markets combine into fewer markets - possibly even into one market.
An important issue closely linked to convergence, is how alliances between utilities, such as power companies, and companies in the converging telecommunications markets should be viewed by the Commission.
Today, it could be argued that an alliance between, for example, a power company and a telecommunications company involves separate markets and is unlikely to raise significant competition concerns. But rapidly changing technology means that will not necessarily be the case in the near future.
The Commission is developing a theoretical framework to analyse the impact on competition of convergence and issues that follow from that, including the effects of certain types of agreements.
"We will be focusing on these issues over the next six months," Ms Bransgrove said.
She said that if any companies are considering entering into a strategic alliance that might involve anti-competitive behaviour, then they should think of two things: "Firstly, anti-competitive behaviour is not a good strategy. It will restrict your own opportunities, as well as your competitors'; it will invariably fail or be caught; and enforcing your alliance will probably be more costly than any benefits received from it.
"Secondly, remember the penalties available under the Act. The Court is increasingly willing to use those penalties, as was shown by the Port of Nelson case, where penalties and costs imposed on the port company were $825,000. In addition, I would confidently expect that the cost to the port company of running the litigation was well in excess of that. Add to that the cost to your firm's reputation, and it should be clear that the smart strategy is to avoid alliances that might lead to allegations of anti-competitive collusion."
At times it can be argued that a business practice that is prohibited by the Commerce Act may bring economic benefits to the country. The Act is pragmatic, and recognises that this is possible. A business practice that would otherwise be prohibited by the Act can still be authorised if the Commission is satisfied that its public benefits are greater than its detriments to competition.
If an application is not made to the Commission, then it cannot consider public benefits from the practice and can only investigate it as a possible breach of the Act.
Copies of Ms Bransgove's speech are available from reception at the Commission's Wellington office, level 7, Landcorp House, 101 Lambton Quay.
