The Commerce Commission has authorised the New Zealand Rugby Union to vary the salary cap rules for provincial unions competing in the Air New Zealand Cup. The variation applies only to the 2007 year.
In June 2006 the Commission authorised a salary cap and associated rules. The NZRU had argued the cap would ensure a more even spread of good players and so improve the quality and profitability of Air New Zealand Cup rugby. The Commission can authorise anti-competitive arrangements if the public benefits outweigh the harm to competition.
In December 2006 the NZRU applied for the provincial unions to get temporary relief from the cap rules to allow them to cover the cost of releasing players for the Rugby World Cup 2007, and the associated conditioning programme. The NZRU argued that some unions were likely to breach the cap when paying for players to replace their absent All Blacks, and that unions should be able to spend up to $18,000 for each All Black who was released, without this counting under the cap.
The Commission concluded that the need to pay for replacements constituted a material change of circumstances since the original application, and that the temporary relief should be granted.
"This variation is a temporary, one-off measure to allow for changed circumstances," says Commerce Commission Chair Paula Rebstock.
"The relief measures proposed by the NZRU are set at a level that will result in a small net public benefit, and leave the balance of benefits and detriments expected to flow from the salary cap largely undisturbed," says Ms Rebstock.
"The Commission originally authorised the salary cap because it considered there were benefits to the New Zealand public."
"The original decision was a finely balanced one, and the Commission has always been clear that, to deliver those benefits, the salary cap must be rigorously enforced."
"The variation authorised today does not affect the need to maintain a 'hard cap' to ensure that the salary cap delivers the expected benefits," says Ms Rebstock.
A copy of the Determination is available on the Commission's website under the Anti-Competitive Practices Register on variation to Decision 580
Background
In Decision 580, issued on 2 June 2006, the Commission authorised the New Zealand Rugby Union to enter into, and to give effect to, arrangements to institute a salary cap for the Provincial Unions competing in the Premier Division of the then new inter-provincial rugby competition, now known as the Air New Zealand Cup competition; and to apply new rules governing player transfers.
Section 65 of the Commerce Act allows the Commission to vary, revoke or grant a new authorisation if there have been material changes in the circumstances since it was authorised or if an authorisation was granted on the basis of information that was false or misleading.
NZRU applied for a variation to the salary cap rules in December 2006, stating that two developments had occurred in relation to the All Blacks campaign for the Rugby World Cup 2007, would mean that the salary cap rules as authorised last year would operate in an unduly harsh or unfair manner. These were the need to cover the cost of releasing players for the conditioning programme, and to play in the World Cup.
The original salary cap authorisation, Decision number 580, and the Determination approving a variation to Decision 580, are available on the Commission's website under the Anti-Competitive Practices Register.
