Archive | Regulation

ASIC takes Westpac to court alleging irresponsible lending

The Australian Securities & Investments Commission (ASIC) launched proceedings against Westpac Banking Corp on Wednesday for alleged breaches of responsible lending laws on home loans.

The federal agency is seeking civil penalties for contravening the responsible lending provisions of the National Consumer Credit Protection Act between December 2011-March 2015.

ASIC alleges the bank failed during that period to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.

The agency alleged Westpac:

  • used a benchmark instead of the actual expenses borrowers declared in assessing their ability to repay the loan
  • approved loans where a proper assessment of a borrower’s ability to repay the loan would have shown a monthly deficit, and
  • for home loans with an interest-only period, failed to have regard to the higher repayments at the end of the interest-only period when assessing the borrowers’ ability to repay.

The National Consumer Credit Protection Act has provisions to ensure that credit providers make reasonable inquiries about a borrower’s financial situation and assess whether a loan contract will be unsuitable for the borrowers.

The first hearing for the proceedings will be on 21 March in the Federal Court in Sydney.

ASIC said the action against Westpac followed its review of interest-only home loans, in which it reviewed the responsible lending practices of 11 lenders.

Links:
Concise statement – ASIC vs Westpac
Originating application
20 August 2015: Home loans review
ASIC release, 20 August 2015: Lenders to improve standards following interest-only loan review

Attribution: ASIC release.

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Aon seeks clearance to buy Fire Protection Inspection Services

Aon NZ has applied to the Commerce Commission for clearance to acquire the business & assets of Fire Protection Inspection Services Ltd.

Both companies provide a range of fire protection services nationally, including inspection of fire sprinkler & fire alarm systems. The commission said Aon, in its role as a sprinkler system certifier, also certifies new sprinkler systems for compliance with the specified New Zealand standard and approves & lists contractors certified to install or inspect sprinkler systems.

Attribution: Commission release.

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Commission turns down media merger

The proposed merger of NZME Ltd & Fairfax NZ Ltd’s media operations would have widespread impacts, and the Commerce Commission said today it intended to decline to authorise it.

That’s not the end of the matter, though. This was a draft determination and the commission is seeking submissions on it, closing Tuesday 22 November.

The commission outlined numerous impacts in its decision release – nearly 90% of the print media market controlled by one organisation, the 2 biggest news websites, one of the 2 biggest commercial radio companies.

I viewed the merger as a defensive tactic in light of the declining appeal of print media, hastened by the declining quality of the products (with rare aberrations).

The commission highlighted single control of 2 local newspaper networks. Since Fairfax took control of my local newspaper, the product has only loosely resembled a newspaper and has been seriously outdone by 2 startups owned by one woman.

The commission also made special mention of the merged entity introducing a paywall for at least one of its websites, without saying (in its release, I haven’t got through the decision yet) why this would be a special problem. It might be simply the likelihood of price increases (from zero to whatever), or something to do with the control of news.

I like the idea of major media hiding behind paywalls because that opens the market to other players, and online there are plenty.

Below, the commission’s release in full:

Commission proposes to decline NZME/Fairfax merger 

The Commerce Commission has today published its draft determination on NZME and Fairfax’s application under the Commerce Act seeking authorisation to merge their media operations in New Zealand. The Commission’s preliminary view is that it should decline to authorise the merger.

The proposed merger would bring together New Zealand’s two largest newspaper networks and two largest news websites. The Commission has assessed the impact of the merger on competition in both advertising and reader markets for a number of media platforms as well as the overall impact on quality and plurality (diversity of voices).

The Commission’s preliminary view is that the merger would be likely to substantially lessen competition in a number of markets, including the markets for premium digital advertising, advertising in Sunday newspapers and advertising in community newspapers in 10 regions throughout New Zealand. It also considers the merged entity would be likely to increase subscription and retail prices for Sunday newspapers and introduce a paywall for at least one of its websites.

Chairman Dr Mark Berry said the merger would result in one media outlet controlling nearly 90% of New Zealand’s print media market.  This would be the second highest level of print media ownership in the world, behind only China.  The merged entity would also control New Zealand’s two largest news websites – nzherald.co.nz and stuff.co.nz – which together have a population reach more than four times larger than the next biggest domestic news website. Further, the merged entity would own one of New Zealand’s two largest commercial radio companies.  All this would result in an unprecedented level of media concentration for a well-established liberal democracy.

“Our preliminary view is that competition would not be sufficiently robust to constrain a multi-media organisation, potentially with a single editorial voice, that would be the largest producer of national, regional and local news by some margin in New Zealand,” Dr Berry said.

“NZME and Fairfax each play a substantial role in influencing New Zealand’s news agenda. Competition between the parties drives content creation, increases the volume and variety of news available in New Zealand and assists with objectivity and accuracy in reporting. Our view is that the removal of this competitive tension would likely lead to a reduction in the quality and quantity of New Zealand news content both online and in print, with potential flow-on effects in television and radio.

“We recognise that the merger would achieve net financial benefits through organisational efficiencies. However, while we cannot quantify the detriments we see with respect to quality and plurality of the media, we consider that detriments resulting from increased concentration of media ownership in New Zealand would outweigh the quantified benefit we have calculated. In particular, the potential loss of plurality has weighed heavily in our draft decision. On this basis, we propose to decline the application.”

Link:
NZME Ltd and Fairfax New Zealand Ltd – Authorisation draft determination – 8 November 2016

Attribution: Commission release.

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Hawkins’ finance companies guilty on loan contract enforcement

2 finance companies headed by former Equiticorp boss Allan Hawkins have been found guilty in the Auckland District Court on 106 charges relating to enforcement of loan contracts. Sentences haven’t been imposed yet.

Mr Hawkins’ son Wayne was also a director of the 2 finance companies at the time of the events before the court, but resigned in February after setting up his own finance company, ABC Loans Ltd, last December.

Judge David Sharp dismissed another 19 charges due to a lack of certainty about the circumstances in which a lender could continue to charge interest & costs after repossessing & selling consumer goods under a continuing security agreement. The Commerce Commission said on Friday it would seek to have those charges reinstated.

Mr Hawkins’ companies, Budget Loans Ltd & Evolution Finance Ltd, failed in a bid to have 122 of the charges dismissed at a hearing in May on the grounds that the Fair Trading Act didn’t regulate them.

The companies bought National Finance 2000 Ltd’s loan book in 2006 and Western Bay Finance Ltd’s remaining loan receivables in 2008, and sought to distinguish those acquisitions from being “in trade” or “in connection with the supply or possible supply of services”.

Judge Sharp found that “in trade” representations about the 2 companies’ rights to the way they could recover money from debtors was an integral part of their businesses, and he found the companies guilty of representations made to 21 borrowers while enforcing loan contracts.

The commission filed proceedings against the companies under the Fair Trading Act in December 2014 alleging they misled consumers about their rights by:

  • repossessing or threatening to repossess borrowers’ property when they didn’t have a right to repossess
  • adding interest & costs to loan balances after borrowers’ property had been repossessed & sold, when that’s unlawful
  • telling debtors they had to make loan payments at a higher rate than had been set by the court, and
  • telling debtors they had a shorter time to remedy a loan default before their goods were repossessed than they were allowed under law.

The commission previously prosecuted Budget Loans in 2010, when the company admitted 34 charges of breaching the Fair Trading Act by charging interest & fees after it had repossessed & sold items of security on National Finance loans. It agreed to make substantial repayments and was fined $30,750.

The commission started the current investigation into Budget Loans & Evolution Finance in 2012, issued a “Stop now” letter to the 2 companies in November 2013 with regard to one aspect of their conduct while its investigation continued, and filed charges in December 2014.

Allan Hawkins headed the listed Equiticorp Group, which was placed in statutory management in 1989 after collapsing in the wake of the 1987 sharemarket crash. The Serious Fraud Office prosecuted Mr Hawkins & other Equiticorp directors and he was sentenced to a 6-year jail term in 1991. He was released in 1995.

Links:
Commerce Commission, enforcement response register & judgments

Earlier stories:
17 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months

Attribution: Commission release, judgments, Companies Register.

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Commission clears Fletcher to buy Higgins

The Commerce Commission cleared Fletcher Building Ltd yesterday to acquire Higgins Group Holdings Ltd.

The clearance covers Higgins’ road surfacing & road maintenance, civil structure & construction products, including most of its aggregates & bitumen businesses. Higgins has not sold its readymix concrete business & property businesses, which will be transferred to existing Higgins shareholders before the acquisition.

Fletcher Building also originally applied for clearance to acquire Horokiwi Quarries Ltd in Wellington, but amended its application to remove this quarry during the commission’s consideration.

The commission said today it focused its consideration of the merger on the competitive effects in the supply of aggregates in regions where Fletcher Building (operating as Winstones) & Higgins overlap – namely North Waikato, Napier, Manawatu-Whanganui, Kapiti & Christchurch. In particular, the commission considered whether the loss of Higgins’ quarry operations in these regions would make it easier for Fletcher Building to raise prices to external aggregate customers such as roading contractors.

Commission chair Mark Berry said the commission was satisfied the merger wouldn’t have, or wouldn’t be likely to have, the effect of substantially lessening competition in the affected markets.

“Higgins & Fletcher Building are key competitors of aggregate products in particular regions. However, we consider that strong competition would continue in these regions from existing competitors and the ability of customers to self-supply.”

Link: Commerce Commission clearance register, decision

Attribution: Commission release.

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Bayleys lands $2.2 million penalty for anti-Trade Me agreement

Real estate company Bayley Corp Ltd was ordered on Friday to pay an agreed $2.2 million and its Hamilton office owner, Success Realty Ltd, $900,000 after penalty hearings in the Auckland High Court over price-fixing & anti-competitive agreements.

They were among 13 national & regional real estate agencies the Commerce Commission filed court proceedings against last December. The commission also issued warnings to 8 more agencies. The proceedings related to 3 separate alleged price-fixing & anti-competitive agreements among national, Hamilton & Manawatu real estate agencies in response to Trade Me changing its fees for listing properties for sale on its website. Trade Me changed from a monthly subscription fee to a fee per listing of about $159, with no cap on the number.

The Commerce Commission alleged that, between 29 August 2013 & 1 August 2014, Bayleys entered into and gave effect to an anti-competitive price-fixing agreement with 4 other real estate companies. Only Bayleys had accepted that the conduct was unlawful. The Commerce Commission & Bayleys agreed to recommend to the court that a $2.2 million penalty would be appropriate.

Bayleys and the other 4 companies in the national agreement – Barfoot & Thompson Ltd, Harcourts International Ltd, LJ Hooker NZ Ltd & Ray White (Real Estate) Ltd – own 50% of Property Page (NZ) Ltd, the company that operates the realestate.co.nz website. Other real estate agents own the remaining 50% of Property Page.

Palmerston North agency Unique Realty Ltd, the third largest agent involved in the Manawatu agreement with a 19% market share (higher than Bayley’s market share), had also admitted responsibility early and had a $1.25 million penalty imposed on it. Justice Courtney said in yesterday’s decision on Bayleys: “Its conduct was comparable in that it was not an instigator or ringleader, the agreement was in force for about 6 months and had the same effect on the Manawatu region as the Property Page agreement had more widely in New Zealand, of eliminating an aspect of competition between the agents, thereby conferring potential for commercial gain.”

Bayleys & Success were the first to appear in court in relation to the national & Hamilton allegations. Both agencies co-operated with the commission’s investigation at an early stage. Bayleys reached a settlement with the commission before court proceedings were filed, and Success reached a settlement shortly after. Each company admitted its conduct breached the Commerce Act prohibition on price fixing.

Justice Patricia Courtney acknowledged, in her ruling on Bayleys released on Friday, the seriousness of the conduct & its potential to affect a large number of transactions for residential properties – both at the time of the arrangement and since.

Justice Courtney said: “The possibility of competition was removed altogether for the period of the agreement, and that situation meant that a new status quo existed when the revised model was introduced. This meant that the scope for competition after the agreement came to an end was open to influence.”

The judge didn’t accept that Success’s conduct fell at the lower end of the spectrum: “The listing of properties on Trade Me was a widespread & popular means of advertising for vendors and the agreement had the effect of depriving vendors of access to that service or, at the least, of the ability to negotiate for that service.”

The Commerce Commission has now achieved penalties from an agency in each of the 3 separate national, Hamilton & Manawatu proceedings. Its cases against the remaining 10 agencies, Property Page Ltd & 3 individuals remain before the court.

Bayleys managed to get its penalty deferred until 31 December, with interest payable, after telling the judge it was committed to “certain transactions between May & October which require substantial capital”.

Links: Commerce Commission enforcement response register
Commerce Commission v Bayley Corp Ltd, High Court judgment 1 July 2016
Commerce Commission v Success Realty Ltd, High Court judgment 1 July 2016

Earlier story:
17 December 2015: Commission files action against agencies over reaction to Trade Me move

Attribution: Commission release, judgment.

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Commission clears Z Energy to acquire Chevron subject to divestments

The Commerce Commission has cleared Z Energy Ltd to acquire 100% of the shares in Chevron NZ, the owner of the Caltex & Challenge brands in New Zealand.

Commission chair Mark Berry said today the clearance was subject to Z Energy divesting 19 retail sites & one truck stop in locations where the commission considered competition would be substantially reduced as a result of the merger.

The commission analysed the competitive impact of the proposed merger on the supply of fuel to retail & commercial customers, and considered how the merger would impact on competition in upstream markets associated with refinery, distribution & storage infrastructure.

Dr Berry said that, having analysed each market, the commission was satisfied Chevron’s departure from New Zealand wouldn’t substantially lessen competition, subject to divestments being undertaken. Commissioners agreed on the impact of the merger on 6 of the 7 markets analysed, with the exception being retail service stations.

“Chevron, as supplier to the Caltex & Challenge brands, has been a passive competitor in New Zealand and followed the lead of its rivals rather than taking an aggressive approach in its pricing. We consider, by majority, that subject to Z Energy divesting 19 retail sites, Chevron’s absence would not make a material difference to the competitive dynamics we currently see, where retail price movements are dominated by Z, BP, Mobil & Gull.”

The commission assessed whether the merger could increase the ability of the remaining 3 major retailers to co-ordinate retail pricing. 3 of the 4 commissioners on the decision-making panel – Dr Berry, Sue Begg & Anna Rawlings – considered that the information obtained during the investigation showed pricing patterns differed around the country and Chevron’s absence wouldn’t make co-ordination more likely, given the divestments the commission required. Dr Jill Walker dissented on this part of the decision.

Dr Walker said there was evidence to suggest co-ordination of retail prices was occurring in some local markets, which would become more firmly entrenched with the merger. Moreover, the permanent removal of a competing supply chain meant the potential for Chevron’s assets to disrupt co-ordination in the future would be gone.

The commission will release a public version of the full written reasons for its decision in mid-May.

Earlier story:
3 June 2015: Z Energy buys Caltex

Attribution: Commission release.

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Commission lifts ‘stop’ on Euro Corp steel mesh

The Commerce Commission said on Friday it had reached an interim agreement with Euro Corp Ltd and lifted its advice not to sell ductile steel mesh represented as grade 500E.

The commission said agreement was reached after consultation with the Ministry of Business, Innovation & Employment. It allows Euro Corp to sell batches of steel mesh provided they pass specific independent testing and have never failed testing in the past.

As part of the agreement, Euro Corp has signed court-enforceable undertakings that require every current & future batch of 500E grade steel mesh to be tested at an International Accreditation NZ-accredited laboratory. The steel mesh must pass 18 tests/batch (3 sheets, 6 tests/sheet) before being offered for sale as 500E mesh, and all test results must be provided to the commission.

The commission said the testing requirements were in line with an expected clarification to the standard the ministry was developing, after convening a technical advisory meeting with industry & technical experts 2 weeks ago: “The clarification will be designed to ensure a uniform approach to testing steel mesh under the standard (AS/NZ 4671:2001) and remove any confusion over the appropriate testing methodology.”

The commission said it was continuing its investigation into historical non-compliance with the standard, and any batches of steel mesh that failed its testing or any other testing wouldn’t be sold.

“The commission’s investigation into steel mesh is focused on possible misrepresentations as to the performance characteristics of the mesh. Misrepresenting a product as complying with the standard when it does not is a breach of the Fair Trading Act, for which companies can be fined up to $600,000/offence.”

Attribution: Commission release.

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Steel & Tube undertakes dual mesh testing

Steel & Tube Holdings Ltd said on Wednesday it would supply only seismic mesh tested by an external laboratory to remove any doubt around product compliance. This follows questions raised in recent weeks about compliance of seismic mesh supplied by several companies.

Steel & Tube chief executive Dave Taylor said the company maintained confidence in its seismic mesh and, to reassure customers, mesh supplied by Steel & Tube would be subject to dual testing – it must pass both the in-house & an external laboratory testing.

Although the laboratories were testing against the same standard, Steel & Tube was surprised by the variability in the results, including results provided by the Commerce Commission, and had encountered ambiguity around the interpretation of the testing standards.

“While we follow through a robust validation process, we will only be selling our seismic mesh range that has been passed as compliant by an external testing agent. That may mean some disruption in supply in the short term, but we will not accept anything less than absolute validation.”

Given the ambiguity & interpretation Mr Taylor said it was perhaps time to review the standards regime.

Earlier story:
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Company release.

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Propbd on Q F19Feb16 – Future transport, Higgins & adhesives clearances, port study, convention centre start

Feedback sought on future transport needs
Fletcher seeks Higgins acquisition clearance
HB Fuller seeks Advanced Adhesives acquisition clearance
Take a surfing cruise to the port of Muriwai…. 
Ministers turn first sod for convention centre

Feedback sought on future transport needs

Auckland Council, Auckland Transport & the NZ Transport Agency are seeking public input on planning transport for about 110,000 new houses on greenfields land.

Deputy mayor Penny Hulse said yesterday significant new transport infrastructure would be needed to support about 110,000 new houses & 50,000 new jobs in future urban areas matching the size of urban Hamilton.

The council & transport organisations will use feedback to help identify the transport networks needed during the next 30 years to support future urban areas in the north-west, southern Auckland, Warkworth & Silverdale.

6 weeks of public consultation began yesterday, with 2 weeks of initial feedback on proposals in each future urban area, starting in southern Auckland, followed by 4 more weeks starting in April.

“It is important we identify early what is needed so projects can be developed and in place before new housing and businesses go in.

“Getting transport well integrated with the future communities to ensure they are well connected and great places to live will be a priority. Making sure jobs are easy for people to get to is also very important.”

Auckland Transport key strategic initiatives project director Theunis van Schalkwyk said the agency was working closely with developers to deliver new transport for special housing areas as they are built, but needed feedback on what people believe future residents’ transport priorities will be.

“It is a good opportunity for people to help guide what mix of transport projects need to happen.”

Consultation will be conducted in southern Auckland from 18 February-3 March, Warkworth & Silverdale/Dairy Flat 25 February-10 March, and north-west Auckland 3-17 March.

Link:
Auckland Transport feedback 

Fletcher seeks Higgins acquisition clearance

Fletcher Building Ltd, through subsidiary Fletcher Building Holdings NZ Ltd, has applied to the Commerce Commission for clearance to acquire Higgins Group Holdings Ltd, including 50% of shares in the Horokiwi Quarries Ltd.

The application excludes Higgins’ readymix concrete business, including joint ventures in readymix concrete, which will be transferred to existing Higgins shareholders before the proposed acquisition.

Higgins is a privately owned company that provides civil construction services and is a manufacturer of construction products such as aggregates.

The Commerce Commission said its decision was due by Thursday 3 March.

Link: Commission clearances register, Fletcher application

HB Fuller seeks Advanced Adhesives acquisition clearance

HB Fuller Co Australia Pty Ltd has applied to the Commerce Commission for clearance to acquire the business & assets of Advanced Adhesives (NZ) Ltd.

HB Fuller is a member of a global group involved in the manufacture & marketing of adhesives, sealants & other speciality chemical products. In New Zealand, it mainly supplies hot melt adhesives for the industrial packaging, paper converting, woodworking, bookbinding & hygiene sectors. It also supplies a small volume of water-based adhesives to customers in the bookbinding & woodworking sectors.

Advanced Adhesives is a manufacturer & supplier of a range of hot melt & water-based adhesives used in industrial applications, including packaging, paper converting & woodworking.

Link: Commission clearances register, HB Fuller application

Take a surfing cruise to the port of Muriwai…. 

The Auckland port future study’s consensus working group released initial work identifying a long list on Wednesday of areas being considered as options to meet Auckland’s future demand for port activities.

The primary consideration seemed to be salt water – including most unlikely port contenders such as Muriwai.

Missing from the list were existing inland port sites and how those & new inland sites might form a component of new port development.

The consensus working group & wider reference group are meeting today to discuss a long list of areas & criteria. A consultant’s report to the consensus working group is due in April and that group has to make recommendations to Auckland Council at the end of June.

Link: Port future study

Ministers turn first sod for convention centre

Prime Minister John Key and Economic Development Minister Steven Joyce turned the first sod yesterday on construction of the SkyCity Entertainment Group Ltd’s NZ international convention centre between Hobson & Nelson Sts.

The total project cost of the convention centre plus associated hotel, laneway & extra carparks is $700 million. The centre is due to open in 2019.

Attribution: Commerce Commission, company & ministerial releases.

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