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Commerce Commission v Objective Corporation Ltd

Commerce Commission v Objective Corporation Ltd

Case [2022] NZHC 1864 29 July 2022

Breach of Contract

Unconscionable Conduct

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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-29

[2022] NZHC 1864

UNDER the Commerce Act 1986

BETWEEN

COMMERCE COMMISSION

Plaintiff

AND

OBJECTIVE CORPORATION LIMITED

Defendant

Hearing: 30 May 2022 with further submissions on 21 June 2022

Appearances:

J S Cooper QC, F J Cuncannon and P I C Comrie-Thomson for the Plaintiff

J H Stevens and G M Shewan for the Defendant

Judgment:

29 July 2022

JUDGMENT OF PALMER J

Solicitors/Counsel
J S Cooper QC, Auckland Meredith Connell, Wellington Bell Gully, Wellington

COMMERCE COMMISSION v OBJECTIVE CORPORATION LIMITED [2022] NZHC 1864 [29 July 2022]

What happened?

[1] Objective Corporation Ltd (Objective) is a multinational software company, listed in Australia. In April 2019, Objective acquired 100 per cent of the shares of Omega Group Holdings Ltd and Alpha 88 Ltd, which offers a specialised building consent cloud-based software product called AlphaOne (now rebranded as Objective Alpha). In October 2019, Objective entered an agreement to purchase all the shares of Master Business Systems Ltd (MBS), which offers a specialised building consent software product called GoGet and had a 50 per cent interest in a joint venture that supplied a related cloud-based website portal, the Simpli Portal. These companies were each other’s closest competitors in New Zealand for the supply of software for building consent authorities to assist in, and digitise, the building consent process.

The proceedings

[2] Objective accepts that, given its first acquisition, its second acquisition contravened s 47 of the Commerce Act 1986 (the Act). Section 47 prohibits acquisition of assets of, or shares in, a business if “the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market”. The market is the New Zealand market for the supply to building consent authorities of software for the digitisation of building consent processes. The Commerce Commission and Objective have settled these proceedings regarding the breach of s 47. They have agreed to recommend to the Court that it impose a final penalty of
$1.54 million on Objective.

[3] I have not referred to commercially confidential information provided to the Court in this judgment. At the request of the parties, I order that the Court file is not to be searched or accessed without leave of the Court, after considering the views of the parties.

Approach to Penalty

[4] Agreed penalty proceedings are in the interests of the parties and the Court, in enabling early disposal of the proceedings and avoiding costly litigation. As the High Court has noted previously in Commerce Commission v New Zealand Milk

Corporation Ltd, there is no objection to parties tendering a joint view on the appropriate penalty.1 The agreed penalty approach in Australian proceedings was confirmed by the High Court of Australia in Commonwealth of Australia v Director, Fair Work Buildings Industry Inspectorate, on the basis the Court must satisfy itself that the submitted penalty is appropriate.2

[5] While the parties agree on a proposed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Commerce Commission v Objective Corporation Ltd

Details

AGLC: Commerce Commission v Objective Corporation Ltd [2022] NZHC 1864
Case: [2022] NZHC 1864
Decision Date: 29 July 2022

CaseChat Overview and Summary

Objective Corporation Ltd, a multinational software company, faced proceedings brought by the Commerce Commission in the High Court of New Zealand, contesting the company's acquisition of shares in two other companies that provided software for building consents. The Commission argued that the acquisitions contravened section 47 of the Commerce Act 1986, which prohibits acquisitions that would substantially lessen competition in a market. The legal issues for the Court to determine included whether divestment was a viable penalty instead of a pecuniary penalty, and if so, the appropriate size and adjustments of any pecuniary penalty. After considering the factors relevant to setting the penalty, including the seriousness of the contravention and the resources of the defendant, the Court concluded that divestment was not a viable option and set a starting point for the penalty based on general and specific deterrence. The Court then made defendant-specific adjustments and reviewed the penalty for totality, ultimately ordering Objective to pay a penalty of $1.54 million.

Palmer J determined that divestment was not a practical or appropriate penalty for Objective, as it was unlikely that a willing buyer could operate the acquired businesses successfully. The Court established the starting point for the penalty by considering the objectives of general and specific deterrence, and relevant factors such as the importance of the market, the seriousness of the contravention, and the size and resources of the defendant. The Court accepted the Commission's proposed starting point of $2.2 million and applied defendant-specific adjustments, resulting in a penalty of $1.54 million. The Court reviewed the penalty for totality and did not make any further adjustments. The Court ordered Objective to pay a penalty of $1.54 million for breaching section 47 of the Commerce Act 1986.

Orders