PUBLIC VERSION Commerce Act 1986: Restrictive Trade Practice Section 58: Notice Seeking Authorisation The New Zealand Rugby Football Union Incorporated Date: 9 November 2005 The Registrar Business Acquisitions and Authorisations Commerce Commission PO Box 2351 WELLINGTON Application lodged by: Kensington Swan 89 The Terrace PO Box 10 246 Wellington Phone: (04) 472 7877 Fax: (04) 472 2291 Contact: John Land/Fleur Knowsley Pursuant to section 58 of the Commerce Act 1986 notice is hereby given seeking authorisation of certain restrictive trade practices. 053130106 fjk Index A Application Details .................................................................................................................... 4 1 Applicant....................................................................................................................... 4 2 Restrictive Trade Practice ............................................................................................. 4 3 Affected Parties............................................................................................................. 9 4 Commission Jurisdiction............................................................................................. 10 B Executive Summary ................................................................................................................. 11 5 Application.................................................................................................................. 11 6 Management Mechanisms........................................................................................... 11 7 Markets........................................................................................................................ 12 8 Counterfactual ............................................................................................................. 13 9 Public Benefits ............................................................................................................ 13 10 Competitive Detriments .............................................................................................. 14 11 Conclusion................................................................................................................... 15 C Proposed Arrangements ........................................................................................................... 16 12 Background ................................................................................................................. 16 13 Salary Cap ................................................................................................................... 19 14 Australian Experience ................................................................................................. 24 15 Player Transfer Regulations........................................................................................ 26 16 Non-payment of Modified Division One Players........................................................ 27 17 Implementation of the Proposed Arrangements.......................................................... 29 D Market and Competition Considerations ................................................................................. 31 18 Counterfactual ............................................................................................................. 31 19 Market Definition........................................................................................................ 32 20 Barriers to Entry/Expansion........................................................................................ 36 E Jurisdiction of the Commission................................................................................................ 37 21 Introduction................................................................................................................. 37 22 “Services” in terms of the Act..................................................................................... 37 23 Application of section 44(1)(f).................................................................................... 39 24 Conclusion................................................................................................................... 40 F Competition Analysis............................................................................................................... 41 25 Introduction................................................................................................................. 41 26 Salary Cap ................................................................................................................... 41 27 Player Transfer Regulations........................................................................................ 48 28 Non-payment of Modified Division One Players........................................................ 49 G Public Benefits – Salary Cap.................................................................................................... 57 29 Introduction................................................................................................................. 57 30 Direct Benefits ............................................................................................................ 57 31 Additional Indirect Benefits........................................................................................ 60 H Balancing of Benefits and Detriments ..................................................................................... 62 32 Section 61(6) analysis ................................................................................................. 62 I Confidentiality ......................................................................................................................... 63 33 Paragraphs containing Confidential Information ........................................................ 63 34 Schedules containing Confidential Information.......................................................... 63 35 Reasons for seeking Confidentiality............................................................................ 63 36 Time Period for Confidentiality .................................................................................. 64 Confidential Schedule A: Draft Salary Cap Regulations.......................................................................... 2 053130106 fjk Confidential Schedule B: Draft Player Movement Regulations ............................................................... Confidential Schedule C: Draft Division One Amateur Player Regulations ............................................ Schedule D: Provincial Unions................................................................................................................. Confidential Schedule E: Collective Employment Agreement................................................................. Schedule F: Format of new NPC Competitions........................................................................................ Schedule G: PricewaterhouseCoopers Report .......................................................................................... Schedule H: Dr Rodney Fort Report......................................................................................................... Schedule I: Ian Schubert Statement .......................................................................................................... Schedule J: Brown Copeland Report ........................................................................................................ Confidential Schedule K: NZRU Analysis of Impact of Cap................................................................... Supplementary Documents Provided The NZRU has also provided a bundle of documents providing supplementary information. The documents provided are: Title: Author: 1. Media Release – 22 September 2005 re: Special New Zealand Rugby Union Payments to Provincial Unions 2. The Impact of Salary Caps in Professional Team Stefan Kesenne Sports 3. Cross-subsidization, Incentives, and Outcomes in Rodney Fort Professional Team Sports Leagues 4. Pay Dirt – The Business of Professional Team Sports James Quirk and Rodney Fort 5. The Use of Salary Caps in Professional Team Sports Chris Davies and the Restraint of Trade Doctrine 6. The Basis for a Successful Sporting Competition Alan Jackson In addition, the Commission has been provided with a copy of: a) Competitions Review – Final Report, NZRU; and b) New Competitions Information Summary – Premier Division, Division One, NZRU. 3 053130106 fjk A Application Details 1 Applicant 1.1 An application for authorisation for a restrictive trade practice is hereby made in terms of section 58 of the Commerce Act 1986 (the “Act”) by The New Zealand Rugby Football Union Incorporated (the “NZRU”). 1.2 Address: 1 Hinemoa Street (Centreport) PO Box 2172 Wellington Telephone: (04) 499 4995 Facsimile: (04) 499 4224 Attention: Steve Tew Deputy Chief Executive Officer 1.3 All correspondence and notices in respect of this application should be directed, in the first instance, to: Kensington Swan 89 The Terrace PO Box 10246 Wellington Telephone: (04) 472 7877 Facsimile: (04) 472 2291 Attention: John Land/Fleur Knowsley 2 Restrictive Trade Practice 2.1 This application relates to proposed practices of a kind detailed in section 58 of the Act. Full particulars are: 2.2 Salary Cap 2.3 A proposal to enter into and give effect to a Salary Cap with the features set out in the table below (defined terms in the table are those