Rugby: Provincial salary cap stays despite watchdog's move

The salary cap that governs the wages paid to players in the national rugby provincial championship will not be thrown out, despite yesterday's announcement that the Commerce Commission will consider revoking its authorisation.

The New Zealand Rugby Union and Players' Association were caught by surprise yesterday by the commission's release, which in turn sparked numerous inquiries about whether the salary cap and restrictions over player movement had been ruled anti-competitive.

In fact, the commission's decision is simply acknowledgment that changes to the employment arrangements of ITM Cup players mean the authorisation granted to the NZRU is no longer required.

The salary cap for this year's ITM Cup is set at a maximum of $1.35 million, though for some smaller unions it will lower as there is a mechanism that ties it to a percentage of revenue earned.

Since 2009, when the new Collective Employment Agreement was signed between the NZRU and Players' Association, every player in the ITM Cup is now an employee.

Under the old employment contract there was still scope for players to sign for provinces as independent contractors.

"It effectively meant the Commerce Commission had to approve any salary cap to avoid anti-competitive behaviour," Players' Association boss Rob Nichol said.

As the Commerce Act does not apply to employment agreements, there was no longer any need for the Commerce Commission to authorise the salary cap.