Commerce Commission armed with new powers

The Bill to introduce a market studies regime in New Zealand passed its third reading, following the politically-charged public debate over retail fuel prices, government tax and fuel levies.

From political debate to legal reality

Earlier this month, Prime Minister Jacinda Ardern made comments criticising the retail fuel industry and signalled that the passing of the Commerce Amendment Bill (the Bill) would be prioritised.

Keeping to the Prime Minister’s word, the Bill has now passed its third reading and will come into force once it receives Royal assent. The Bill, among other changes, amends the Commerce Act 1986 to empower the Commerce Commission to conduct market studies (referred to as “competition studies” in the Bill), either on its own initiative or at the direction of the Minister of Commerce and Consumer Affairs. You can read our previous news alert on the Bill here.

Various commentators have taken issue with the Government’s pointed focus on the fuel companies, pointing to the impact on pump prices of government tax and fuel levies, including the Auckland regional fuel tax.

A new Commerce Commission power will impact other industries

While it has looked likely for some time that retail fuel would be the first industry in line for a market study, the Commerce Commission is set to receive additional funding to the tune of up to $1.5m annually to conduct market studies.  This is expected to be sufficient funding for one market study each financial year, meaning other industries could very well feel the spotlight.  Supermarkets and construction materials have come in for mention in the Hansard debates.

Other industries that have been subjected to market studies in Australia and the UK include: energy (Australia and UK), care homes (UK), new car retail (Australia), digital pricing tools (UK), private healthcare (UK), dairy (Australia) and retail banking (UK).

See our infographic for quick reference.

The Bill plugs a policy gap …

The Bill plugs a policy gap in New Zealand’s competition regime, giving the Commerce Commission the power to review markets with a view to promoting competition, as opposed to just protecting it through investigation and enforcement activity, and through its determination of merger clearance applications, authorisation applications, and now collaborative activity clearance applications.

It will bring New Zealand into better alignment with competition regimes internationally, particularly those in Australia, the UK and Canada, where the national competition authorities have the ability to conduct market studies.

… but market studies will come at a cost

Market studies are not a low-cost tool.  Market studies in Australia and the UK have entailed significant time and cost to businesses, multiple information requests, submissions and cross-submissions, and occasional enforcement activity (i.e. regulator-led litigation) stemming from information uncovered through the inquiry.

Moreover, they will be disruptive in most cases to the industries concerned, as outcomes (through Commission recommendations) could involve de-regulation, reform of institutions, introduction of business self-regulation, improvement of information dissemination to consumers or suppliers, regulator-led provision of information or guidance, and/or enforcement action.

For advice on the Amendment Act and its implications, contact one of our team.

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