Tuesday, 19 September 2017

Big discount! Get it here!

This year's Competition Law and Policy Institute of New Zealand annual workshop is coming up on Saturday October 14 in Auckland. It's got a class act of topics and speakers, as you can see from the programme and the bio of the keynote speaker, Timothy Cowen, who among other things has been heavily involved in the big EU case against Google, and who will be speaking on 'Curbing Big Data/ Big Tech: Lessons from Europe on misuse of market power, anti-competitive agreements and remedies against this growing worldwide digital-age problem'.

Now, academics and students, listen up. Do you know of students, or are you one, who would benefit from the workshop? CLPINZ has a new and heavily discounted student rate to make the workshop more accessible to students of competition law and policy. It's - wait for it - 75% off the standard non-CLPINZ-member rate, and brings the student cost down from $900 to an affordable $225. Sorry, there's no discount off CLPINZ membership, or off the after-workshop dinner if people would like to go, but the conference itself is now much more within reach of a student budget.

You'll want to take it up, won't you? So email CLPINZ@conference.nz to get the discount code, and register here. See you at the workshop.

Thursday, 14 September 2017

Another part of the house price story

Housing is understandably high on the political agenda at the moment. But amidst all the blame-seeking and potential policy responses, one of the big drivers of our high house prices seems to be largely ignored, in part because it doesn't give the pollies any room to point the finger at their opponents.

The reason it doesn't is because it's a circumstance almost completely out of our own hands: the cost of our longer-term fixed rate mortgages is very low by historical standards, and that's almost completely because of international trends. We essentially import world bond yields - as the RBNZ's economists documented here - plus a risk premium for being New Zealand, and the banks onlend to fixed rate borrowers at that rate plus a commercial margin.

Here's a chart of current benchmark (10 year) bond yields across a range of the developed economies, using data from the Financial Times.

Long term interest rates are unusually low mainly because four of the major central banks - in the US, the Eurozone, Japan and the UK - have been keeping them very low by buying bonds (sending their price up and hence their yield down), a policy often known as 'quantitative easing' or QE. It's been part of their plan to give post-GFC monetary policy more oomph: traditionally, central banks have only bothered with short-term interest rates, whereas QE also gives them a good deal of control over longer term ones as well. Low yields in the QE countries have had knock-on effects on yields in non-QE ones like Switzerland.

And 'unusually low' doesn't even begin to describe the outcome. There are now literally trillions of dollars' worth of bonds (some US$9 trillion according to the FT) trading on negative yields: you pay the borrower for the privilege of investing in its debt. You can see in the chart, for example, that the Swiss and Japanese governments can borrow money for as long as 10 years where the investors end up paying the government. Just this week the Austrian government raised five year debt at a 'cost' of -0.165% a year.

We know that our own central bank is keeping short-term rates low - "Monetary policy will remain accommodative for a considerable period" as the latest policy decision put it - and that has been one of the elements in the recent price boom. As floating rates linked to the RBNZ's policy dropped, and household incomes kept growing, there was a surge in mortgage serviceability, which has been one of the big moving parts in the consequent boom in prices. But you knew that.

What's been less emphasised if that even if the RBNZ hadn't cut short term rates to where it has, the rest of the world's central banks dealt us substantially lower longer-term fixed rate mortgages in any event. And that boost to the demand side of the market isn't going away anytime soon. In the US the Fed is getting close to easing back on the scale of its QE (still buying bonds, but not as many), and the Bank of England and the European Central Bank may start heading the same way later this year or (more likely) next, while Japan looks set to keep its current QE going into the indefinite future. Whatever unwinding of QE that eventually materialises is going to be a slow, careful, gradual, medium-term process. There could well be local five year fixed rate mortgages around the 6% mark for quite a while yet.

There's another element to this imported easy monetary policy. Around the world there's been what the investment professionals have been calling "the hunt for yield" or, in more purple moments, "the craze for yield". The traditional widows-and-orphans assets of money in the bank and government bonds have been yielding little or nothing (indeed, US$9 trillion worth of less than nothing). So even conservative investors have been forced either to swallow the unattractive terms on their usual fare - this week Austria sold €3.5 billion of bonds with a hundred year maturity on a preposterously low 2.1% yield - or instead to head into income-yielding assets like property that offer something better.

The local  investor is making the same calculation. Even at current high prices you can still get a 3.5% to 4.0% rental yield on an Auckland house, according to the (very useful) data compiled by interest.co.nz. It's not what a conservative investor would normally be looking for from an investment property, but it beats the bank deposit and government stock alternatives. In our own little way we've got the same hunt for yield: it's not as extreme as in some places  - as the graph shows, our bond yields haven't dropped to Japanese or Eurozone levels - but it's another part of the picture.

And if you think the link between loose overseas monetary policy and New Zealand house prices sounds like the abstract reasoning only an economist could come up with, then you haven't paid enough attention to the Irish house price boom and bust. Ireland, which had been growing like topsy, was gifted eurozone interest rates that were too low for its circumstances. House prices exploded.

Speaking of adding fuel to flames, why would you increase subsidies for first home buyers? As an elementary bit of sketching supply and demand curves on the back of a shopping receipt would show you, the only immediate effect of subsidising the demand for something in fixed supply is to raise its price by the full amount of the subsidy. And it's not only ineffective, it's regressive - a straight transfer from the taxpayer (including all the low earners who pay tax from dollar one) to the house owner. In the longer run, it fattens the margins from housing development, so it could encourage more supply (assuming the binding constraint isn't land-use planning or construction capacity, and it might be), but in the long run we have all joined the bleeding choir invisible, we have snuffed it, we are no more. As a short-term policy it's worse than useless.

But that's this election for you. I'd thought we'd got past the worst of elections as they used to be, but this all-party lollyscramble, with its side dishes of daftness and deceit, is pure 1970s.

Wednesday, 6 September 2017

Competition is good for women's pay

Motu's recent paper 'What drives the gender gap', has rightly got a lot of attention: full marks to its authors Isabelle Sin, Steven Stillman and Richard Fabling. Motu has gathered a broad selection of the coverage here and if you haven't yet read the piece for yourself then here's a longish executive summary and the whole caboodle. And if you want the whole thing boiled down to 17 syllables, Motu's executive summary haiku said
Women are paid less,
but aren’t less valuable.
We blame sexism.
There's one aspect that hasn't caught much of the headlines, however, and that's the link between how competitive a marketplace a business is in, and the extent of gender discrimination it goes in for. In sum, the link is strong, and it means that if an industry is more down the monopoly end, women get treated even worse than usual.

As the paper reminds us (page 27),
Starting with [Nobel Prize winning economist Gary] Becker (1957), the argument has been made that taste discrimination [i.e. discrimination in the negative sense we use in everyday English] cannot persist in a perfectly competitive product market because firms that discriminate will lose money compared to those that do not and will be driven out of the market. This has led a number of papers to focus on the relationship between product market competition and discrimination.
The corollary to that however is that if markets aren't competitive, there aren't the same pressures on employers to make most efficient use of their staff, and can afford to pander to whatever prejudices they've got without taking much of a hit to the bottom line.

Does this happen in real life? When I was a financial journalist in Tokyo, one American banker told me that he had the pick of the Japanese labour market, because Japanese banks strongly preferred to hire men for the important jobs, leaving him a clear run at the best women graduates. Conversely I remember a Japanese banker proudly showing off his state of the art foreign exchange dealing room, and telling me that "Yes, we've got 23 people here - 17 dealers, and six women".

In New Zealand, Motu devised a measure of how competitive each industry is (if you're of the wonkish tendency, I'm about to add a technical footnote - here it is * - and the rest of us can now carry on). While they were at it, they also devised measures of how much skilled labour each industry uses, and how tight the labour market was for each industry at any point in time, which they needed to try to sort out different explanations for the gender wage gaps.

And with that out of the way, here's what they found (page 31):
There are a number of key findings. First, industry-years with a one standard deviation more skilled workforce have a gender wage-productivity gap that is 19.2 percentage points higher if they have the mean level of product market competition and difficulty hiring. Second, this gap is doubled if the industry-year is one standard deviation less competitive, or is eliminated if the industry-year is one standard deviation more competitive than average. Third, this additional effect of lower levels of competition is eliminated if the industry-year has a one standard deviation higher difficulty in hiring. Overall, we find that the gender wage-productivity gap is larger in industry-years with higher skilled workers, lower levels of product market competition, and more competitive hiring markets ['competitive' in this sentence means lots of people looking for jobs].
Let's unpack this a bit. Firms with an unusually high level of skilled workforce pay men a stonking 19.2% more than women for the same productivity contribution to the business. That's on the basis that the firm is in an industry that is about average for the level of competition going on in the sector, and also when the labour market in that sector at the time is nothing unusual. That's a whole story in itself.

But look again at that second finding. That already large pay difference is doubled - doubled! - if there's lots less competition among businesses in the sector. However the large difference goes away completely - to be consistent, completely! - if there's lots more business competition. It also goes away completely if a tight labour market is holding employers' feet to the fire and forcing them to make gender-blind hiring decisions, which is what you'd expect. We routinely see employers, for example, hiring more people from minority groups when there's been a sustained business cycle and hirers can no longer pick and choose the way they might have done.

There are people who don't like competition - the hand-wringing types who don't like the Schumpeterian real world and who'd prefer collaboration or cooperation. Get real, folks: if women want fairer pay, one highly effective approach would be to use markets to work for them. Insist on gales of competition in every industry (and, incidentally, support initiatives like the Commerce Commission being allowed to look at the competitive state of play). That way, there'll be fewer guys with cozy jobs in dozy industries ripping you off - because you'll have the real choice of going to his competitor and getting what you're worth.

* The measure of competition comes from a principal components analysis (love it as a technique) run over four measures of competition from the Business Operations Survey (eg firms reporting no competition, or only one or two competitors), plus a capital/labour ratio. Personally I can't see the relevance of the capital/labour ratio to competition or (excess) profitability - airlines for example might well have a high capital/labour ratio because of the planes but I'm not sure that tells me a lot about whether the airline game is competitive or hyperprofitable - but in any event their measure of competition (the first component) has stronger links with the competition measures than with the capital/labour ratio, so that's all right.

Wednesday, 30 August 2017

A blast from the past

A reader who'd liked my post the other day on The Shipping News pointed me towards something I'd forgotten (or possibly missed at the time). It's the European Union's submission on shipping cartels, made to our Productivity Commission's 2012 inquiry into freight forwarding.

Why, you may wonder, was the EU bothering with a freight inquiry at the far end of the world?

Two reasons. The EU - through its competition arm, 'DG Comp' as it's known - had an interest because it had relatively recently (2008) abolished the shipping lines' exemption from cartel laws in Europe. And because it wanted to tell us that it thought the case for allowing shipping cartels (as we were doing at the time) was a load of cobblers.

DG Comp said that more countries were bringing shipping under the competition law or had never exempted them in the first place: "exempting container shipping cartels can hardly be described as the global regulatory standard" (para 9). And it pointed out that "the EU repeal is very significant in that it expressed the unanimous agreement of the then 25 EU Member States. Any Member State could have vetoed the proposed legislation. Yet all Member States chose to support" (para 7). In other words, getting the whole 25 to agree on anything is normally a colossal exercise in cat herding, but the case for getting rid of shipping cartels was so obvious that even the fractious 25 were all on board.

DG Comp also said that if the shipping lines' argument for cartels - "stable rates and reliable services" (para 12) -  had any merit, then exporters and importers would support them, but they don't: "the shippers have repeatedly stated that they would rather have competitive prices than stable high prices" (para 12). And the shipping lines' claims about the downside of abolishing cartels - "exemption would lead to "destructive competition", increased concentration, lack of investment and reduced service" (para 13) - had not been borne out by what had actually happened in Europe when cartels got the flick.

And it made the excellent general point (para 14b) that
the liner industry is no different from other fixed-schedule, high-fixed costs transport industries (such as the airline sector or the rail sector) that function well under the standard competition law regime.
So the good news is that we did, after navel-gazing for nearly six years, see the sense of views like DG Comp's, and we finally brought shipping cartels within the general competition law. The bad news is that we continued to give the shipping lines special treatment, in particular allowing them to cooperate on "capacity adjustments in response to fluctuations in supply and demand for international liner shipping services" (s44A(8)(e) of our amended Commerce Act). If they end up having the ability to jointly determine capacity, then effectively they will have ended up with the ability to jointly determine prices, so we'd be back to square one as if price-fixing had never been outlawed. And there's a further bit of leeway in s44B relating to an exemption for "price fixing in relation to space on ship".

Another oddity of the special treatment for the shipping lines is that the amended Act (in sections 65A through 65D) introduced a new clearance regime for cartel provisions that are "reasonably necessary" for the purpose of a collaborative activity. If there is indeed, as the shipping lines argue, a necessary link between cartel provisions and running a shipping service, they, like any other group of businesses, have now got this new avenue to get the official seal of approval.

But no: it's one law for the rest of the country and one law for the shipping lines. And this for a sector that's been revealed to have been a global competition scofflaw.

Friday, 25 August 2017

What the Cabinet read

Yesterday the Cabinet paper on what to do in the light of MBIE's targeted review of the Commerce Act went up on MBIE's website.

It made for interesting reading. It was very largely on the side of the pro-competition angels: it showed a good appreciation of how more effective competition can improve our relatively low productivity and lower our relatively high prices. And as part of the process the Minister, Jacqui Dean, got the green light to publish Promoting Competition, a welcome programme of work that will be part of the overall Business Growth Agenda.

Mostly, the Cabinet paper got the 'market studies' bit of the review right. It picked up on the current inconsistencies - Cabinet itself had recently encouraged more market studies by the Telecommunications Commissioner (part of the Commerce Commission) while still not letting the rest of the Commission do the same, the Electricity Authority can run ones in its bailiwick - and pointed to the unsatisfactory outcomes when ersatz studies are run as a second best substitute.

As it said in para 55, "Following the conclusion of the Fuel Market Financial Performance Study it is likely that the Government will still not have a good understanding of the severity of competition problems in the market". Which is exactly where I'd got to: "This half-baked time round, we ended up with just about the worst outcome, for everyone, of suspicions left unresolved. And we're now going to have to do the full, proper inquiry that should have been done in the first place". No offence, as I also said before, to the professional folk who did the petrol study: the problem was the mandate, which tried to do a quick and poorly scoped study, on the cheap, without full information gathering powers.

It was good, too, that for market studies "the funding approach should be agreed at the same time" (para 57): there have been times when the Commission's got lumbered with new jobs but no new money to do them. As the paper said (para 57 again), "if the power is granted but not funded and the Minister directs the Commission to use it then the Commerce Commission is forced to trade off their adjudicative or enforcement activity with work on market studies. This would be detrimental to the competition regulatory system as a whole". Quite right, so there's going to be a (maximum of) $1.5 million a year allocated. I quite like the idea of a maximum, and I'm sure businesses will do, too: it should act as an efficiency incentive on the Commission.

But the Cabinet paper dropped the ball when it came to letting the Commission initiate market studies. It reviewed international practice, and found that as a general rule competition authorities could either initiate on their own, or it was a policy combo where authorities could initiate on their own, but could also be asked to do one: "A small number can only undertake a study if it is externally initiated (e.g. by Ministers)". And then the Cabinet paper opted - very oddly in my view - to go with the "small number" rather than with international standard practice, and then only with additional controls that require the Minister to satisfy a "why do this" test and get the buy-in of Cabinet as a whole.

There was, I felt, a tone in this part of the paper that an empowered Commission might go rabid, and that the Rottweiler consequently needed to be well chained up. Paragraph 53 went to some pains to point out that even after been given these (constrained) market powers, there would still be lots of other constraints that would stop the Commission running amok and biting people. If I were having a quiet word in the Commission's ear, I think I'd be advising it to do more to polish up its perception in political circles. And I'd especially be encouraging it to point out - if politicians have been hearing too much from businesses not fond of the Commission - that the primary victim of business rorts can very often be other businesses.

Which brings us to section 36, and anti-competitive use of market power. As readers will know, I think the current law is an ass, and want it changed to match Australia's, and have said so in various places. But those of us of that view (including the ACCC, the Commerce Commission and Consumer NZ) were in the minority in submissions to MBIE's targeted review. So the law is not going to get changed, at least for now.

That said, I think I can live for the time being with where the Cabinet paper got to. For one thing, the Minister said (para 71) "I am of the view that there are problems with section 36 and that it is an important provision to get right in a small market like New Zealand". She went on to qualify that, but I intend to regularly requote the first part of that sentence in particular, and in various tones of voice: "there are problems with section 36", "there are problems with section 36".

In any event it makes some pragmatic sense, as proposed in the paper and also supported by Treasury, to spend the next year and a bit researching how big a problem we might or might not have with abuse of market power, and also waiting to see how the Aussies get on with their reformulated version of the law, assuming it gets through the madhouse that is the Aussie Senate.

Towards the end of the paper, paragraph 123 reads
Legislative change to the Commerce Act will be required in relation to cease and desist, enforceable undertakings and market studies. In this regard, a Commerce Amendment Bill has a [word redacted] priority on the 2017 legislative programme.
I don't like that redaction. As a general rule, on any policy issue, I think a government should be prepared to tell us whether it thinks it's a big deal and we can expect something done about it soon, or whether it doesn't, and we shouldn't. In this particular case, given that the last amendment to the Commerce Act took nearly six years, I'm afraid that the word redacted could well be "low".

Thursday, 24 August 2017

In the undergrowth of the Prefu

The Pre-election Economic and Fiscal Update - the 'Prefu' - came out yesterday when I was away giving some expert evidence at the Board of Inquiry into the proposed East-West Link motorway in Auckland. You've probably got the big picture about the Prefu already - if not try the ever reliable Rob Hosking's 'Joyce unveils rosy pre-election economic update' in the NBR (probably $, and worth the sub) - but now that I've read it, here are some additional perspectives.

There's an interesting difference of opinion between Treasury and the Reserve Bank about the outlook for interest rates and the Kiwi dollar. For Treasury, "The Official Cash Rate is expected to begin rising in mid-2018 as the Reserve Bank seeks to achieve its objective of stabilising inflation at the 2.0% mid-point of its target range. From around 2.0% in June 2018, short-term interest rates are forecast to rise to around 3.8% in June 2021" (p20 of the Prefu). For the RBNZ, as it said in Table 2.1 on p11 of the latest Monetary Policy Statement, the OCR is going to stay where it is all the way out to late 2019. For what it's worth, the financial markets (going by current futures pricing) lean more Treasury's way.

The difference on interest rates feeds into different views of where the overall value of the NZ$ is heading. As shown below, the Bank has it peaking around now and then going on a progressive slide, whereas Treasury (in Table 2 of the 'Additional information' bit of the Prefu) have it rising a little more and then staying there.

Another thing to note is the scale of the fiscal boost to the economy. The headline numbers on fiscal surpluses don't tell you much about whether tax and spending plans boost or brake the economy: instead, the 'fiscal impulse' is a go at figuring out what fiscal policy is doing, once you've stripped out all the cyclical things that happen to the fiscal books (like good times boosting the tax take, as they are now).

Estimates of the impulse are always iffy, although other sighting shots at it have come up with much the same as Treasury's. Here it is (again from the 'Additional info').

After years of grinding away at rebuilding the state's coffers - six successive years of tighter fiscal policy - it's now all systems go, with a fiscal boost in the year to June '18 amounting to some 1% of GDP, plus a bit more the following year. People will have all sorts of reactions to that, from a cynical quelle surprise in election year, to why not address some real needs now that the money's more available (the Family Incomes Package is in that boost).

Dull and boring macroeconomists however are likely to say that loosening fiscal policy in good times - 'procyclical' policy as we call it in our game - isn't usually the best of plans, though I'm prepared to cut some slack when some of the boost also addresses our infrastructure shortfall.

The final thing worth digging out of these fiscal updates is the outlook for profits. New Zealand's a bit short on profits data: Stats are working on it, but we don't yet have quarterly profits numbers, unlike for example Australia, the UK or the US. So anything that throws some light on what is one of the key moving parts in a market economy is always welcome. That's where Table 3 in the 'Additional info' comes in handy, as it has forecasts for 'operating surplus, net' (profits, essentially) for both agriculture and the rest of the economy.

They're only annual, but it all helps. Here's what the numbers look like (percentage changes aren't in the original table, so I've added some).

Down the farm you can see the huge impact of the recovery in dairy prices from their previously dire levels. Elsewhere it's not been the profits bonanza you might have expected from such a decent run for the overall economy - another part of our productivity paradox, perhaps? 

Wednesday, 23 August 2017

The Shipping News

Earlier this week I mentioned that it had taken the thick end of six years for the Commerce (Cartels and Other Matters) Amendment Bill to work its way through the parliamentary grinder. It didn't help along the way that the government had second thoughts - or cold feet - about one of its original provisions, to criminalise hard core cartels, and yanked that bit. But on August 14 what was left of the Bill finally staggered over the finishing line.

There are various summaries around the place - take your pick of Russell McVeagh's, Chapman Tripp's, or Bell Gully's - but the bit I'd like to pick up on is the new regime for shipping. Up to now, the shipping lines had been exempt from the Commerce Act, in my view for no good reason, and our Productivity Commission was absolutely right when it said as part of its 2012 inquiry into international freight services that
Current exemptions for shipping companies from the Commerce Act should be removed so that normal competition laws apply. This change would outlaw any agreements between shipping lines that fix prices and/or limit capacity unless the Commerce Commission judges that their public benefits outweigh any anti-competitive detriments
In the event the Bill dealt to shippers price-fixing, but it did allow shipping lines to cooperate to do these "specified activities" listed in s44A(8) (provided they improve the service):
(a) the co-ordination of schedules and the determination of port calls;
(b) the exchange, sale, hire, or lease (including the sublease) of space on a ship;
(c) the pooling of ships to operate a network;
(d) the sharing or exchanging of equipment such as containers;
(e) capacity adjustments in response to fluctuations in supply and demand for international liner shipping services.
No doubt some of these activities could well be efficient and helpful for both the shippers and their customers. But you're also left with the feeling that if shipping lines are able to jointly set capacity, as in subsection (e), they've effectively been left with the ability to set price in any event.

Does it matter? Oh yes. In another of those odd coincidences that have been happening recently, shortly before our shipping provisions become law the Aussie courts fined NYK, a Japanese shipping line, A$25 million for being part of an enormous and long-running global shipping cartel. It was the second highest cartel fine in Australia (behind the A$36 million fine on Visy Board in 2007 for a cardboard packaging cartel) and the first case under Australia's criminalised cartel regime.

As the judgment makes clear, NYK and a bunch of other shipping lines had been operating a global cartel since 1997. At [46] it says
From at least February 1997, NYK and a number of other shipping companies, including the [eight] Carriers [servicing Australia], had arrived at an arrangement or reached an understanding to the effect that, as a general proposition, they would not seek to alter their existing market shares or otherwise win existing business from each other. That overarching arrangement or understanding was generally referred to as “maintaining the status quo” or giving and receiving “respect”. It may conveniently be called the “Respect Agreement”.
The "Respect" agreement - I rather like the overtones of Mafia protocol - had everything a cartel prosecutor could ask for: not just the  'freight rate provision' (price-fixing) but also a 'bid rigging provision' and a 'customer allocation provision'.  And it had all the cloak and dagger stuff of your hard core cartel. At one point NYK's internal compliance people got antsy, for example, so the managers involved decided to tighten up security. At [158]
NYK employees in the Car Carrier Group continued to engage in communications with their counterparts at the other Carriers. Those communications were generally conducted orally over the telephone or in face-to-face meetings. They were rarely documented. Where the discussions were conducted by telephone, the employees generally conducted the conversations away from their desks, in hallways, lift lobbies, outside the office or in a room referred to as the “phone booth”. The phone booth was a small, glass enclosed room about the size of a phone booth. Some employees were specifically instructed to conduct such telephone calls away from their desks to minimise the risk of junior staff overhearing the conversation and reporting the conduct to the Fair Trade Promotion Group.
NYK was lucky in a way. It has been up to its ears in proceedings in other jurisdictions: the judgment mentions Japan, the US, South Africa, Chile and China, and it is likely others have yet to surface. But in Australia it pleaded guilty, fully cooperated with the Director of Public Prosecutions and the ACCC, expressed genuine contrition, and explained that it have made real efforts to improve head office culture, including withdrawing from all shipping line 'conferences' it used to be party to. As a result it got a 50% discount on what would otherwise have been a stonking A$50 million fine. As Justice Higney concluded at [300]
Cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment. It is inimical to and destructive of the competition that underpins Australia’s free market economy. It is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly. That is so even where, as here, the decisions and conduct are engaged in overseas and as part of a global cartel. As has already been explained, but for NYK’s cooperation and willingness to facilitate the administration of justice, the penalty would have been substantially higher. That should serve as a clear and present warning to others who may have, or may be considering or planning to, engage in similar conduct.
You'd wonder, though. If the NYK judgement had come out a year or two back, rather than this month, would the Minister at the time (Paul Goldsmith) still have flagged away criminalisation, at least for cases like this? And would the Commerce Select Committee has been as willing to give the shipping lines such a soft pass on collaboration?

Monday, 21 August 2017

No cheap cars please, we're Aussies

What a bestiary Aussie politics is these days - and I don't mean the dogfights over second citizenships, though it would be nice if some of the oddballs who got in at the last election have at least one Irish grandparent, making them Irish citizens by descent and ineligible to keep their seats.

Away from the citizenship headlines, some of the pollies have been up to an unpleasantly protectionist bit of business which has seen the Aussie government rat on its previous commitment to consumers to allow some second hand car imports into Australia.

Infrastructure Minister Paul Fletcher's media release, 'New Road Vehicle Standards Act to Better Protect Consumers and Provide More Choice' (!) was dolled up in the dress of consumer welfare ("appropriate consumer awareness and protection arrangements") but none of the arguments he made looked convincing. The world Fletcher painted - of high administrative costs and no big net benefit to consumers - bears no relationship to the reality we've experienced in New Zealand. A reference to "price reductions estimated to be less than 2 per cent across the market" in particular looks a very lowball number, and I suspect the "across the market" reference, decoded, means "not a lot of change for some, but quite large reductions for others". As well as not conforming to the facts as we have actually lived through them, maintaining the ban flew in the face of advice from a variety of Australian bodies including the Harper review of competition policy.

Perhaps, despite their flimsiness, the Aussie government believes its justifications, but that may not all that is going through its mind. For the Aussie Financial Review, "It is understood that heavy lobbying by politically influential car sellers - as well as backbenchers such as John Williamson, Warren Entsch, Andrew Broad and Ian Macdonald - prompted the government to dump the option" (in  'Car buyers lose out as government backflips on parallel import rules', which may be paywalled, but if you haven't got a sub, get one).  Whatever the government's possible mix of intentions, an end effect was to do a big favour for a small, and, let's face it, rather unloved set of characters at the expense of doing a big favour for many millions of car buying households. And where, incidentally, were those tribunes of the people, Australia's Labor Party? They went along, too, as quoted in the AFR article.

A week earlier, by the way, the ACCC had come out with its draft market study into the selling of new cars. The media release said that "Complaints to the ACCC about new car manufacturers have risen to more than 10,000 over the past two years. Our draft report highlights the urgent need to address widespread issues in the industry". Not, in short, a sector that deserved ongoing favourable treatment, and I'd argue that the protectionist moat they're allowed to live behind is precisely the source of those "widespread issues" the ACCC found.

This latest proactive ACCC market study was another good example of the progress market studies can make to advance consumers' interests and promote more effective competition. So it's a shame that our own Commerce Commission isn't going to be able to do the same thing. As MBIE has said (at the foot of this webpage) the Commission isn't going to be able to start ones off its own bat: "The Commerce Commission’s market studies power will only be exercisable at the direction of the Minister of Commerce and Consumer Affairs", and then only after the Minister has satisfied an (as yet to be defined) "I smell a rat" test.

Still, it's something, and I suppose we should be somewhat grateful for the half a loaf we've got, or might eventually get. " Parliament", MBIE says, "will need to legislate for change to the Commerce Act for the market studies power to be introduced".

Oh goody. The most recent change to the Commerce Act - the Commerce (Cartels and Other Matters) Amendment Bill - took only five years, ten months and one day to go through the sausage factory.