Saturday, 2 July 2016

The law is an ass

My paper, 'Abuse of market power: the end of "make-believe" analysis?', drew a good crowd at the NZ Association of Economists' annual conference. That's partly because people like to session-hop at conferences and listen to areas outside their usual specialty - a fair few in the audience were folks who don't usually 'do' competition - and partly, I'd guess, because people reckon it's an important policy issue: markets won't work as we'd want them to, if competition is subverted by players with market power.

From the discussion, it was clear that people were left shaking their heads at the folly of our statutory wording (in s36 of the Commerce Act) and its subsequent jurisprudence in the courts. Very briefly, the folly consists of:

  • statutory wording that looks for a 'purpose' to knacker competition and the 'taking advantage' of market power, but
  • 'purpose' is subjective (barring careless e-mail trails) and often business behaviour has multiple purposes, many benign, which can veil the bad stuff, while 
  • 'taking advantage' has been interpreted by our courts as meaning you're home free if you've done something that a firm without market power would have done
  • which completely misses the point that something done by a firm with market power can have very different effects than the same thing done by a firm without market power, and
  • leads to an examination of what would have happened in a fantasy counterfactual world, and
  • nowhere looks at the important issue of what are the actual or likely effects of the behaviour in the market, and
  • Australia's just come to the view that their regime (very like ours) is not fit for purpose, and 
  • in sum the whole shebang comes close to giving firms with market power a free pass on pretty much anything that isn't the most obvious of rorts.

But you knew that (and if you didn't, there's chapter and verse in the paper).

The reason I'm raising it again is that there's an opportunity for people who may be concerned about the current toothless (and internationally idiosyncratic) state of affairs to do something about it.

Last year, MBIE started a 'targeted review of the Commerce Act', which included looking at the operation of s36. An initial issues paper drew 39 submissions. But now there's an opportunity for cross-submissions: you don't have to be one of the original submitters to get into the fray. You have till July 21 to get any views you've got into the policy pot. Full details of the process thus far can be found here, including links to the previous submissions and the logistics of submitting your own.

I'd emphasise that this isn't an anti-big-business agenda. The primary point here is the proper functioning of markets, for everyone's benefit, businesses and consumers alike. The big loser from anti-competitive behaviour is often other businesses.

In any event, get your views on the record. If you're not in, you can't win.

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