Tuesday, 27 June 2017

Very good news from MBIE

I'd just got off the plane from Dunedin and turned on the phone and there it was in my inbox - the press release from Jacqui Dean, the Commerce and Consumer Affairs Minister, saying that the Commerce Commission will be able to conduct proactive 'market studies' and suss out any potential competition issues in the economy.

I'm delighted. Various groups have been banging on about this for the past few years - the Productivity Commission, me on multiple occasions (if you're a competition wonk, search this blog for 'market studies'), the Commerce Commission itself - and it's good to see MBIE took the case on board. It's clearly the right thing to do: it brings us into line with best practice in most developed countries, and remedies some policy absurdities. There is the obvious nonsense that a competition authority cannot investigate the state of competition. But perhaps the worst one was that one part of the Commerce Commission is required to report on the state of affairs in telco markets - which it most recently did this month, when it found that regulatory cuts to fixed line prices were indeed passed on to consumers rather than trousered by your internet service provider - while the rest of the Commission is forbidden to look at anything else.

So full marks to the Minister and to MBIE for implementing this sensible reform. I hope it won't take too much gloss off the praise if I say that the policy development process took too long for what was at the lay down misère end of the policy spectrum. But we're there now, and that's what matters: as the release said, the change will enhance competition.

The press release also said that 'cease and desist' orders are getting the chop. I didn't have a strong opinion on this: I sympathised with the initial intent of the things, which were meant to be a quick way to stop anti-competitive harm until the full pitched battle took place in the courts later on. There's a policy development lesson here, too: the original 'cheap and quick' design got overloaded with so many checks and balances that the whole thing became a non-starter as a practical option. If you want something quick and simple, then make it quick and simple.

The other big news is that reform of our 'abuse of market power' legislation (section 36 of the Commerce Act) has been kicked down the road; as the press release said, "While the consultation process has demonstrated that Section 36 does not work perfectly for some types of conduct, it is not yet clear whether an alternative test would benefit competition or consumers. Officials will continue to look into this and will report back in mid-2018 before decisions are made regarding section 36".

While I'm a tad disappointed that the Minister didn't go the whole hog and change s36, too, I'm actually not that surprised by the punt for touch. It's a complex decision, with decent arguments on both sides - though better ones on the side for change - and even the Aussies, who had their big 'Harper' review of competition policy, also took two bites at the cherry, with the Harper review followed by a separate consultation on their equivalent of our s36. And it's politically hard, too, as the Big End of Town tends not be look too kindly at the most likely alternative to our current arrangements.

But at least the debate goes on - I hope the "officials will continue to look into this" bit will allow for some further input from those involved in the debate - and mid 2018 isn't too long to wait. Though frankly if the Aussie Parliament signs off on the 'effects test' reform to their Act, we would have very few options left other than to follow them. Quite apart from the desirability of trans-Tasman standardisation where appropriate (and I think it would be in this case), standing pat with our current legislative wording and case law would leave us all alone in the western world with an idiosyncratic law of our own that's incapable of controlling any Six Hundred Pound Gorillas that go rogue.


  1. Thanks.

    Sounds as if they adopted the 'no-brainer' recommendation, and kicked he can down the road on the potentially more troublesome subject. All and all, not a bad outcome.


  2. I agree, not bad. And the door is still open on s36. I don't currently have any feel for when the Aussie legislation will get the nod (or even if it will, given the Senate loonies over there), but I suspect our options will narrow down very fast immediately after the Aussies change their law. It doesn't hurt to wait and see which way the Aussies jump


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