Wednesday, 4 July 2018

How will market studies work?

Last night we had the latest LEANZ event in Auckland - a panel discussion on the 'Commerce Commission's new market studies power: how should it (not) be used?'.

The panel was chaired by our genial host for the evening, Andy Glenie of Andrew Creagh Lai, and comprised Peter Wilson, principal economist for the NZIER and one of the authors of MBIE's 2017 petrol pricing study; Glenn Shewan, special counsel and a specialist in competition and regulation at Bell Gully; Chris Bowden, senior legal counsel at Air New Zealand and who advises primarily on competition and regulatory matters; and yours truly. The event was organised by AUT's Richard Meade, who had also been an author of the MBIE petrol report. It followed an earlier Wellington session on the same topic.

There was quite a meeting of minds on some of the issues. Without putting words into people's mouths, I'd say that we were relaxed about the proposal to let the Commerce Commission do market studies on its own initiative rather than only at a Minister's direction. For one thing, it is more likely to be a measured response to potential competition issues rather than a politician's scratch at an electorally handy scab. For another, as one audience member suggested, an independent Commission might be more ready to take on politically well-connected industries. Only afterwards (as you do) did I think of the ACCC's 2017 inquiry into new car retailing: the Aussie pols continue to protect the new car dealers, but the ACCC found dubious anti-consumer arrangements, especially around repairs.

We also all felt the kick-off needs more refereeing. Whoever starts a study - the Minister or the Commission - ought to be required to say, in some detail, what they think the problem is that is worth expending the taxpayers' resources on. At the moment there's only an "in the public interest" test, which one panellist correctly called "vacuous". I especially liked the idea put up by a couple of my panel colleagues that there should be public consultation on the terms of reference, which, as well as being a democratic way of going about things, would help to identify exactly what the issues might be and help prevent scope creep.

It also became clear that there might need to be some further thinking done about the uses of market data gathered for a market study. From the audience, for example, John Land asked whether the data would be available for, say, later s27 or s36 cases, or for later mergers in the market studied? I'm generally of the view that, except in rare cases, data gathered for one purpose shouldn't be used willy-nilly for another, but even if you stuck to that "Chinese walls" approach, it's still hard for Commissioners or staff to "unknow" what they know.

Tomorrow I'm off to the Transport and Infrastructure Select Committee to talk to my submission on the Commerce Amendment Bill, which among other things provides for the new market studies power. If you're wondering (as I was) why Transport and Infrastructure has ended up as the venue, rather than Economic Development, Science and Innovation (which normally handles competition issues and is, for example, the Select Committee looking at cartel criminalisation), the answer seems to be that the Bill also provides for potential changes in how airports might be regulated, which puts it more within Transport and Infrastructure's purview.

I'll put up my own submission after I've talked to the Committee: the process seems to be that submissions are being published after submitters have fronted up. So far there aren't many on the Select Committee website from the usual competition suspects: the only one thus far is Russell McVeagh's. I don't agree with their proposal to limit initiation only to the Minister, but I certainly found myself in agreement with their ideas - along the panel's lines - for a tighter process around the initiation of a study and around its terms of reference.

Well done to the organisers and especially to the hosts, Andrew Creagh Lai: without business support LEANZ seminars won't happen, so thanks again. Though members' subs help too: head here.

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