It's a start

Last week's competition policy announcements by Scott Simpson, the Minister for Commerce and Consumer Affairs, were some modest steps in the right direction (and a nice little coup for the Competition Law and Policy Institute of New Zealand's annual workshop, where he made the speech).

He was surely right to make it easier for businesses to collaborate where there are likely to be net consumer benefits, given that the Commerce Commission's current authorisation process is "too complex, costly, and slow for business". Authorisation as it is currently practised isn't so much like using a sledgehammer to crack the proverbial nut: it's more like commissioning a squadron of war elephants to trample on it for months.

He also said that "We have also heard in your submissions" - the ones in response to MBIE's turn of the year consultation on 'Seeking feedback to improve competition in New Zealand' - "that businesses and individuals are increasingly reluctant to share information with the Commission because of fears confidential information could be released under the Official Information Act, potentially leading to retaliation or misuse of confidential information by competitors. This is undermining the Commission’s ability to collect evidence and receive useful information, particularly in investigations and merger clearances".

This is something that has been rumbling for a while, and he's done something about it. I can't say that I warm to one of his solutions, to exempt information provided to the Commission from the ambit of the OIA for 10 years, as I reckon we could do with less whiteanting of the Act,  but I suppose it will do the job in its way, and the other proposals (more flexible confidentiality orders, and whistleblower protection) look good ideas.

If I can be grumpy for a moment, I'd like to observe that this concern for confidentiality wasn't so obviously to the fore the last time Parliament looked at the Commerce Act, when in 2021 it introduced s99AA to allow the Commission to share information with "a public service agency, a statutory entity, the Reserve Bank of New Zealand, or the New Zealand Police", contrary to my elegant and well reasoned submission.

What struck me otherwise about the Minister's announcements was how much was still to come. The MBIE consultation was open-ended, but included a questionnaire (which many of us filled in) indicating what they most wanted to hear about. They included "the effectiveness of the current merger regime"; how to deal with "creeping acquisitions" and entrenchment of market power, for example, through 'killer' acquisitions of nascent competitors; whether to align our approach to mergers with the Aussies'; and a big question asking "How effective do you consider the current merger regime is in balancing the risk of not enough versus too much intervention in markets?". MBIE wanted to know whether potentially non-competitive mergers that were not notified to the Commission are an issue, and whether the Commission might need extra powers to deal with them (such as a stay or hold separate power). And MBIE wanted to know whether the Commission should be able to accept behavioural undertakings as part of a merger approval.

Outside mergers, MBIE also wanted to gather views about potential anti-competitive 'concerted practices' and what to do about them, and what role industry codes or rules might play in bolstering the competition regime. And then there were various rats and mice, including whether the Commission's injunction powers need modernising, views on assorted technical and minor amendments, and an open-ended "what else have you got to say".

So it would be fair to say that - six months after consultation closed - the announcements last week dealt to only two of the 11 broad topic areas MBIE canvassed: we've had some baubles, but no Christmas tree. The Minister said that "Further decisions on the merger regime, potential new industry codes, and other changes will be announced over the coming weeks". Given that we've been on the slow side in recent years when it comes to competition policy reform, compared with the Aussies in particular, a quick policy timeframe is good to hear.

CLPINZ 2024

The 35th Annual Workshop of the Competition Law and Policy Institute of New Zealand (CLPINZ) was held last week at the Northern Club in Auckland, and - despite breaching the universally acknowledged convention that every Kiwi conference must at some point offer sausage rolls - was otherwise a well-attended and highly interesting day and a half. Hat tip to the organisers on the Board of CLPINZ and to the indispensable Charlotte Emery at Conference Innovators.

It led off with outgoing CLPINZ chair Anna Ryan introducing the keynote lecture from UCLA's John Asker (UCLA link, personal site, Cornerstone Research site), on 'The Competitive Effects of Information Sharing'. John reminded us that, since at least Hayek, we should think about markets and prices as an immense, efficient, decentralised, information-sharing mechanism for allocating resources, and the integrity of prices really matters for the outcome of the process. But there is a potential tension between the necessary information-sharing in the market, via price signalling, and the possibility of people using the information to collude and undermine the benefit of the free flow of signals. And it's not hard to see real life examples: he cited the case of a Perth-based web-based scheme which had aimed to show each petrol station's prices so that consumers could get the cheapest petrol, but which eventually degenerated into a mechanism enabling the petrol companies to coordinate prices. While some competitive effects can be reasonably obvious, John said that, unlike in areas like mergers where there are known analytical techniques, economics hasn't yet developed the full suite of forensic tools that would enable competition regulators to sort out the sheep from the goats. And when you do apply what tools are available, you don't always get unequivocal answers: his modelling (with coauthors) of timber 'stumpage' auctions, for example, where competitors had information about each others' timber inventories, came up with mixed results: "diagnosing how competition is impacted in non-price information sharing is complicated, and can lead to an outcome where reasonable people might disagree as to whether competition has been adversely impacted".

Keynote speaker John Asker, flanked by session chair Anna Ryan; Fionnghuala Cuncannon as commentator

Commentator Fionnghuala Cuncannon felt that ideally you would like to know when information sharing is harmful, and what is allowed or not under the Commerce Act, and hopefully the Venn diagram of the two ideas would overlap enough to give you a operational basis to act from. On the first point, she agreed with John that deciding on competitive harm is not settled, though in some cases you may well see instances where things look wrong, one example being the price following behaviour based on the 'main port price' that the Commerce Commission noticed in its petrol market study (see for example Figure X3 and paras X35-6). On the second she felt that the Act was "okayish" as it stood, but maybe we could have a think about buttressing it with the likes of the "concerted practices" provisions in s45(1)(c) of Australia's legislation.

Emma Ihaia, the chair of the session on 'Tikanga - is it relevant to Competition Law', introduced it by saying that tikanga is "an area largely unknown to many of us in the room", and that assessment certainly included me: by way of reference for people equally uninformed, Wikipedia says "Tikanga is a Māori term for Māori law, customary law, attitudes and principles, and also for the indigenous legal system which all iwi abided by prior to the colonisation of New Zealand". By the end, we were all a great deal better up with the state of play. Te Aopare Dewes said that use of tikanga is part of a transformational change in Aotearoa New Zealand, that it is now part of our common law post Ellis*, and that it will have relevance for the statutory interpretation of competition law. She also pointed to the Commerce Commission's use of tikanga concepts such as kaitiaki (stewardship, as for example on p13 of the Commission's latest annual report) and its awareness of Māori perspectives in its September 2023 Moana/Sanford merger decision**, although she reckoned the merger would likely have been cleared even without a tikanga lens. The Hon Justice Christian Whata (who headed the Law Commission study which produced the definitive report on the legal dimensions of tikanga) then took us through tikanga as custom, values, and law and talked about "the principles of engagement" which will need to apply as tikanga and European law (if I can call it that) learn to jog along together, including both relevance (tikanga won't affect every matter at issue) and reconciliation (there's no longer a presumption that European law prevails if push comes to shove). And finally Simon Peart took us through some hypothetical case studies the panel had devised to see how the two legal perspectives might or might not play nicely together. One of them (an agreement between otherwise competing Māori fishing companies to place a rāhui on fishing, to conserve the stock, which might amount to output restriction under the cartel provisions of the Commerce Act) didn't look especially problematic: it was fine from the tikanga side and (I'd guess) a strong candidate for authorisation from the Commission's side. The other (one Māori ski operator denying a competitor a licence to operate) was a good deal trickier to reconcile, and reminded us that not all of these issues are going to be a gentle stroll in the park.

The tikanga panel discuss some case studies: L-R, Te Aopare Dewes, Hon Justice Whata, Simon Peart, and session chair (and incoming CLPINZ vice chair) Emma Ihaia

Paul Comrie-Thomson chaired the next one, 'Wellington, we have a problem!', where barrister and incoming CLPINZ chair Ben Hamlin made a convincing case that exemptions from the Commerce Act for "the Crown" are both a legislative mess and poor public policy. Yes, s5 of the Commerce Act binds "the Crown is so far as the Crown engages in trade", but both "the Crown" and "engages in trade" are poorly defined. The Crown (however defined) also has extensive (though nor unfettered) scope to limit competition when not engaged in trade, and as a matter of good public policy it would be better if that scope was subject to some sort of overriding rationale or principle. Ben suggested that "bodies exercising public power should only be able to limit competition where expressly authorised by Parliament, it is reasonably necessary to achieve some public purpose, or it is permitted by a Commission authorisation", and he's drafted a Bill that would legislate along those lines (he's interested in feedback and assistance in polishing it up, so feel free to contact him). In these endeavours Ben was enthusiastically supported by the commentator, Dr Eric Crampton, who pointed to a range of examples of what he regarded as anti-competitive regulation (eg incumbent professionals being allowed to act as the gatekeepers assessing new entrants wanting to ply their trade) and which arise because "The Commerce Act provides broad exceptions for the Crown, particularly in relation to activities that affect commerce but are not considered to be in commerce".

The 2023 workshop had pioneered a new concept, the "Next Generation" session, where rising stars in the competition and regulation world get to strut their stuff, and it worked so well that it was back this year, again chaired by Will Taylor. Russell McVeagh senior solicitor Callum Dickson spoke on 'Privatisation in the space industry': one takeaway was that governments can be quite smart in organising procurement so that they're not at the mercy of a few suppliers or one, in this case suppliers of rocket launching services. Wynn Williams associate Rachael Monkhouse talked about 'The application of competition law to professional sports', where it's evident that sometimes sport gets carved-out treatment that to my eyes at least isn't always defensible. And Houston Kemp economist Nick Twort spoke about 'New analytical tools for understanding retail competition', and in particular the location data that can be cheaply hoovered up from your mobile phone and which can give improved empirical backing for regional market definition, where previously you and I might just have drawn a 5 kilometre circle around an outlet. All good stuff, and while on the topic of up and coming talent, the winner of the inaugural 2024 CLPINZ writing award was Russell McVeagh's Lydia Christensen, with her article, 'Competition Law and the Environment: Climate Change as a Non-Economic Consideration', where she argues that the Commission "has failed to genuinely engage with climate change factors as non-economic considerations that ought to be balanced against other factors".

Will Taylor (L) introduces the Next Gen speakers: L-R, Callum Dickson, Rachael Monkhouse, Nick Twort

Saturday morning brought us 'Settlement of IP disputes', chaired by Otago Professor Ed Willis and presented in case study format by barristers Earl Gray and John Land. Their argument was that since the the expansion of the definition of a cartel in the 2017 changes to the Commerce Act to specifically mention collusive output restriction, agreements in intellectual property disputes to stop producing things that infringe copyright or patents are at risk of being pinged as a cartel, and the risk is all the more real after the Moola*** case. Their solution is an amendment to the Act (which they have drafted and is ready to go) which would exempt good faith settlements in genuine disputes from the ambit of s30 cartel conduct. We need to be wary of anything that might open the door to the rather despicable 'pay for delay' sham patent settlements we've seen in overseas pharmaceutical markets, but that said, I can see the issue that confronts genuine settlements. Part of me wonders about the legal reasoning - how can it be an output restriction if the output allegedly restricted could never have been legally produced in the first place? - but when I asked the question, it didn't seem to cut any ice with my learned friends in the law. I also got the distinct impression that the Commission would be unlikely to bestir itself in cases where, on the facts, like in Earl and John's dairy packaging machinery example, there's clearly no collusive anti-competitive intent.

Finally we got to what Anna Ryan later described as "almost a second keynote address", and it was: Danielle Wood, chair of the Australian Productivity Commission, spoke on 'Competition Policy: Back in Fashion?', in a session chaired by her former colleague Hayden Green. In Australia, the answer to her question is, absolutely yes: they are pressing on with further reform (after two thorough previous goes, the 'Hilmer' and 'Harper' reviews), with their current rolling well-resourced Competition Review and its Expert Advisory Panel (of which Danielle is a member, as is John Asker) and which has already produced draft M&A legislation to address eg 'killer' and 'creeping' acquisitions. It is also tackling other good ideas, including addressing the epidemic of non-compete agreements which is anticompetitively blighting labour market mobility, and working on the next instalment of a National Competition Policy (programmes of reform agreed between the Federal and State governments) which might encompass things like easing parallel import restrictions. The Productivity Commission itself has further useful things on the go, such as liberalising occupational licencing. If you don't have access to the CLPINZ workshop materials, Danielle reprised her presentation in the latest of Treasury's guest lectures, and you'll find both a video and the slides here.

(L) Danielle Wood, chair of the Australian Productivity Commission, and (R) commentator Catherine Montague, manager of competition policy at MBIE

The commentator was Catherine Montague, manager of competition policy at MBIE, speaking in a personal capacity rather than presenting a ministry or government view. She suggested that there was potential impetus for reform in New Zealand, based on the current government's focus on productivity, the example of the Aussies, and the rark-up we got from the OECD in Chapter 3 of their latest economic survey of New Zealand (from the Executive Summary, "Insufficient competition is an important factor underpinning low productivity ... more can and should be done to further improve competition outcomes"). While nothing's yet settled, potential candidates for attention are mergers ('creeping' mergers, amending the SLC test to specify that it would include entrenching market power, and aligning with wherever Aussie gets to), non-competes and other restraints in the labour market, ensuring more attention is given to the competition effect of policy changes, and implementing a Consumer Data Right. 

Fingers crossed that something like this agenda happens, and sooner rather than later: recent experience has unfortunately been that we have been too timid in scope and process, much too slow, and decidedly belated. Either MBIE or our new Ministry for Regulation would be well advised to take a leaf from the Aussie textbook and get on with something similar to their latest Competition Review, and if we're interested in alignment with our friends across the ditch, a couple of cross-appointments (like the ones the ACCC and the Commerce Commission already operate) wouldn't go amiss, either.

*Ellis v R [2022] NZSC 114, [2022] 1 NZLR 239

**The final clearance decision doesn't seem to have been loaded into the Commission's online case register

*** Commerce Commission v Moola.co.nz Ltd [2021] NZHC 3423

CLPINZ 2023

 After a rapid scramble to reorganise the schedule following the last minute loss of the planned keynote speaker, the 34th annual workshop of the Competition Law and Policy Institute of New Zealand (CLPINZ) successfully got underway in Wellington over the weekend.

Top of the bill - promoted at short notice from the previously planned 'fireside chat' session, and very much appreciated for their willingness to step up and help out - were Commerce Commission chair John Small, on 'The future of antitrust', and Andy Matthews of Matthews Law as commentator. CLPINZ chair Anna Ryan of Lane Neave chaired the session.

John Small and his chosen topics; Andy Matthews commenting

John noted a swing in the intellectual competition policy pendulum, with a strong trend of more regulation for competition which had started twenty years ago with the Telco Act and has more recently extended to petrol, groceries and retail payment systems: on petrol, he noted that there were some retail "issues", a conclusion you'd tend to agree with after reading the latest quarterly petrol market monitoring report. He signalled that there is likely to be more ComCom activity against restrictive practices, an area which he accepted had been underdone to date, with the likes of retail price maintenance, anti-competitive covenants, cartels - the leniency programme is still "ticking away" - and in the fulness of time the revised s36 provisions against abuse of market power likely to see more playtime. He said that the NZ merger guidelines were due for review in any event, and noted that they're also a hot issue in other jurisdictions (notably in the US and Australia). And he put some emphasis on how ComCom plans to engage with its various stakeholders: "efficiency-based playing nice", as he put it, preferably relying on soft power (such as guidelines) and on "direct, respectful engagement", and avoiding litigation if possible, but going there if ultimately necessary.

Andy agreed that there had been a pronounced trend towards regulation for competition since around 2001 when there had been a "Big Bang" away from the previous reliance on light-handed, or no, regulation, and there could be a big payoff from the latest regulatory initiative, on consumer data rights, which could make competition in banking, for example, more effective. He also agreed with John's view that consumer law can be effectively used to complement competition policy, with for example significantly higher Fair Trading Act penalties over time providing a stronger incentive to be more consumer-friendly. And although the zeitgeist has moved to more hands-on interventionist competition policy, Andy reminded us that (a) the new and globally high-profile FTC/DoJ guidelines are just that, guidelines, and don't change the underlying law, and (b) regulation is all very well, but the first best option is always likely to be more effective competition, as we notably saw when a third mobile telco rolled out its gear.

Session 2 was "The most environmentally friendly carbon neutral CLPINZ session ever! Or is it?". In other words, the currently controversial area of "greenwashing", making misleading claims about the greenness of a business's products, activities, positioning or performance. The speaker was Charlotte Turner, senior associate, climate risk governance with MinterEllison in Melbourne, commentator was Kirsten Mannix, acting general manager - fair trading at ComCom, chair Bradley Aburn from Russell McVeagh. Charlotte referenced a web-scraping survey of the increased prevalence of green-focused claims, Kirsten referenced another which found an alarmingly high (~40%) proportion of potentially misleading claims. It's self-evidently an area with the potential to bite careless people: that said, as Charlotte said, the fundamentals haven't changed, and there are still well-established tests for 'deceptive' and 'misleading' even if the field they're being applied in is relatively new. And as Kirsten reminded us, one of the established principles is that 'intention' is not the point: being misleading will always put you on the wrong side of the law. You may well have read ComCom's own 'Environmental Claims Guidelines: a guide for traders', but might also like to follow up on some references Charlotte provided that originated with ASIC, the Aussie financial markets regulator: 'How to avoid greenwashing when offering or promoting sustainability-related products', and 'REP 763 ASIC’s recent greenwashing interventions'.

Session 3, 'Section 36: What can we learn from the Australian experience?', gave us incisive insights into how our s36, now amended to be in line with Australia's equivalent s46, will go in trying to deal to abuse of market power, given that our previous formulation of the law had proved ineffective. Chaired by Jennifer Hambleton,  it featured two very good speakers - Simon Muys from Gilbert + Tobin in Melbourne and Ed Willis from the University of Otago - and even though the 10 cases commenced under the new law in Australia have yet to go the full legal distance, and in some cases are still cantering towards the first fence, we got good ideas on what we might reasonably expect here. While some (including me) had hoped we might have got to a simpler place, compared to the counterfactual complexities of our old s36, both speakers agreed that litigating the new s36 will not be any simpler, just different (though, thankfully, more intellectually coherent). Establishing anti-competitive purpose, and establishing anti-competitive effect, will remain tricky, which is a bit of a disappointment to those of us who had hoped the Australian 'effects based test' would cut through more easily to the chase, and market definition looks to be at least as  crucial as previously. 

Simon Muys (L) and Ed Willis (R) reflect on the jurisprudence around abuse of market power

Session 4 was 'The Next Gen' session, a new CLPINZ idea aimed at showcasing some of the talent coming through the younger ranks of the competition and regulation community, and was chaired by NERA's Will Taylor. Left to right below, we got Sophie Vinicombe, solicitor at Russell McVeagh, talking about Ticketmaster antitrust claims in the US (what looks in retrospect to have been a very poor merger clearance); Sophie Harker, senior solicitor at Chapman Tripp on collaborating with competitors in emergencies like Covid; Luke Archer, principal investigator, Commerce Commission, on competition and sustainability; and Jono Henderson, consultant, NERA, on self-preferencing in digital markets (eg when a Google search throws up Google-associated products ahead of others'). All good topics, all well handled, and (going by people's reactions and the discussion at the CLPINZ AGM) I'd guess a 'Next Gen' session is going to be an ongoing feature of future workshops.

Session 5, 'AI and Collusion: Unveiling the Challenges of Tomorrow', featured a bright idea by chair Ben Hamlin: have AI (in the form of ChatGPT) write both the blurb for the session and the biography of the speaker, James Every-Palmer, which ended up crediting James with everything short of the Nobel Prize in Economics (not to downplay his real achievements: let's hat-tip his involvement in the Lawyers for Climate Action NZ win in the High Court, forcing the government to roll back its poor plan to paper the country with cheap emission trading scheme credits). James was surely right to argue that there is a long list of potentially anti-competitive concerns, not only over facilitated collusive conduct, such as tacit algorithmic price-formation, but also over unilateral conduct (including predatory conduct, and anti-competitive tying and bundling) and further issues across a variety of non-price dimensions including quality and privacy. Me, I'm a tech optimist, and inclined to believe the benefits of modern platforms in aggregate far outweigh their downsides, but you have to expect that some of the powerful incumbents will from time to time push their luck too far.

And finally Session 6, 'Aotearoa New Zealand's Turning Point - Competition and Consumer Policy Implications', chaired by moi, featured Mayuresh Prasad from Deloitte Access Economics in Wellington. Mayuresh gets a big thank-you for stepping in at literally days' notice to fill the gap in the programme after John Small and Andy Matthews moved to the keynote slot. He showed us, first, some modelling of the costs and benefits of what we need to do to keep temperatures rising by no more than 1.5 degrees. In the graph below there's a period where we incur costs to put in place policies like carbon taxes and spend on new renewable energy (and hence our GDP on the green 'do something' track falls below our GDP on the orange 'do nothing' track). After a period - the 'turning point' of his title - we pull ahead of where we would have been otherwise, and Mayuresh put numbers on the initial costs and ultimate payoffs. The costs, for mine, looked a bit on the low side, but otherwise his modelling fits with other attempts along these lines which also show that we can indeed have our cake (a greener sustainable world) and eat it (have a higher standard of living). And secondly Mayuresh explored some of the competition and regulation policy implications, notably around facilitating the necessary collaboration for good stuff to happen, and in particular giving certainty early in the piece as to what is or is not permissible, as we don't have a lot of time to waste.

CLPINZ 2022

Last weekend the 33rd annual Competition Law and Policy Institute of New Zealand (CLPINZ) workshop was held at Simpson Grierson's Auckland offices - many thanks to James Craig and the Simpson Grierson team for use of the impressive facilities. It was once again a hybrid event - effectively standing room only for the 80 or so attending in person, with others attending online - and it increasingly looks like the most effective and flexible way of putting on events like this. One of my mates reports that the digital version worked really well, so hat tip to Shannon Woodward and the team from Conference Innovators for organising everything and to their technical folk for making the linkups work.

CLPINZ attendees hit the coffee, Saturday morning

First up was the keynote speaker, Professor Fiona Scott Morton from the Yale University School of Management: she was a fine presenter, and you could see why she's won teaching awards. Her general theme as per the workshop programme was 'Misuse of market power enforcement', and her presentation (online, from Edinburgh) was titled 'Competition Policy Whiplash'. Her argument was that over the past three or four decades economists, influenced by the 'Chicago School' style of thinking, had retreated more and more from activist anti-trust enforcement and towards deregulation and letting markets rip, whereas the economy, particularly the 'new' economy of tech and platforms, was posing more and more potentially anti-competitive problems. Old school economic thinking, and legal evidentiary standards in the US around an unrealistically high burden of proof, were being danced around by corporate strategies such as 'buy or bury' (acquisition or elimination of nascent competitors, what some call 'killer acquisitions'). Economics, and law, she reckoned, need a rev up to be able to better analyse what's going on (economics) and to be more able to do something about it in a courtroom (law).

Changing the law to better nobble anti-competitive stuff is precisely why we've recently reformulated s36 of our Commerce Act. Ben Hamlin, the commentator on Fiona's paper, had a look at how we're set up to deal with the issues Fiona raised. On the plus side, our s36 looks a more flexible instrument than its US equivalent, partly because "likely effect" leaves room to catch anti-competitive effects that would fall short of the "more likely than not" test in an American court. And our High Court can (and typically does for these s36 cases) have a Lay Member, so there's a better chance that modern economics will get a look in (Ben told us something I didn't know, which was that both the Court of Appeal and the Supreme Court can appoint an economic adviser, which looks like a good option to have). On the down side, when we have tried to ping potentially anti-competitive stuff, it didn't work very well (albeit under the old s36 and before  modern case management), and the Commission is going to have to lift both its investigation and prosecution game if it's going to be effective. And while the 'new' economy gets a lot of focus both overseas and at home (we've got some big tech companies of our own), Ben noted that the decarbonisation challenge posed by climate change is going to pose stiff competition challenges elsewhere, too (eg if a renewables-based electricity generator's market power got a tailwind).

Onwards to 'Setting the bar for collaborative activity workouts', presented by Sarah Keene and commented on by Emma Ihaia of Link Economics. The 'workout' theme referred to the gym involved in the Commerce Commission's decline of the first authorisation of a 'cartel' provision in a collaborative activity (press release here, decision here). Bit of a mouthful, but what's going on is that the Commission can authorise what would otherwise be a no-no - in this case, a gym franchisor setting maximum and minimum membership fees for its individual franchised gyms - if the provision is "reasonably necessary" for the collaboration to work. Several people pointed out that a lot of the evidence in this decision was redacted, and from the outside we're not privy to what the Commission saw, and even without knowing the details, the fact that the gym managed for some years without the provision it wanted authorised rather undercut the argument that it was "reasonably necessary" for the operation to be a commercial goer. That said, it looks distinctly odd that franchises have been caught by the law at all (people, including Sarah in a past life, had argued they shouldn't have been) - and I feel the same way, to my mind they are interconnected parties - and it's equally odd that even the Commission didn't see any anti-competitive harm ("In our Statement of Issues we expressed the preliminary view that competition is unlikely to be substantially lessened by the Proposed Agreement"). But that was moot: falling at the "reasonably necessary" hurdle meant it couldn't be cleared, even if it did no competitive harm. 

Session 3 chaired by Hayden Green of Axiom Economics was 'Insights into the Commission', originally meant to be a tour d'horizon by outgoing ComCom chair Anna Rawlings but sadly disrupted by a bereavement in her family. In her stead ComCom's Antonia Horrocks (GM Competition) and Andrew Riseley (GM Legal Service), stepped up at short notice and did very well indeed across a wide variety of topics (y'all know who they are but if not profiles are here). Among the things I picked up on: the growth of the Commission (79 folks when the Commerce Act hit the statute books in 1986, 408 now), reflecting its expanded roles; it's setting up an outcomes-based framework to figure out its actual impact (or not), and is planning some look-back analysis of previous merger decisions (gets a tick in both those boxes from me); the value for money as a lighter-touch regulatory option of the $300K a year spent on the airports' information disclosure regime; how 'must do' things like the recent tsunami of mergers have sucked resources out of more discretionary stuff; and, something I'd been baffled about ('What if they threw a party ...', 'Sterny McSternface'), what was going on with authorising collaborative activity to help with the response to Covid. As it happens, quietly in the background ComCom was in fact allowing helpful initiatives through, but barring a rather oblique reference (on p18 of the latest Annual Report), you'd be hard pressed to know. The Commission could usefully give itself a more public pat on the back.

Session 4, chaired by Alicia Murray of DLA Piper, was on unfair terms in business to business (B2B)  contracts, which kicked in here in New Zealand this August for B2B contracts where the trading relationship between the parties is less than $250K a year. Australia's had a regime going for small business contracts ('small' defined differently, but never mind) since 2016, so Professor Jeannie Paterson of the University of Melbourne walked us through what's been happening there, with local  commentary by Jennifer Hambleton from MinterEllisonRuddWatts. The upshot from Australia is that while there is little case law (there have typically been settlements when the regulator has challenged terms), the likelihood that what is adjudged unfair in a B2B contract and what is unfair in a business to consumer contract may be different, and may reduce the likelihood that a term is unfair: Jeannie said for example that "Running a business is all about bargaining for a viable balance of risk and cost in the deal. Many businesspeople are savvy at this trade-off. They may not be able to influence the terms of a standard form contract, but they may negotiate price, which should reflect the risks assumed". That said, it wouldn't be safe to conclude that anything goes, and you can stick any old terms to anyone on a take it or leave it basis: "the takeaway lesson ... may be caution in the scope of the boilerplate provisions". Jennifer ran us through the technicalities of the NZ legislation, including pointing us to one of the limbs of the legal test for an "unfair" contract term, namely "The term is not reasonably necessary to protect the legitimate interests of the party advantaged", and noting that there is "significant uncertainty" about what that means. Given that (as we learned in a preceding session) "reasonably necessary" was also the big issue in collaborative activity authorisations, you'd wonder (as a non-lawyer, in any event) whether there couldn't have been a user-friendlier formulation in the law. In any event, the new legislation is one of those useful bits of consumer law where, by addressing imbalances of bargaining power, it helps grease the wheels of workably competitive markets.

Our dinner speaker was Neale Jones from government relations and communications firm Capital, who gave a very entertaining and insightful guide to effective political lobbying. I'd guess most of his audience have had a go somewhere along the way at influencing things in the competition and regulation space (I've weighed in on s36, market studies, ComCom's Covid-era powers, and ComCom's info sharing with other agencies) and we picked up some practical ways to do it better.

Saturday morning, and we started off with 'Market studies, looking back and looking forward'. It was to have been chaired by Will Taylor of NERA, but at the last moment he came down with the dreaded lurgy, and the ubiquitous Ben Hamlin stepped in to preside over Eric Crampton from The New Zealand Initiative and Lucy Cooper from Chapman Tripp. Two big points from Eric: if you're concerned that competition isn't working in a market, the best first question to ask is, what are the barriers to entry? Why aren't new entrants able to come into a market and eat the incumbents' supernormally tasty lunch? And secondly, when you do that, you're liable to discover that there are "impenetrable thickets" of overlapping blockages which are the real issue: he mentioned the cumulative effects, for example, of regulation (including occupational licensing), statutory protections, zoning and consenting in the planning process, and the Overseas Investment Act. Both Eric and Lucy wondered about the selection process: so far the topics chosen (while good ones) have all been government priorities, and there could well be traction from ComCom being given its head to look at where it thinks there may be issues. Lucy raised something I hadn't thought of: she said that ComCom's strength is in analysis and findings, and perhaps there's scope for the policy recommendation piece to be shared with, or done by, others, given that policy development is an art form of its own. I can see the point, and Lucy (who's been through the supermarkets and petrol bunfights) knows more about process than I do, but FWIW, what you might gain in policy development you might lose in urgency (think s36, and others), unless the policy developers' feet were held to the fire in the same way that ComCom is forced to move right along with its market studies.

Ben Hamlin warms up the audience for Eric and Lucy

And finally we got to an oddity of New Zealand's competition regime, ComCom's legislated inability to accept behavioural undertakings in merger proceedings. In the session, chaired by Glenn Shewan from Bell Gully, we heard from Linda Evans from Herbert Smith Freehills in Sydney (Australia allows behavioural undertakings, and Linda's been involved in some big ones), with commentary from Michael Tilley, Geelong Cats fanatic and mergers manager at ComCom. Another very good session, and I hope I don't do it an injustice by cutting straight to the chase, namely that an absolute prohibition doesn't make much sense and that occasionally - occasionally - behavioural undertakings will be a good way to go. Linda: "The experience, particularly in the US, but also from Australia and Europe, indicates that behavioural undertakings may be appropriate in certain circumstances. In particular, well designed behavioural undertakings can effectively resolve any competition concerns, while also maintaining the efficiency benefits of a transaction". Michael: "There is a case for change; Acceptable standalone conduct remedies are likely to be rare; Claimed efficiencies should be treated with caution; Consumer benefits should outweigh the costs; Commission would want ability to say “no”".  When we get the next update of the Commerce Act, this should be on the agenda.

If you'd like more detail on anything, the papers and slides are already up in the members' area of the CLPINZ website, and recordings of the sessions will also be available in the near future.

A long post, but then this was a pretty chunky and meaty workshop. I'd guess the length was, um, reasonably necessary?

The future is hybrid

The Competition Law and Policy Institute of New Zealand (CLPINZ) held its 32nd annual workshop in Wellington over the weekend. As is the norm these Covid-plagued days, it was a 'hybrid' event, with people having the option of attending in person or online: the Commerce Commission's going the same way later this year, and the NZ Association of Economists ended up there perforce, when Day 1 of their conference got away in person but Day 2 fell foul of a Wellington lockdown and was rescheduled online.  

My guess is that even when Covid is gone, we'll stick with the hybrid model: there will always be takers for both options, and (let's face it) the online option makes for much cheaper overseas speakers. Plus the technology is in the bag: Charlotte Emery and her Conference Innovators team did a fine job successfully juggling speakers from Washington DC, Brussels, Sydney and Melbourne, as well as hosting online attendees from Australia and New Zealand. Hat-tip, too, to workshop dinner venue Dockside: confit duck, twice-cooked pork belly, and dark chocolate torte worked for me.

The big opening keynote, chaired by Lane Neave's Anna Ryan, was the University of Chicago's Dennis Carlton on merger retrospectives. This wasn't Dennis's first CLPINZ rodeo - he gave the keynote at CLPINZ #21 in 2010 - and it was great to have him back as one of those heavy academic hitters who can put economics across in plain English and whose analysis is informed by getting his head around real world cases (he was involved in Air New Zealand / Qantas, for example). Dennis said that competition authorities obviously ought to look back and see how their merger decisions played out, but they should focus not just on the market pre- and post-merger, but also, in the interest of upping their game, on how well their modelling and analysis at the time actually played out later. One of his examples was US airlines, where six big airlines merged down to three (Delta/Northwest, United/Continental, American/US Airways): you'd guess (well, I would, anyway) that this would not be good for the travelling public, but in the event his econometrics showed quite clearly that "these mergers have been pro-competitive, with no significant adverse effect on nominal fares and with significant increases in passenger traffic as well as capacity".

Commentator, NZ ComCom chief economist Lin Johnson, spoke about local merger experience. My takeaway was that it could be a temptation to be overoptimistic about the prospect of expansion, entry, re-entry, or imports effectively constraining the merged entity. For overseas constraints, like new entry or import expansion, it's particularly important to make sure that new entry is indeed on the strategic agenda of the mooted entrant, and that (even if willing to come in) world market conditions don't make other options elsewhere more attractive. And it's worth checking the sensitivity of would-be import expansion to small changes in exchange rates. And both Dennis and Lin talked about the importance of thinking ahead about the sort of data you'd like to have about post-merger outcomes.

Next up, chaired by Russell McVeagh's Troy Pilkington, we had John Land on 'Anti-trust and IP' (i.e. intellectual property), with Russell McVeagh's Petra Carey as commentator. The argument was that proposed changes to s36 of the Commerce Act (moving to an 'effects' test for abuse of market power) and to s45 (repeal of the provision whereby merely enforcing your patent rights didn't put you foul of s36) could end up interacting in an unhelpful way. The risk is that perfectly unexceptionable commercial patent-licensing, which could even be efficient and pro-competitive, could be miscast as having the effect of constraining competition. If I were the Economic Development, Innovation and Science Select Committee, which will let us know its views on the Commerce Amendment Bill in mid September, I'd be tempted to rethink repeal of s45.

Onwards to 'Economic regulation of water', chaired by Chapman Tripp's Simon Peart, with NERA's Will Taylor and Water New Zealand's CEO Gillian Blythe as speakers - Will laying out exactly what the regulatory issues are in the current programme of 'Three Waters' reform (drinking, storm, and waste), and the tools that might be used to achieve them, and Gillian giving us a lot of helpful background on how the industry operates. If this is all news to you (as it mostly was to me), then you'll find the reform proposals here, while Gillian pointed us to this very useful trove of water performance data. Sadly, the story hitherto is one of an immensely fragmented system with a chronic infrastructural deficit and periods of acute crisis (think Auckland's inadequate reservoirs, Havelock North's drinking water, Wellington's pipebursts). Incentives to foster dynamic efficiency have clearly either fallen down or are perverse (eg electoral incentives to keep the rates down today while the pipes burst tomorrow). The proposed consolidation into four national water service entities looks a useful first step: whether better dynamic incentives will kick in, though, isn't at all clear.

Session 4, chaired by Bell Gully's Glenn Shewan,  was on media bargaining codes, which took us into the competition issues of bargaining imbalances between the big social media platforms and the news media, and what, if any, compensation should be paid by the likes of Facebook and Google for the public good of news provision. King & Wood Mallesons' Wayne Leach took us through the system Australia has set up (it's Part IVBA of their Act), while we got New Zealand industry viewpoints from Stuff's Editor in Chief Patrick Crewdson and NZME's General Counsel Allison Whitney. Wayne posed a number of questions, with maybe the big one being whether competition law can, or should, be extended to solve all the world's ills. And while Patrick claimed not to be an economist, he nonetheless managed to reason his way exactly to where an economist would have got on externalities (tax negative externalities like conspiracism and fake news, subsidise positive externalities like non-partisan newsgathering).

If session 4 had wondered whether competition law has a role in regulation of digital platforms, session 5, chaired by DLA Piper's Alicia Murray,  wondered what, if anything, it could or should do to assist with rolling back climate change. Brussels based Jordan Ellison from Slaughter and May took us through how European competition law can in theory be compatible with firms' cooperating for environmental benefit: a 'carbon defence' would apply if, say, three firms collectively agreed on some action to eliminate X tonnes of emissions, and would be safe from challenge if the value of any subsequent price rise to consumers was less than the overall saving to society from the emissions saved. The commentator, principal economist Reuben Irvine of ComCom, reminded us of 'Sustainability and Competition - Note by Australia and New Zealand' (available, with other useful stuff, here), where the good news is that in both countries the definition of a net benefit is wide enough to encompass things like environmental payoffs (as, for example, it was also wide enough to accommodate the democratic value of media plurality in the mooted Stuff/NZME merger). We'd have less difficulty accommodating genuinely (net) beneficial cooperation than the Europeans might. That said, inter-competitor agreements shouldn't be the default, and businesses shouldn't be able to stop competing in the sustainability dimension of their product offerings without some vigorous tyrekicking.

And finally we got to 'Consumer data right and open banking', chaired by moi but with the heavy lifting on the session structure largely down to Will Taylor. Rosannah Healy from Allens in Melbourne took us through the Aussie experience with legislating for consumers' control over the assignment and use of their data: they've been up and running since 2017, while we're still at the stage of planning legislation for next year (you can read our policy decision here). And Josh Daniell, CEO of open finance platform Akahu (mission, "to empower consumers to gracefully control and leverage their personal data")  showed us what sorts of applications we are actually likely to see in New Zealand. The CDR is a really exciting development: in principle, it should reduce switching costs and enable new entry in sectors such as banking (typically one of the first cabs off the rank when CDRs get underway), electricity, and  telecommunications. In practice, it tends to take quite a bit of drawn-out sector-specific customisation, but I wouldn't underrate its potential to be a game-changer over the longer haul.

Two final thoughts. One was that the workshop would would have been good in any event, but got an extra boost from hearing from industry players like Gillian, Patrick, Allison, and Josh: at our table (a motley crew of economists, lawyers, officials and enforcers), we all felt we learned a lot from them. And the other, which emerged across various sessions, was that the Commerce Act is looking decidedly moth-eaten. There have been targeted reviews of bits of it (like the one that culminated in the current s36 proposals and the, overdue, ability for ComCom to conduct market studies), but when you look at the current inability of ComCom to establish industry codes (à la supermarkets inquiry), or to accept behavioural undertakings in mergers, or to issue interim authorisations as it used to be able to, or elsewhere (eg the clunky wording of the retail price maintenance sections), it looks like it's time for a vigorous spring clean.

An excellent resource

Interested in staying up with Australia's criminalisation of cartels, and New Zealand's impending move to do the same? Then head over to the MLex site and download your free copy of  'Collusion Damage: Australia’s struggle to secure its first criminal cartel convictions — and make jail time a deterrent at last '.

It's an excellent resource. As the report says, "Since the first individual criminal cartel charges were laid early in 2018, MLex has been present at every material court hearing in Canberra, Melbourne and Sydney", and the expertise shows. The report is on top of all the cases currently live. My take, not theirs, but after reading this report, and also going by the coverage of the case in the Australian Financial Review, I do wonder from a variety of perspectives if the ACCC is going to succeed with its alleged cartel case against the underwriter banks left with unsold ANZ Bank shares. 

There's a chapter in the report about New Zealand's impending regime, where I agree with MLex that "It’s true that the Commerce Commission will still have the full suite of civil offenses at its disposal and will be under no obligation to unleash a criminal prosecution for trivial matters. Yet ensuring that well-meaning, small businesses -  those that aren’t large enough to have in-house counsel or even to employ a law firm to review their decisions - don’t get caught up with criminal offenses designed to ensnare larger, possibly global players, will remain a challenge for the agency".

In writing up the CLPINZ session on cartel criminalisation I'd also wondered about potential overkill, and had assumed we in New Zealand would end up with some arrangement similar to that between the ACCC and the Commonwealth Director of Public Prosecutions, which hopefully would set some seriousness threshold before unleashing the criminal process. But I learn from the MLex report that "Unlike the ACCC, the Commerce Commission will be able to take its investigations to court directly, without handing the file over to public prosecutors; however, it will be required to ascertain how its planned prosecution measures up with the Solicitor General’s Prosecution Guidelines, which demand “evidential sufficiency” and proof that the prosecution is in the public interest". As the Guidelines say, "The predominant consideration is the seriousness of the offence", and hopefully a conservative approach will be the way to go, rather than feeling the collar of commercial naïfs.

Speaking of resources, I came across the MLex report on its useful Twitter feed. If you're interested in competition tweets, head over to my own Twitter posts and help yourself to my Twitter 'Competition' list (currently 73 members). And if New Zealand economics is your thing, then the 'NZ economics' list (52 members) should be of interest. If there are local competition or economics folks I've missed, let me know and I'll add them.

CLPINZ 2020 goes online

Last week's Competition Law and Policy Institute (CLPINZ) workshop was - perforce - the first time CLPINZ has run the annual event online, and the good news is that the technology worked just fine (ably organised by Conference Innovators, special hat-tip Olivia Lynch). Covid is reshaping a lot of things (as I wrote in Acuity, the accountants' magazine) and sometimes for the better. Online workshops may not provide the same personal contacts and networking but they can deliver a lot of bang per buck once travel costs don't come into the equation for speakers or attendees.

Can't cover everything but here are some of my highlights.

The keynote was the topical 'Antitrust in times of crisis and emerging from the crisis', by Maureen K. Ohlhausen from Baker Botts in Washington DC, with commentary by Ayman Guirguis from K&L Gates in Sydney and session chair Anna Ryan of Lane Neave in Christchurch. One theme was the need for competition authorities everywhere to scramble hard to authorise (or at a minimum stand aside from preventing) collaborative activities between firms who would normally be competitors, when they are responding to covid logistical challenges (eg coordination of grocery deliveries, or availability of medical resources). The ACCC in particular has in my view been commendably quick to get provisional authorisations out the door. 

Another was how to treat 'failing firms': there are a lot of cases where firms are in trouble (or heading for foreseeable trouble) and while they can't qualify for the usually strict merger conditions around a 'failing firm', a properly forward-looking analysis of the competitive outlook might well lead you to allow a merger. 

A third theme was the renewed focus on market power in the tech space now that we're all even more dependent on the big tech names for our remote working and our online shopping. The conclusion as I saw it was that there is still no clear verdict on whether these markets are naturally tippy towards one predominant incumbent, or whether there are issues of market power that need to be corrected.

Consumer law isn't usually top of my interests, but I was very much taken with the session on 'Unconscionability and unfair contract terms', where the speaker was Sarah Court, Commissioner, ACCC, the commentator Anna Rawlings, Chair of the NZ Commerce Commission, and session chair James Craig of Simpson Grierson. As background, Australia's got unconscionability on the statute books, and we're minded to go the same way. I'd heard Sarah Court on this topic before (see here) and while the Kobelt case she cites as showing the Aussie law isn't working might be one of those odd cases that might not influence anything over the longer haul, there's a real chance that our courts might also struggle to nail genuinely ratbag behaviour. Why not read Kobelt and see what your call would have been? And if you think Kobelt got the wrong end of the stick, what would you suggest to fix it?

Another area where we look to be heading to align our legislation with the Aussies is changing our current s36 of the Commerce Act, the bit that deals with abuse of market power. The plan is we will move away from our current legal test (which focuses on the 'counterfactual test' of what would a firm without market power have done) to an 'effects test' which, as it says on the tin, tries to take an objective view of whether the conduct actually works anti-competitively (both jurisdictions would also retain anticompetitive purpose, which would catch those incriminating internal e-mails). 

I went into this session - 'Misuse of market power – what an 'effects test' would mean for New Zealand', speaker Dr Katharine Kemp from the University of New South Wales, commentator Brent Fisse of Brent Fisse Lawyers, session chair John Land from Bankside Chambers - with what I regret to reveal was a largely closed mind: I'm pro-change. But I came out with the odd niggle of doubt about potential over-reach. Faced with the choice of the status quo or the change, I'd still change, as the counterfactual test asks the wrong question plus we get the benefit of trans-Tasman alignment, but I suspect policy analysts on both sides of the Tasman will be watching the first few 'effects' cases very closely indeed.

And yet another area where we are harmonising with the Aussies (and with global practice generally) is criminalisation of cartels, where on the topic of  'Cartels – criminalisation – lessons from the Australian experience' we heard from Marcus Bezzi, Executive General Manager at the  ACCC, commentary from Marc Corlett QC from Britomart Chambers, chairing by Glenn Shewan from Bell Gully. I'm generally not in favour of yet more criminal offences when we already have far too many people in jail (by developed economy standards), but I'm prepared to make an exception for 'hard core' cartels which I see from a moral perspective as akin to fraud (quite apart from the often sizeable economic detriments).

One thing that's worried me, though, is that every 'ordinary' New Zealand cartel, if I can call it that, would attract criminal charges, which I would regard as overkill. I was partly relieved to hear Marcus talk about a memorandum of understanding between the ACCC and the Aussie Commonwealth Director of Public Prosecutions which aims to keep the criminal route for the worse cases, which is surely right. I presume something similar will go into place here at home before we go live in April next year. Marc Corlett's remarks said (to me at least) that individuals caught in the grinder between the criminal prosecutor and a perhaps not always supportive employer are going to be in a tough place: another reason in my view to make sure that we concentrate on the hard core conduct and the big fish.

The session on 'Acquisitions of nascent competitors', speaker Renata B. Hesse from Sullivan & Cromwell in Washington DC (who if I heard it right may indeed have coined the phrase 'killer acquisition'), commentator Iain Thain from DLA Piper in Auckland, session chair Will Taylor from NERA Economic Consulting in Auckland, got me thinking. This is a really tough area. It's important to stop killer acquisitions: as Iain emphasised, it's the competitive struggle that unearths all sorts of lucky discoveries (sometimes unexpected ones) even if in the end the market tips to one big winner. But it is very hard for competition authorities to deal with, when even those most up with the game in any given sector can't be sure what might have developed into a credible challenger to an incumbent, but for its pre-emptive acquisition. As Renata said, you're often trying to do an objective analysis of something that is inherently subjective. 

Some days I favour channelling my inner Schumpeter, not worrying too much about temporary tech monopolies and letting it all play out in the creative destruction gale. Sometimes there must be good outcomes when an incumbent offers a genuinely better product, once it has bolted on the smaller-firm functionality it's just bought, whereas you might be waiting years for the small firm to develop a full-feature offering. But then will incumbents' internal R&D slack off if they can rely on buying the next bright idea? And what if ... you get the drift. This is hard.

Life's too short to summarise everything but for the record we also had an economists' panel - 'Hipster economists? Values, welfare and evidence', and a corporate counsel oriented panel - 'Handy hints for practice – Joint ventures and commercial agreements', and if they ring your bell you can get in touch with the panellists (here's the full workshop programme with the details).

CLPINZ 2019

Last weekend we had the 30th annual workshop of the Competition Law and Policy Institute of New Zealand, and to mark the CLPINZ anniversary we went back to Christchurch where it had all started (on August 11-12, 1990). We even had two of the original attendees (John Land and Alan Lear). Back then the inaugural workshop had spent a fair deal of its time on s36, abuse of market power - plus ça change, eh? Thirty years on we're almost on the cusp of junking our ineffective s36 and going the Aussie route, but we're not quite there yet.

The keynote speaker via video link was David Evans, chairman of Global Economics Group and co-author (with Richard Schmalensee) of the excellent Matchmakers: the New Economics of Multisided Platforms, which is a very good guide to two (or more) sided platforms. His topic was "The role of market definition in assessing anti-competitive harm in Ohio v. American Express", and his conclusion was that the US Supreme Court got it right in finding for Amex.

It was a top-notch presentation, but not everyone was convinced by the conclusion. I hadn't been, either, when I first encountered the Amex case. Amex was trying to defend the practice of "anti steering": shops who accepted Amex cards were contractually prevented from suggesting that customers taking out their Amex cards should or could use competitor cards like Mastercard and Visa (which were cheaper for the shop to accept). As blatant an anti-competitive contractual provision as you could find, you might think, and initially I thought so, too. But I changed my mind ('Two sides to the story') and I'm now with Evans.

From discussions at the workshop, however, some of my colleagues think it's a mistaken ruling, and let's not forget the court itself had split 5 - 4. One attendee sent me 'Why credit-card rules are anticompetitive', and you can find the formal economics here. And there are others who think that between Amex and the AT&T / Time Warner merger, the US Supreme Court has lost the pro-competitive plot: see for example 'Policy Failure: The Role of "Economics" in AT&T - Time Warner and American Express'.

I won't reprise the whole workshop: copies of the presentations will be going up on the website for members (you are a member, aren't you). I'd particularly recommend Professor Martin Richardson's paper on 'The role of lay members in court', which has a lot of useful stuff on what makes for a good expert economist witness. In the interim, if you're desperate for Evans' paper, you can find a version here.

Assorted takeaway thoughts:

- Chris Whelan from RBB Economics presented on 'Cutting edge tools in economics' and mentioned the upward pricing pressure arithmetic of vertical mergers, bargaining theory, machine learning, and an application of regression to separating "buy" trades from "sell" trades in financial markets (an issue that arose in an Aussie case alleging manipulation of short-term interest rates). On that occasion the regression approach was misapplied and fell over, and that's fair enough, but in my discussant paper I argued that regression is still the go-to workhorse tool for a great deal of empirical work outside competition cases, and there's a lot of scope to use it more than it has been (I was pleased to see interesting regressions pop up in the Commerce Commission's petrol market study)

- from the Fair Trading Act session on making unsubstantiated representations, I have to confess I didn't know that you had to be able to justify any advertising claims you make at the time you make them. Even if they're subsequently challenged and found to be true, you're at risk. I noticed that all the early prosecutions were about manufacturing (heat pumps, steel mesh, water filters): happenstance maybe, but it left me wondering about enforcement in the 70% of the economy that's made up of services

- cartel criminalisation goes live in New Zealand in 2021. The Commerce (Criminalisation of Cartels) Amendment Act 2019 does not distinguish between 'hard core' and other cartels, though a lot of us would hope that criminal sanctions would only apply to the more egregious ones. I learned from the presentation by Gilbert & Tobin's Elizabeth Avery that in Australia there's a mechanism (an understanding between the ACCC and the Commonwealth Director for Public Prosecutions) for sorting the worst from the less bad. I presume - hope? - that we'll do something similar

- in the electricity sector, there's a plausible scenario that we're going to need a big expansion of generation capacity to cope with the likes of cars moving from petrol to electric power. But I'm left wondering whether we can get our infrastructural and regulatory acts together to enable it to happen. And while we're on electricity, what's happened to the retail electricity pricing review?

- I'm now persuaded (rather belatedly) that prohibiting the Commerce Commission from accepting behavioural undertakings in the context of a merger makes little or no sense. Sarah Keene at Russell McVeagh has been arguing this for yonks, and did again at the workshop, and no doubt others have been pushing the barrow too, and I think it's correct. The Commission might well end up using the power sparingly, but it's better than not having the option at all

Christchurch itself was an eye-opener: there are more swathes of the CBD than I'd expected that are still vacant lots. A lot of reconstruction has already been done, and a good deal more work is underway, but there's still an awful lot left, as the cathedral in particular reminds us.

Workshop takeaways

Last weekend was the latest annual workshop of the Competition Law and Policy Institute of New Zealand (CLPINZ). Wellington turned on its loveliest weather, all the speakers and discussants performed well, there were sausage rolls at the meal breaks, and during my absence in Wellington the Warriors broke their home game hoodoo and took the two points. An excellent week-end all round, and special thanks to Chapman Tripp for providing the excellent facilities.

Many of the usual suspects were at the workshop, but if you're in the game and had to miss it, head over to the CLPINZ website, sign up as a member, and you'll get access to the papers (they're not up yet, but will be). You'll also get access to previous years' presentations.

The papers speak for themselves: here are some personal thoughts I took away.

Cartels - the cause célèbre du jour is the Lodge case. This is the one where a whole bunch of real estate agencies pleaded guilty to price-fixing, but for the eponymous hold-out in Hamilton, who went to trial and to widespread surprise beat the rap in the High Court. At the time I wrote about the fines for those who had pleaded guilty and said that "in the context of small to medium provincial businesses, even to my unsympathetic eye they were looking down the severe end". Having listened to the cartels session, and to the session on coming to a negotiated settlement with the Commission, I'm more of that view now. I never thought I'd feel that way, but as David Blacktop's presentation said, there can often be some "precipitating event" that causes otherwise well-meaning, normally competitive businesses to lapse into a concerted (rather than independent) response to the event - in this case to Trade Me's attempted jack-up of real estate listing fees. No, they shouldn't collude on a response, and in principle it doesn't matter that they would have come to the same decisions independently, but all the same they got backed into a corner and were anything but the cartoon cartelists in the proverbial smoke-filled room. Time for more understanding, in my view, of the reality they found themselves in. The goss, by the way, is that the Commission stands a good chance of having Lodge overturned in the Court of Appeal, but stranger things have happened. And while we're on the topic...

The law - okay, I'm an economist, and anyone who gets their legal advice from an economist deserves what happens to them, but I've got some questions. Is there anyone on the look-out for where Australian and New Zealand competition law might be diverging? We don't want, for example, the situation John Land described, where the legal approaches to price fixing may be going down different roads. Is there any kind of trans-Tasman body that keeps a weather eye out and acts to harmonise on best practice? And speaking of harmonising on best practice, it seems from what Minister Faafoi said at the workshop dinner that reform of s36 - anti-competitive abuse of market power - will be back on the agenda next year. Good: the Aussies have fixed their equivalent, and we should get in behind. I've also got some disquiet (partly stemming from Lodge but also more generally) whether behaviour at the lower end of culpability will be prosecuted under the forthcoming criminalisation regime, rather than the 'hard core' cartels that should be its target.

Regulation - I found myself in strong agreement with Ross Patterson's response to Sasha Daniel's paper on 'The future shape of telecommunications regulation'. Ross argued that there is no lack of competition in access to fast broadband and hence no case for regulation, especially when you're regulating one technology (fibre) but not another (fixed wireless) and with a - I think he said 'clunky', but if he didn't I am - a clunky form of 'building block' price cap regulation.

The internet - our new digital economy is going to be a minefield from both competition and consumer law perspectives, and I suspect we'll be making both Type 1 and Type 2 errors for some time before we get it right, if we ever do. That was my overall impression from the keynote 'Collusion without the smoke-filled room: from public statements by wetware to algorithmic pricing by software' from Professor Joseph Harrington and 'Consumer Analytica: NZ consumer law application to international developments in privacy and use of data' from Sarah Keene. I suspect there's likely to be behaviour that is anticompetitive or unfair/misleading that will not be pinged, and behaviour that's legit that risks being rapped. Joe Harrington is surely right that we likely need jurisprudence and new guidelines to distinguish between the two, but we're still a long way from being able (for example) to "develop rules for how a platform can intervene in the setting of prices" or to "define the class of prohibited pricing algorithms".

Market studies - the papers presented at the session I chaired were absolutely on the money. If you're thinking about how the Commission should use the powers it's (more than likely) going to get, you've got to read the excellent presentations from Mike Tilley and Richard Meade. They've both had first-hand experience of doing these studies, and it showed. Market studies are a great idea, but there are more process issues to think through than you (or I) might have imagined. I'll just chuck in one final thought for MBIE's consideration: I suggest that any company that attempts to invoke our 'anti-dumping' provisions should automatically trigger a market study into its industry.

Quantification - James Mellsop and his NERA colleague Kevin Counsell gave a very good presentation on 'Mergers: exploring the economic tool box', and walked the attendees through unilateral effects in auction markets (using a pathology merger example), vertical arithmetic (a version of critical loss analysis) using the AT&T/Time Warner example, and then some Cournot modelling of a wool scouring merger (using made-up data, by the way, if anyone involved in any of those cases is wondering). Good stuff, and they got it across in a user-friendly way that - my keyboard nearly inserted 'even' - lawyers could understand. My feeling is that we are, finally, on the brink of a new more data-driven and more quantitative approach to competition analysis, after a long period when the tide had gone out a very long way indeed on playing with the numbers. As I've said a few times before (eg here or here) there's far more empirical data becoming available, and better (and often more robust) ways of interrogating it. The Commission's Reuben Irvine said that some of these quantitative techniques, like the auction and vertical arithmetic tools James and Kevin mentioned, are already in use, if somewhat behind the scenes, at the Commission, and about time, too. In my stint there, applicants and opponents very rarely reached for even the more basic econometric methods (regression, differences-in-differences), and you could go years without tripping over a correlation coefficient. We've become an immensely data-rich world: time to start using it, rather than making anecdotal guesses about (for instance) the degree to which products are or are not in the same market.