Did it work?

A year ago, in the interest of making competition work, we switched our electricity supplier ('We take the plunge'). And now that we've got a year of bills from our NewCo, we can compare them with what our OldCo used to charge. Here's how it worked out.

Pretty good, eh? So there's not a lot of reason for you to be one of the 400,000 to 750,000 people who've never switched, is there? Off you go to Consumer New Zealand's Powerswitch or the Electricity Authority's What's My Number. Make the competitive process work for you.

Incidentally, that estimate of the very large number of people who've never switched came from the Electricity Price Review. As its website says, "Please note: the review delivered its final report to the Minister of Energy and Resources on 29 May 2019. The timing of its public release has yet to be determined".

Good policy development shouldn't be precipitate, but I'm leaning towards the view that four months is enough thinking time given that a range of options were canvassed and consulted on during the review process (if you've forgotten them, head to 'At A Glance', which is p3 here). It's getting time to see the report and the government's response.

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.

Let's get more active

By far the best single way to get unemployment down is to keep up a good run of economic growth at a robust pace. Not only does the unemployment rate go down, but the longer and stronger the expansion, the more it succeeds in bringing more marginalised groups into employment.

I've shown previous versions of the graph below: here's the up to date version, which shows (yet again) that less favoured groups suffer distressingly high rises in unemployment when the business cycle goes pear-shaped, but conversely a long expansion works its magic on everyone, even on those who tend to be on the outer. It's not perfect - rates of unemployment for some groups, notably Maori and Pasifika, are still too high - but the long post-GFC expansion has seen big falls in the unemployment rate across all groups..

Because growth alone will not deal to everything there's always a role for 'active' labour market policies that try to make the labour market work better. Residual unemployment for example could be down to things like skills mismatches: employers are looking for people with skills they don't have. Or it could be down to regional immobility: who's going to move from Northland to a job vacancy in Auckland given the cost of putting a roof over your head in Auckland? And there can be other mismatches preventing people willing to hire from signing the deal with people wanting to work.

There's a brilliant new bit of research out looking at active labour market policies, and which ones work. They're not just any old active policies: they're ones where there was a control group experiment, where you can see how those who went through the programme fared compared to those who didn't, which is how the researchers can tell if it made any difference. Here's the more readable version for the intelligent public - 'Understanding what works for active labour market policies', on the excellent Vox site - and full-blown policy tragics can get the more academic version here.

Here's the key result in terms of the impacts on earnings and employment:

If we focus on the median impact on earnings, wage subsidies and independent worker assistance ['Support to micro-entrepreneurs and independent workers'] show the greatest impact relative to the control group, with improvements of 16.7% and 16.5%, respectively. Vocational training programs have a median impact of 7.7%, while employment services show an almost negligible impact. The median impact on employment outcomes exhibits a similar pattern

Here's the graph they drew to show the results, though to be honest it's hard to see the scale of the impact with the vertical scale they've chosen to use.

They also discovered a variety of other things that make complete sense: "Individualised coaching or follow-up of the participants, training exclusively focused on a specific industry, and the provision of monetary incentives to trainees all correlate with better outcomes in vocational training programmes (the most frequent ALMPs in our dataset)", and, unsurprisingly, they also found that you get better outcomes when you run these programmes in good times rather than in the pits of a recession.

They also found (noting that cost data isn't uniformly available) that you get what you pay for. As the graph below shows, employment services programmes are cheap, but useless, while the most effective option, helping people to do their own thing, costs the most.

There's a lot we could learn from this. Currently we're down the wrong end of the OECD league ladder when it comes to what we spend on active labour market policies (as I discussed here). This research gives us a pretty clear steer on what we should do to up our game.

It's also left me wondering about our policy institutions. This research works because all over the world people have invested in randomised control trials - experiments where you try something out and compare it with what happens where it wasn't rolled out. But I can't think of many home-grown examples where we've had a go at economic policy field experiments: charter schools, maybe, but they got sat on.

My feeling is that we're too fond of the over-dirigiste 'one size fits all' approach. And our chronic political oppositionism makes both the public service and the decision-making politicians far too wary of experiments that might go wrong - even when they might hold valuable information about what works and what doesn't. There's too high a political price to pay for what will be pilloried as 'failure', and it's hindering finding out what might or might not make a real difference to those hardest to get into work. We should move on: it's time to join the adult policy world.

Those high petrol prices - another view

There's a graph, Figure 3.8 on page 82, in the Commerce Commission's petrol market study that's puzzled me. And not for the first time: it also puzzled me when I first saw an earlier version of it, in MBIE's 2017 go at an inquiry into the petrol industry (where it was Figure 4 on p3). Here is ComCom's one.

It shows the price at the pump of a litre of premium petrol in a wide range of higher income countries, standardised by being converted into US dollars. Eyeballing the graph, you see New Zealand is there at roughly US$1.47. At the exchange rate of the time (March quarter '19) of 68 US cents, the price converts into NZ$2.16, which looks right. All good.

Because the price at the pump is heavily affected by local taxes, for competition policy purposes you need to focus on the price ex taxes, which is shown in blue in the graph. New Zealand does not show to advantage, with the third highest petrol price. Cue song and dance about how bad we are.

But what's been puzzling me is the weirdness of the country rankings. Your first inclination is to go looking for some underlying explanatory patterns - transport costs from major oil fields or refineries? - but it's hard to spot any. The three countries at the top - Mexico, Korea, us - are as odd an assortment as you'll ever see. The three at the bottom - Slovenia, Chile, Finland - don't obviously have much in common, either.

The ordering could of course reflect differences in local competitive intensity. You look at Mexico's top billing, for example, and you wonder about Pemex, a state owned monopoly up to 2013 which still has nearly three quarters of the petrol stations. You wouldn't know about the rest of them without some intensive investigation along our own Commerce Commission's lines.

But I'm also wondering whether the somewhat jumbled pattern mightn't partly reflect the fact that the petrol prices have been converted into US dollars at market exchange rates, rather than at purchasing power parity (PPP) exchange rates.

If this whole 'which exchange rate to use' thing isn't your bag, let's backtrack for a moment. If you're comparing, say, the price of an Apple i-Pad Pro 11" Wi-Fi 256GB, you'll find it's on Amazon at US$799.99 and you'll find it's NZ$1648 at JB Hi-Fi. At today's exchange rate (63.7 cents) the Amazon one costs NZ$1256. Good deal cheaper in the US.

But market exchange rates are fickle beasts and move around a lot. Because an iPad is expensive locally today doesn't mean it mightn't be locally cheap next Tuesday if the Kiwi dollar were to fall sharply against the US dollar over the weekend. You shouldn't be drawing any long-term policy conclusions about iPads - or petrol - on the basis of an exchange rate that might make a fool of you in no time.

Which is why these international comparisons are more normally done on a different basis. Supposing you went out and bought a wide bundle of stuff in the States, and it cost you US$100,000. You do the same in New Zealand, and it costs you NZ$150,000. It would then be fair to say that US$1.00 has the same buying power as NZ$1.50. In that case you wouldn't be in the least bit surprised if a litre of petrol cost US$1 in the States and NZ$1.50 here: that's just what you'd expect, because anything that costs a US dollar in the States is on average likely to cost NZ$1.50 here, as we discovered on our shopping expedition.

Long story short, people making international comparisons tend to use that US$1-equals-NZ$1.50 exchange rate, called the purchasing power parity rate (obvs). And here's what happens when you do that same chart of ex tax prices in blue above, but at that PPP rate instead. I've used the latest (2018) PPP rates as calculated by the OECD (you can find them if you fossick here).

In New Zealand's case, the pre-tax petrol price doesn't change much. It was around 77.5 US cents before (again eyeballing the number from the ComCom graph, as I'm not going to pay the €900 the International Energy Agency wants for the exact data). At the March quarter market exchange rate of the time, 68 cents, that was NZ$1.14. The PPP exchange rate wasn't very different: it was 67.6 cents. So our local price translated into US$ at PPP was 77.1 US cents, rather than the 77.5 US cents price you get at market exchange rates. Same diff.

But other countries' prices move around quite a lot when their PPP rates are used instead of their market exchange rates. And the end result is that our relative position drops quite a bit. We were third highest out of 33 on a market rate basis: on a PPP basis we're 14th out of 33. There's a bit of imprecision here, as I've used eyeball data rather than precise ones, so I wouldn't obsess over whether it's 14th or 13th or 15th*. This PPP ordering also makes a bit more intuitive sense than the market rate one: the bottom three, for example (now Norway, Finland, Iceland) look like a more coherent bunch.

There are still good reasons for having a market study look at the petrol market: those rates of profitability that ComCom found, in particular, need some explaining.  But one conclusion from this exercise is that I wouldn't get carried away by the "we're one of the dearest in the OECD" line of argument.On this, entirely conventional, alternative way of making the comparison, we're a little bit on the expensive side of middle of the pack.

*If you want to see the data I've used, and maybe check I haven't got the wrong end of any sticks, it's here (assuming I've got Dropbox working right).

By the numbers

There's a really neat bit of dataviz gone up on the Productivity Commission website, which has a go at showing different measures of the intensity of competition in the various sectors of the New Zealand economy. The Commission has had an interest in competition as it surmises - I'd say correctly - that the intensity of competition (or lack of it) may have something to do with our national productivity (or lack of it).

The story starts with the Commission getting Motu's Dave Maré and independent researcher Richard Fabling to look at the links between the intensity of competition and productivity outcomes, an exercise they published as 'Competition and productivity: do commonly used metrics suggest a relationship?'. As part of that exercise they first had to get the underlying dataset scrubbed up, an exercise they describe in brief here; their full paper is here.

The competition and productivity data that Maré and Fabling collated form the basis of the dataviz. It's the work of data wizzes Aaron Schiff and Harkanwal Singh, who have taken the data on competition and created the Competition Explorer.  There's an accompanying paper, 'Competition in New Zealand: highlights from the latest data', which you'll be relieved to hear "is aimed at non-specialist (and non-economist) readers", and which explains that it "provides a consistent set of competition measures for 39 industries for each year between 2001 and 2016".

Have a play with the Explorer. By default you start at the 'About' tab, which shows you the measures: yer standard Hirschman Herfindahl Index of concentration; price to cost margins (in two flavours, broadly similar); profit elasticity, which measures the responsiveness of profits to changes in variable costs and which should be higher in more competitive industries (again in two flavours, but the 'fixed effects' version is the one with legs); and subjective measures of self-reported levels of competition in their neck of the woods as told by businesses to Stats' Business Operations survey. Once you've got your head around the measures head for either 'Home' or 'Measures' and you're underway.

In principle this measurement of the strength of competition is a good idea. I liked it before, when the Productivity Commission was doing its services inquiry ('Yes, you can measure competition'), and again when the Electricity Commission had a go at trying to figure out whether electricity retailing was more or less competitive than other parts of the retail sector ('Measuring the degree of competition'). We all need to know whether markets are workably competitive, and I'm a big believer in using data imaginatively wherever possible.

But there's no getting away from the conundrum that it's hard to do. Maré and Fabling did the sensible thing: when you have a whole bunch of indicators, each of which is likely related in some way to the intensity of competition, you can feed the lot of them into the principal components sausage machine and see if the various data series reflect some underlying common driver. As it happens, the exercise turned up two* common underlying threads, one linked to market structure and one linked to profitability, which was promising.

But subsequent attempts to see how these competition indices affected productivity did not find a lot. One explanation, as the Productivity Commission said in its 'Cut to the Chase: Competition and productivity' write-up of the research is that

this does not necessarily mean that competition and productivity are unrelated but could reflect the fact that changes in competition over the period studied have not been particularly pronounced, meaning any effect of competition changes on firm productivity has been masked by other sources of time variation in productivity.

Another, though, as the Commission and the various researchers acknowledge, is that measures of competition within industries will not necessarily reveal what you are really interested in, which is competition within markets. It's possible that an industry might be homogeneous enough to be a market, but it's generally not going to be the case. Sometimes an industry - like Professional, Scientific and Technical Services - is going to be so diverse that data based on it are going to be a jumble of the many markets within it (eg for lawyers and accountants, who may be lumped together in the same industrial sector but are very rarely in the same market for competition purposes).

So: interesting stuff, but still a work in progress. We may not yet have been able to unearth many of the likely real links between competition and productivity, but it will be worth banging on with the search. And the Productivity Commission's competition proposals (from pp5-6 of the 'Cut to the Chase' publication, and based on their earlier services sector report) are good standalone ideas in any event:

● addressing search and switching costs, including better support for comparison websites, dealing with unfair contract terms, promoting switching facilities and portability;

● addressing occupational regulations, including the role of professional bodies in supporting competitive entry to the market and the merits of certification regimes as opposed to those based on registration; and

● continuing to refine competition law, including Section 36 relating to the misuse of market power and its interpretation.

*Strictly speaking three, but the third did not explain much.

How'd it go?

You'll have seen the key takeaways from the Commerce Commission's petrol market study:

many fuel companies appear to be achieving a level of profitability in New Zealand that is persistently higher than what we estimate a reasonable return would be in a workably competitive market ... The core problem, in our view, is that an active wholesale market does not exist in New Zealand. This is weakening price competition in the retail market (Executive Summary, X10-11)

and you can follow up on the details in the full report.

Most people, rightly, will be concerned with the substance of the report, but us competition geeks also have an interest in the market study process itself, especially as this was the first use of the Commission's new market study powers. So, how'd they go?

Overall, I'm impressed. They've self-evidently done a ton of work on this in effectively just six months. Occasionally I've been critical of how some of the Commission's work would stack up, from a productivity point of view, against a top rank commercial economic consultancy. Not this time. I was especially impressed by the work done in Attachments B though E on estimating profitability. And amongst all the other stuff they tackled it was good to see regression analysis applied, too: in a world of ever bigger torrents of data, the opportunity to deploy econometrics to useful effect is growing all the time. If this productivity partly reflected the tight deadlines, on Parkinson's Law lines, then let's keep whipping the Commission along. But I'm also pretty sure it reflects the team (Commissioners and staff) raising their game.

And the heap of data the Commission had available makes another point: you're not going to get meaningful answers to any potential competition questions unless the folks involved have a clear mandate to fossick where they need to, have the powers to collect the data and other information they need, and have the resources to process what they find (contrary to some asinine political reaction about spending a million dollars of the taxpayers' money). MBIE's petrol inquiry in 2017, despite the fine people they recruited to do it, had ticked none of those boxes adequately: the Commission's did. The case for market studies, as set up under Part 3A of the Commerce Act, is now closed.

Another thing I noted was the willingness to put out work-in-progress analysis with a "this is where we've got to, whatcha reckon?" tag. That's progress too: you don't want to put out shoddy stuff, but you don't want to be unnecessarily perfectionist, either. On this showing, the 80:20 rule is getting more of a look-in at 44 The Terrace. It's not without its own challenges, and no doubt the Commission's lawyers are several steps ahead of me in dealing with how you allow adequate consultation if some of these provisional findings get changed between the draft report and the final one, but the "it's looking as if this is how it's going down, are we right or wrong?" approach has a lot going for it, including the clear signal of open-mindedness.

That's another thing: this study looked a balanced exercise. It's easy (trust me) to see 'problems' everywhere when you're a regulator: to the man with a hammer, everything looks like a nail. But I thought the report, correctly, said the right things about the efficiency of the petrol companies' infrastructure, their retail innovations on the forecourt, and the inadvisability of jumping to inadequate-competition conclusions just because companies are profitable.

The other thing I'd wanted to see was a firmly remedy-oriented approach (assuming there were problems identified). No complaints there, either: head straight to Chapter 8 if that's your thing. I may be reading too much into 8.6 - "A number of the options are directed at industry participants who may be best placed to implement them. Others are of a regulatory nature that the Government
may consider instead of, or alongside, those market options" - but if the sense, or hint, is that the industry can get to a better place through enlightened self-interest improvements rather than anything more heavily-handed regulatory, jolly good.

On the substance of the report? So far I've only given its 424 pages the once over lightly, but it looks a generally plausible set of findings, even if not what people on the street were likely expecting as the big issue (some kind of tacit leader-follower price coordination). One thing that is nagging me, though, is the extent to which our local business cycle may be partly responsible for the reported petrol company profitability. Here, for example, is a chart (from page 326) showing a measure of profitability (return on average capital employed) for both the New Zealand petrol companies and a group of overseas comparators.

It looks, doesn't it, like profitability everywhere took a knock through the GFC, but recovered afterwards - fairly early on here at home, only in the last few years overseas. You see the same cyclical pattern in local importer margins, too, if you look at Figure 2.4 on page 28. I'm not saying that a relatively good post-GFC cyclical expansion here in New Zealand explains everything away, but at the moment I'm left wondering whether at least some of the profits reflect generally benign economic conditions as much as anything, and, if so, how that should be incorporated into the analysis.

The unsung heroes

Earlier this month, in a criminal case, the Federal Court of Australia pinged Kawasaki Kisen Kaisha Ltd (K-Line) A$34.5 million, the highest ever criminal cartel fine in Australia, though just adrift of the highest civil penalty, Visy's A$36 million in 2007.

K-Line was the second Japanese shipping company to have its collar felt for the longstanding rort of rigging the cost of shipping Japanese cars to Australia, following the earlier criminal conviction and A$25 million fine for NYK Line (see 'The Shipping News'). The K-Line judgment is here (handy hint - you can safely skip paras 86 through 169).

The only reasonable response to the fine is, jolly good. This fell squarely within the 'hard core' kind of cartel conduct that criminalisation was intended to punish and deter, complete with the usual cloak and dagger contrivances. NYK had had a version of Maxwell Smart's 'cone of silence', and K-Line had "reports ... often marked with words to the effect of “Confidential. Dispose of after Reading”. You can imagine some hapless manager in Tokyo trying to eat the files as the lads from Japan's Fair Trade Commission arrived.

The only smidgen of mitigation that, as an economist, you might feel for them is that, as the judge noted

41 ... the market for ocean transport service for roll-on, roll-off cargo was characterised by high capital costs with ‘lumpy’ investment, meaning that capacity could not be smoothly adjusted in response to demand.

42    The market was also characterised by long investment lead times. That was because the length of time required to commission and build a specialised car, or car and truck vessel was approximately two to three years per vessel. Such vessels were also not generally available for short term lease or charter, though in some instances space on vessels was made available between particular carriers pursuant to space chartering arrangements

But workably competitive markets are inventive enough to come up with licit solutions to these kind of problems. One is long-term 'take or pay' contracts, as you see every other day in (for example) the commercial property market, where developers line up leasing precommitments before they turn the first sod.

Lawyers should probably have a look at the bits of the judgment that discuss the extent of K-Line's cooperation with the ACCC, as described in the agreed statement of facts. The judge at [193] pointed to the "rather general and anodyne nature of some of the facts recited in it" and at [341] said it was "a statement of facts which appears to have been the product of detailed discussion and agreement between the respective legal teams. The result is a lengthy and detailed document which has no doubt been carefully crafted as a result of the negotiations, but which is nonetheless rather unhelpful in a number of important respects. The Court is left in the rather unenviable position of having to decipher and draw inferences and conclusions from that rather bland and sanitised document". You can be too clever by 'arf, in other words.

Other than that, there isn't too much to take away from the sheeting home of a particularly large, global and brazen cartel.

Except for two unsung heroes at K-Line.

One pops up at [79], where we read that "The Car Carrier Business Group General Manager was particularly distrusted by some NYK and Mitsui employees because he would sometimes compete aggressively for market share and on occasion attempt to depart from agreements reached with the other carriers" (he subsequently got sat on).

The other appears in [81], where "a Manager in one of the regional teams in the Car Carrier Business Group proposed to the Managing Executive Officer of the Car Carrier Business Group that K-Line should consider ceasing its communications with other carriers because such communications were risky for K-Line and its employees and K-Line should focus on having a strong sales force" (he - almost certainly a he - was ignored).

Well done, guys. And hopefully for their companies' sakes there aren't honest New Zealand executives in the same ignored and sidelined boat. Cartel criminalisation goes live in New Zealand from April 2021.

I've been to a conference

The Commerce Commission's biennial 'Competition Matters' conference has wrapped up. Here are some of my takeaways: where the road forked for parallel sessions, I went the economics / competition / regulation route rather than the law / fair trading / consumer protection path, so if you prefer that end of the world you'll probably need to watch the recordings of those sessions (they're not up on the Commission site yet, but can't be far away).

If there was an overarching theme, it was Big Data and all that new digital economy stuff. Repetitive though it sometimes can be to be reminded, again, of the ever-increasing pace of change, the reality is that we are indeed in the early stages of one of those transformative technologies that alter how entire societies behave and work. It's right up there with the printed book and the car. My main takeaway was that, if you subscribe to the traditional 'is there a problem / what's causing it / can we fix it / ought we' policy model, competition analysts everywhere are largely at sea. They haven't satisfactorily got over the first fence, let alone the rest of the course, or as the Singapore Commission's Han Li Toh put it more formally, we're all still looking for "adequate evaluative tools".

For what it's worth, I could easily be convinced that the net benefits of the new technologies massively outweigh any costs, and some of of the scaremongering reminds me of the comparable 'make a man walk with a flag in front of it' response to the arrival of the car. By all means ping any of the big players if you can indeed find them guilty of the same sort of rort a steelmaker might get up to (though we're not even sure enough on issues like market definition to be able to do that), but otherwise from a competition policy point of view I'd be very loath to jump to premature controls of any kind, let alone the heavy duty structural separation ideas that are being floated on the American presidential campaign circuit. Maybe I'll change my mind when I eventually get round to reading the UK's Furman report ('Unlocking Digital Competition') and/or the ACCC's doorstopper 'Digital Platforms Inquiry', summary here, which appeared as the conference was underway, but for now count me among the anti-competitive agnostics.

I was very encouraged by what's been called 'NewReg' regulation, the idea that panels of consumer representatives can be given authority to strike product quality agreements with regulated businesses. At the moment for, say, our electricity lines businesses, we default to things like frequency or duration of power outages, on the assumption that regularity of supply is the key quality characteristic in consumers' eyes. But it mightn't be. They might care more (and did, in the case of AusNet, the Melbourne area lines business where this got a trial) for how quickly a company cleans up after things like power surges, or whether they can easily get hold of someone at the company when they need to talk to them about something.

When the consumer panel wandered - like "curious chooks" as its chair put it - across the whole of the lines business, they found heaps of things that could easily be made to work better for consumers. It reminded me, in a good way, of the management fad a few years back for 'process reengineering'. Remarkably, they found improvements that would both benefit consumers and save AusNet money, which is a remarkable illustration of the general proposition that monopolists can be very dozy indeed when not challenged (I don't mean that to be especially critical of AusNet, who after all embraced this NewReg trial and ran with it). I'd say there is clear room for this to be at least a complement to our current 'building blocks' regulation, and in an ideal world a replacement for it. And I also wonder about the community trusts who run some of our lines businesses, and are hence exempt from price control on the assumption that the community ownership structure will constrain monopoly power. How effective have they actually been in that curious chook role? Or have they been [insert your favourite harmless animal metaphor here]?

Market studies - the first one isn't far away now, with the draft petrol study maybe two to three weeks away. For the sake of the new regime, this first one needs to go well, and not just on the technical market analysis stuff but also on how it is sold to its various audiences. One of the things that the very experienced Roger Witcomb, former chair of the UK Competition Commission, emphasised was that market studies need government support, and while you don't want independent authorities like our Commission pandering to the current public service please-the-pollies zeitgeist, this first one needs to hit all the appropriate persuasiveness buttons.

Roger also stressed being remedy focused from early on, accepting that you don't necessarily know, day one, how a study is going to unfold. In our regime, the Commission doesn't have any market study enforcement powers, and maybe that's broadly right and best left to the pols. Commissioner John Small mused, though, about whether it would be useful for our Commission to have a power to initiate binding codes of conduct, along ACCC lines: that might well be a useful extension (either in the market studies context or more generally). And speaking of remedies, it's useful that (ahem) some of us helped get s51E into the law ("The Minister must respond to the final competition report within a reasonable time after the report is made publicly available") to stop the minister sitting on the Commission's recommendations.

The big keynote speeches were very solid. Dr David Halpern on behavioural insights convinced me (and others, going by coffee urn chats) that competition analysis needs to look hard at how consumers actually behave in the real world rather than relying solely on the old utility maxing within constraints we default to. Dr Howard Shelanski on competition intervention in markets likely confirmed us in our existing views on price controls (ick) and line of business regulation (meh) but opened our minds to potential greater use of access regulation. And Ed Willett left us with some warm fuzzies that we've rolled out fast fibre-based broadband better than the Aussies have, and also raised the possibility that maybe some of the old rationales for telco regulation may not apply any more. If I'm sitting at home with a choice of copper, fibre, and three mobile networks selling fixed wireless (in turn based on competitive backhaul markets), where's my regulatory problem?

Assorted other snippets: it is indeed probably worth kicking the tyres harder when looking at vertical mergers, though, on the other tack, if you're looking for the paper that Martin Cave cited, pointing to the unexpectedly widespread efficiency benefits of vertical mergers, it's 'Vertical Integration and Firm Boundaries: The Evidence'. And despite Dr Darryl Biggar's emphatic 'No' to my question about whether electricity lines businesses should be let play in the solar and battery markets, I think I'll remain open to it for now, if only for pragmatic get the damn thing done reasons.

Finally, the panel on 'Why does competition really matter?' looked at how the work of regulators sits with the broader national wellbeing agenda as set out, for example, in Treasury's Living Standards Framework. I didn't warm to one bit of it: there was, I thought, a bit of unnecessary economist self-flagellation. It's not (in my humble) true that economists in general have been mesmerised by GDP and monetary costs and benefits, and oblivious to soft outcomes they couldn't measure, nor that competition authorities have also been blind to them. Look at (for example) the Commission's decision on NZME / Fairfax, where by far the biggest moving part was the likely loss of media plurality in the civic marketplace (as I discussed here).

But the rest of the panel's ideas were spot on. If you look at two of New Zealand's biggest challenges - productivity (low and sticky), and poor outcomes for too many at the bottom end of the heap - making competitive markets work properly helps on both fronts. Stronger competitive pressures could do a useful Schumpeterian job of clearing out our disproportionately long tail of low productivity firms (as the Productivity Commission's Murray Sherwin noted). And on the equity front, it's inevitably the most vulnerable who fare worst when the anti-competitive fix goes in.