Thursday, 18 March 2021

The pointy end

Almost seven years ago,  the Productivity Commission raised it as an issue worth looking at. MBIE put out an issues paper in 2015; submissions rolled in in early 2016; the government kicked for touch in 2017; MBIE put out another discussion paper in 2019; a policy paper went to Cabinet in February 2020; and at long last a Bill was introduced this month. The Commerce Amendment Bill 2021 is now with the Economic Development, Science and Innovation Select Committee, which is due to report back by September 16. 

In sum, we've finally got to the pointy end of doing something about s36, the bit of our Commerce Act that is supposed to rein in powerful incumbents from abusing their market power, but doesn't. The Bill provides for changing our s36 wording from the current unsatisfactory

"A person that has a substantial degree of power in a market must not take advantage of that power for the purpose of — (a) restricting the entry of a person into that or any other market; or (b) preventing or deterring a person from engaging in competitive conduct in that or any other market; or (c) eliminating a person from that or any other market"


"A person that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in — (a) that market; or (b) any other market".

It gets us out from under all the problems "taking advantage of" has caused in our competition jurisprudence, and for good measure lines us up with the Aussies, who made the same change to their equivalent legislation back in late 2017.

Submissions to the Select Committee are due by April 30, so it's time to start putting your thoughts together. If you want to keep track of how the Bill is going, you can sign up to get e-mail alerts from the Select Committee here and you can follow progress at the Bill website.

I will be submitting in wholehearted support of the change to s36 for the reasons I mentioned last year when the policy paper went to Cabinet ('It creeps ever closer'), and I hope others will, too. But I'll be opposing one element of the Bill. Last year I didn't like the look of a proposed amendment, giving the Commerce Commission powers to share information it holds with other public agencies: I thought that "there should be a tough threshold test before any of that information gets passed around the wider public sector agencies", and indeed the Cabinet paper had talked about "appropriate safeguards".

In fact the proposed level of safeguarding is pitiful. The Bill at s99AA(1)(b) provides that the Commission can hand information over when it considers it "may assist the public service agency, statutory entity, or Reserve Bank in the performance or exercise of its functions, powers, or duties under this Act or any other legislation".

"Hey, guys, you might find this handy" is no safeguard at all.

Thursday, 11 March 2021

What's next?

The OECD came out this week with an update to its economic outlook and a set of policy recommendations. If you've wondered how New Zealand has been faring through the Covid outbreak, relative to my selection of the usual suspects, here's how we went in 2020 (we're red, and there are a couple of comparators in green, the OECD, and the world as a whole) ...

and here's how the OECD sees 2021 going ...

... and here's their best guess at 2022.

We scrub up pretty well when you look back at 2020: we had a typical-sized downturn (a tad worse than the world as a whole, a tad better than the typical higher-income OECD country), but for a much better Covid outcome than in most places, so as a package it's pretty impressive. Longer run, it looks, unfortunately, like back to the pre-Covid status quo: the OECD says we should expect relatively slow growth by either world standards or by comparison with our better-off peers.

On policy, beyond the obvious big macro settings (" A premature tightening of fiscal policy must be avoided.  The current very accommodative monetary policy stance should be maintained"), the OECD's recommendations are
  • "vaccinate fast" (Co-ordinate and accelerate vaccination of adults across the world, ensure poor countries receive their fair share of doses, and improve funding for the COVAX initiative, ensure effective test, track and trace programmes)
  • "invest fast" (Speed up implementation of new spending boost growth and jobs, help businesses adapt to a digital future, privilege grants and equity-type support over debt to give viable small and medium-sized companies the space to develop, invest in cleaner infrastructure and digital technology to foster a transition to a more resilient and sustainable economy) and
  • "support people" (Protect the incomes of people hit hardest by the crisis, help the low skilled and the vulnerable, improve training schemes and access to the labour market, focus on youth – young people need particular support now and to help them prepare for a changing world of work)

and who's going to argue with any of that, though you have to feel that "invest" and "fast" do not come easy to New Zealand policymakers, and I'll be pleasantly surprised if it happens. It would be nice if, for once, we just took the OECD's ideas and ran with them quickly and comprehensively: unfortunately, our track record is not crash hot ('Are we serious?', 'Take advice? Moi?').  Among other things, we wouldn't have today's housing market problems if we'd listened to the OECD's suggestions, going back to 2017, on how to address them. 

Wednesday, 3 March 2021

What if they threw a party ...

... and nobody came?

Which, in the competition space, is where we've got to, with our attempt to make it easier for companies to collaborate to deal with problems like Covid disruption to supply chains. We set things up to make it easier and faster for the Commerce Commission to authorise collaboration - but nobody's used the new dispensation.

Here's the background. The COVID-19 Response (Further Management Measures) Legislation Act 2020 went live mid May of last year. Its heart was in the right place. During an 'epidemic period', a new s65AD of the Commerce Act allows the Commission to issue a provisional authorisation. ss65AD(2) and (3) are the key bits:

(2) The Commission may make a determination in writing granting a provisional authorisation ... if the Commission considers it is appropriate to do so—

(a) for the purpose of enabling due consideration to be given to the application; or

(b) for any other reason.

(3) The Commission is not required to comply with section 61(5) to (6A) before granting a provisional authorisation

(3) means that the Commission doesn't have to hang about and be "satisfied" - the test in normal times, under s61(6) - that the collaboration would provide "a benefit to the public which would outweigh the lessening in competition that would result". It can just say, get on with it for now and we'll do a fuller analysis later. Right on.

As fellow aficionados of New Zealand's mania for micromanagement will appreciate, you don't see the wide discretion of "for any other reason" written into the Kiwi statute books too often. In fact it's a straight crib from the Aussie equivalent (for wonks, s91(2)c of their Competition and Consumer Act). The ACCC has been able to do "interim" authorisations all along, Covid or no Covid, and you'd think that's a sensible plan.

Oddly, our own Commission used to have the power to issue provisional authorisations under the then s63 of the Commerce Act, but that got repealed by s22 of the Commerce Amendment Act 1990. Go figure.

Never mind, here we are today, back to the original status quo, even if it only applies in epidemic periods. Given that in normal times getting an authorisation strongly resembles wading through hip-high tar for months carrying a complete bound set of Econometrica, something cheap, cheerful and, above all, fast, was just what was needed to enable urgent collaboration in the public interest.

But nobody's used the new process. There have been no applications for authorisation under the new provisions.

Which is odd, because over in Oz, the ACCC has been issuing interim authorisations all over the place: public and private hospitals, medical wholesalers, grocery retailers, banks, regional airlines, and fuel importers and distributors. It's been commendably quick - overnight, on one occasion - in turning the applications around, and it's been putting pro-competitive safeguards such as time limits into them without nobbling the public welfare point of it all. 

What sort of stuff is being authorised? For the supermarkets, as an example, it was things like jointly addressing panic buying: "co-ordinating store hours, including allocating dedicated shopping hours for  elderly and disadvantaged members of the public during periods of high demand for Retail Products", "implementing uniform or similar purchase limits and related public messaging", and "measures to ensure continuity of supply to consumers in remote or regional areas, including securing special allocations of stock and joint requests to suppliers", as you can read in this draft determination.

Sure, Australia and New Zealand each have their own funny little ways, and there's no reason why we should do everything the same way. But I'm still bemused why helpful interim authorisations are flying off the ACCC shelves, while nobody's come into the Commerce Commission looking for one. Anyone got ideas?