Proposed amendments to the Commerce Act will enable the Commerce Commission to proactively investigate suspected non-competitive markets. These changes have been “fast-tracked” by the new Minister of Commerce, Kris Faafoi, in part so that ‘real’ action can be taken in response to last year's criticism of the fuel industry.

Commission will have power to carry out ‘market studies’

Market studies (defined as “competition studies” in the Commerce Amendment Bill) are thorough investigations into a particular market, or markets, where there are concerns that the market(s) could be functioning sub-optimally. Most comparative jurisdictions overseas already have these types of investigatory powers so NZ is currently an outlier.

The idea is that the Commerce Commission will be able to initiate investigations into markets where it is in the public interest to do so, rather than just waiting for breaches (or alleged breaches) of competition law to occur. The Minister of Commerce will also have the power to direct the Commission to initiate an investigation.

Similar powers already exist in our telecommunications regulatory regime, and in Australia, recent market studies have examined cattle and beef, communications and new car retailing markets.

Competition safeguards or expensive fishing expeditions?

The proposed powers are controversial given the impact on, and potential costs to, the private sector each time a market study is carried out.

One view is that the proposed changes correct the current weakness in our approach to industry regulation, namely that regulation at the direction of politicians allows big businesses with vested interests to capture the regulatory process by using their monopoly resources to lobby politicians.

On the flip-side, there is concern that there aren’t enough checks and balances for the new powers. It is one thing to subject market participants to the Commerce Commission’s powers of compulsion when the Commission is investigating an alleged breach of the Commerce Act. But it is an entirely different matter to compel businesses to hand over their records and undergo intense investigation under oath (and at great cost) just because the Commission may have a general concern about the state of competition in their market.

Whichever view you take, the Bill is powering its way through the Parliamentary process. It had its first reading on 12 April and is due to be reported back by the Select Committee on 13 May. The stated aim is that it will receive Royal Assent on 14 August 2018. 

Watch this space.