MBIE monopoly power reform paper puts forward Opposition proposal rejected by govt

Tuesday 17th November 2015

A government paper into the abuse of monopoly power has thrown up an option aligning New Zealand with Australia's approach, which was previously shot down by the Crown 16 months ago in favour of reviewing the law.

The Ministry of Business, Innovation and Employment is calling for submissions on specific provisions of the Commerce Act, which it says aren't fit for purpose in that they fail to punish anticompetitive conduct by powerful firms to the detriment of consumers, are too complex for cost-effective and timely application, and aren't appropriately aligned with other prohibitions and their international equivalents.

The issues paper focuses on the monopoly power provisions of the Commerce Act, which the Productivity Commission last year said needed examining as to "whether other approaches offer greater accuracy in identifying situations where firms have taken advantage of market power and damaged dynamic efficiency with consequent detriments to competition, innovation and/or productivity."

While the paper doesn't have a preference for reform, it puts forward four potential options. Among those would be introducing a test on the effect of conduct in damaging the market rather than the purpose test currently legislated for, which would reflect the approach taken by the Australian Competition and Consumer Act, and the approach recommended in a 2013 review into Australia's competition policy.

That option was put forward by Labour MP Clayton Cosgrove in late 2013 as an addition to a separate piece of legislation that would criminalise cartels, but was rejected seven months later by then-Commerce Minister Craig Foss who preferred to review the provision through the government's Business Growth Agenda.

Other options canvassed in the paper include maintaining the status quo while inserting guidance to direct the courts in a different way, amending the law to remove a requirement a firm is only in breach if it's taken advantage of its market power, or a combination of removing the 'take advantage' requirement and introducing an 'effects' test.

The paper is also open to other options put forward by submitters.

MBIE is also seeking feedback on the Commerce Commission's alternatives to court action, with the settlements regime weak because it's based on contractual arrangements and don't generate case law, while a 'cease and desist' process has only been used once over 14 years and is seen as the main problem.

The paper sees possible options as changing the 'cease and desist' process to resemble more successful procedures covered by other jurisdictions, or dropping that regime and relying solely on settlements. That could also include amending the settlements regime to an enforceable undertakings system.

MBIE also wants feedback on allowing the Commerce Commission to embark on formal market studies, though its preliminary view was that such an extension of its powers was unlikely to be helpful.

Submissions on the paper are due by Feb. 9, 2016.

BusinessDesk.co.nz

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