Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Cartel criminalisation risks competition, report says

Cartel criminalisation risks competition: Productivity Commission

By Pattrick Smellie

June 5 (BusinessDesk) - Legislation criminalising cartel behaviour carries sufficient risk of harming collaborations that could improve competition to mean it should be reviewed within two to four years of implementation and data collection should start now to allow comparisons to be made of its impact, says the Productivity Commission.

Issuing its final report on competition in services industries, the commission also firms up its recommendation for a full review of the key provisions of the Commerce Act governing anti-competitive behaviour, especially as advances in information technology in coming years "will likely feature large economies of scale and network effects and thereby raise competition issues."

Commenting on the Commerce (Cartels and Other Amendments) Bill, the commission is critical of the government for allowing it to "languish" on the parliamentary Order Paper, saying it is "unaware of any policy rationale for this delay", which it is concerned is already creating a chilling effect on firms who may wish to collaborate but are fearful of falling foul of the proposed new law.

Smaller firms, in particular, appeared reluctant to enter into collaborations where they feared possible breaches, "presumably because they lack the legal expertise to confidently navigate competition law."

Despite provisions designed to permit collaborations, "perceptions remain that criminalising certain activities will have a dampening effect on pro-competitive business activities."

A full review of the amendment's impacts on business decision-making should be undertaken between two and four years' after its enactment, and "data collection needs to begin prior to the policy's implementation, not when the evaluation takes place two years later."

Many of the concerns raised in the commission's report,about poor productivity improvements in New Zealand service industries stem from the combined effects of a small market in which many small firms struggle for profitable scale, and the tendency in small markets for a few, dominant players to emerge.

While a few large competitors doesn't necessarily produce poor outcomes for consumers, the report discusses at length how to create a better balance in the existing competition law, the Commerce Act, than the current "counter-factual" test enshrined in Section 36. The Commerce Commission has also called for a review of the test.

Unlike many other countries, New Zealand is unusual for using just this test, based on a hypothetical judgement about what a firm would have done if there hadn't been a competitor to start with.

The test "causes problems because it focuses on the actions of firms in the hypothetical counterfactual world where a firm lacks substantial market power rather than on market outcomes," it said.

"Actions are not only harder to pin down, they are also unreliable proxies for market outcomes. While the current approach may deliver a desirable degree of certainty, it does so only by effectively setting a very high threshold for what counts as a transgression," the commission says. "The price paid for this certainty is the risk of damage to dynamic efficiency from a too-lenient test that allows dominant firms to indulge in and behave in exclusionary ways."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news