Competition regulatory system

This page describes the competition regulatory system, its objectives and our qualitative assessment of it. It also lists the main statutes and changes to regulation either planned or in progress.

System description and objectives

The competition regulatory system primarily relates to the Commerce Act 1986, and includes both the generic competition regime and the economic regulation regime under that Act.  Other competition-related legislation, such as the Telecommunications Act 2001 and the Electricity Industry Act 2010, also contribute to the objectives of the competition system, but they are outside the system as defined here.

The system comprises three main components:

  1. competition law – with the core of the system being the Commerce Act 1986, which protects the process of competition or, if competition is limited, provides for regulation for outcomes consistent with competition
  2. competition policy – the advocacy and advice processes whereby officials with competition assessment expertise seek to promote competition to inform wider government policies and practice (eg competition impacts in regulatory impact assessments)
  3. competition institutions – the institutional arrangements through which competition law and policy is given effect. In particular, the Commerce Commission, an independent Crown entity, administers the Commerce Act 1986 and is monitored by MBIE.

The objective of the competition regulatory system is to promote competition, or outcomes consistent with competition, in markets in New Zealand for the long-term benefit of consumers.

The system is foundational for New Zealand, as it provides for principle-based standards and processes to protect and promote competition in markets for goods and services on an economy-wide basis. It also provides a credible regulatory threat or means to mitigate monopoly power in markets where competition is limited. The value of regulatory assets currently subject to regulation under the competition system is over $16 billion. The performance of this system is very significant for the New Zealand economy and its international reputation.

Ministerial portfolio and key statute

Portfolio Key statute

Commerce and Consumer Affairs(external link)

Commerce Act 1986

Regulatory agencies and their roles

Policy advice

Agency Role

MBIE (lead)

Responsible for the strategy and policy advice functions in relation to the competition regulatory system. This is led by MBIE’s Competition and Consumer Policy team.

Treasury

Provides secondary advice in relation to the competition regulatory system. Also responsible for overseeing the competitive neutrality of the Crown’s trading enterprises (eg NZ Post, TVNZ, the Public Trust) and the quality of regulatory impact assessments.

Commerce Commission

Provides expert advice and information to input into strategy and policy advice functions (eg advising on the operational implications of policy options).

Others

While outside the competition regulatory system as defined, numerous sector-specific policy teams in MBIE and across government are responsible for the strategy and policy advice functions relating to their sectors or functions. These include:

  • MBIE (eg communications policy and energy markets policy)

  • Ministry for Primary Industries (eg Dairy Industry Restructuring Act 2001)

  • Ministry of Transport (eg Civil Aviation Act 1990)

  • Productivity Commission (eg research and inquiries)

  • Ministry of Foreign Affairs and Trade in relation to trade agreements with foreign governments.

Operational policy and regulatory determinations

Agency Role

Commerce Commission (Lead)

Responsible for operational strategy, policy, processes and determinations to implement competition law. This includes developing rules and processes for regulated businesses, making determinations on applications, and general enforcement and regulatory control policies and priorities.

MBIE

Responsible for some operational policy matters related to competition institutions, including monitoring the Commerce Commission and administering of cost recovery levies.

Advice, education and information

Agency Role

Commerce Commission (Lead)

Responsible for providing a range of advice, information, advocacy and education to the public on the Commerce Act, and to the Minister as part of market studies or economic regulation inquiries.

Compliance and enforcement

Agency Role

Commerce Commission (Lead)

Responsible for enforcement of the Commerce Act.

 

Others

While outside the competition regulatory system as defined, other key actors include:

  • Crown Law – responsible for oversight of Crown criminal prosecutions

  • The courts – adjudicate on Commerce Act enforcement cases and provide judicial oversight of Commerce Commission processes and determinations

  • Other sector-specific regulators – eg the Electricity Authority, the Gas Industry Company.

Monitoring and evaluation

Agency Role

MBIE(Lead)

Monitors and evaluates performance of the competition regulatory system through both informal and formal means, such as: environmental scanning, ongoing stakeholder engagement, and initiating research or targeted reviews.

Commerce Commission

Monitors and evaluates market developments, the effectiveness of the competition regulatory system, and the Commerce Commission’s performance

The Treasury

Monitors and evaluates the Government’s regulatory management strategy, including regulatory impact assessments. Also assists MBIE in monitoring the performance of the competition system and any associated reviews.

Collaboration and information-sharing between regulatory agencies

MBIE and the Commerce Commission

The Commerce Commission is an independent Crown entity and must act independently in relation to its statutory functions. However, there is substantial information-sharing between MBIE and the Commerce Commission in terms of the policy and operational settings around competition and regulatory matters and consistent with MBIE’s Crown entity monitoring role. This includes regular meetings between staff at all levels of the organisations and reporting consistent with the Crown entity monitoring requirements.

MBIE and other regulatory agencies

The MBIE Competition and Consumer Policy team collaborates and also shares information with other domestic agencies, as follows:

  • Within MBIE – coordination occurs with other policy and governance teams on matters of mutual interest, as overseen by MBIE senior management. This includes strategies for research and evaluation and policy advice on competition in sectors.
  • The Treasury – we have regular meetings to share information on the performance of the competition regulatory system and identify opportunities to collaborate.
  • Other departments – engagement occurs consistent with the consultation obligations under the Cabinet Manual, particularly in relation to matters that may impact on competition in markets.

MBIE’s Competition and Consumer Policy team also collaborates and shares information with international agencies that interface with the competition regulatory system, as follows:

  • The Australian Treasury – we continue to apply the principles set out in the 2010 MOU between the Governments of Australia and New Zealand on Business Law Coordination (although expired in 2015). We regularly share information on developments with our respective competition regulatory systems consistent with promoting a single economic market. We also coordinate to administer cross-appointments of Commissioners for the Australian Competition and Consumer Commission and the Commerce Commission
  • International fora – we participate in various fora, including the APEC Competition Law and Policy Working Group and OECD Competition Committee.

Commerce Commission and other regulatory agencies:

Domestic agencies

  • The Commission works with a number of other regulatory agencies including the Electricity Authority, Gas Industry Company, Energy Efficiency and Conservation Authority, Civil Aviation Authority, Utilities Disputes and Telecommunications Disputes Resolution.
  • The New Zealand agencies that the Commerce Commission has entered into Memorandum of Understanding or Cooperation Agreements are listed on the Commerce Commission website(external link).
  • The Competition and Consumer Investigation Guidelines describe when the Commission will share Information with other agencies during an investigation. Where the Commerce Commission conduct an investigation in conjunction with another agency it will provide information to that agency.

Other departments

  • In addition to MBIE, the Commission also engages with officials from the Ministry of Primary Industries in relation to its responsibilities under the Dairy Industry Restructuring Act 2001 and is well placed to support the Department of Internal Affairs in its Three Waters Review involving the potential economic regulation of water infrastructure.

International agencies

  • The Commission has a close working relationship with the Australian Competition and Consumer Commission (ACCC) and Australian Energy Regulator and has co-operation arrangements with the ACCC and other international competition law enforcement and regulatory agencies in Canada, Taiwan, and the United Kingdom. Counterparts in the United Kingdom include the Competition and Markets Authority and Office of Gas and Electricity Markets, and the Commission for Communications Regulation in Ireland.
  • The Commission provides assistance to developing competition agencies in ASEAN and Pacific countries.
  • The Commission also contributes to international fora including OECD Competition Committee and the International Competition Network.
  • Pursuant to the Commerce Commission (International Co-operation, and Fees) Act the Commission can provide investigative assistance to a recognised overseas agency, to assist the overseas agency in carrying out its work in relation to competition law and to share compulsorily acquired information held by the Commission. The Commission has a set of guidelines that explain how it deals with requests made from recognised overseas regulators.

Regulated parties and main stakeholders

The regulated parties and main stakeholders of this system are:

  • all entities (eg individuals, businesses and local authorities) supplying or acquiring goods or services in markets in New Zealand (unless specifically exempt)
  • the Crown to the extent it engages in trade
  • regulated suppliers (3 major international airports, 29 electricity lines businesses, Transpower, 5 gas pipeline businesses)
  • consumers in so far as they are the parties that businesses are ultimately competing for
  • practitioners and academics who work on competition and economic regulation issues.

Key associations or groups representative of these parties that we engage with include:

  • BusinessNZ, RetailNZ
  • ConsumerNZ
  •  Electricity Network Association, Electricity Retailers’ Association of New Zealand, NZ Airport Association, Board of Airline Representatives, Major Electricity Users Group
  • NZ Law Society, Competition Law and Policy Institute of New Zealand (CLPINZ)
  • Particular industry associations, as required – eg Payments NZ, NZ Franchise Association, NZ Shipping Council, International Container Lines Committee.

Processes for engagement with regulated parties and stakeholders

As policy is being developed, engagement takes place through standard policy development and legislative processes, including:

  • through meetings with key stakeholders (referred to above) and other issue-specific stakeholders, where relevant
  • by releasing issues papers and discussion documents, consulting on these and seeking feedback
  • by releasing exposure drafts of bills and regulations and seeking feedback.

Parliamentary processes for consulting on bills also provide for public engagement.

On the operational side, the Commerce Commission engages with regulated parties and consumer and business stakeholders through regulatory processes and standard stakeholder engagement opportunities including:

  • meetings with key stakeholders of regulated entities, business associations, government agencies, business and consumer groups
  • attending and speaking at relevant industry conferences
  • holding targeted workshops which provides stakeholders with the opportunity to participate in regulatory processes
  • consulting on determinations and draft guidance
  • providing feedback on issues papers, discussion documents, draft bills and presenting to select committees
  • publishing a wide range of guidance and information on our website around our compliance, regulatory and enforcement processes
  • issuing media releases on key decisions. 

The Commerce Commission holds a biennial Competition Matters conference to raise awareness of current competition and regulation issues. System actors also support and attend annual conferences or workshops organised by key stakeholders to discuss current issues (eg the annual CLPINZ workshop).

System’s fitness for purpose

Effectiveness

System performing well against criteria

New Zealand’s competition law and regulation is well regarded internationally which is reflected in international comparisons such as the WEF Global Competitiveness Index and the IMD Competitiveness Rankings. However, like other small and remote economies, New Zealand experiences lower levels of competitive intensity than larger countries or countries located in close proximity to other countries. Fully counteracting New Zealand’s size and distance disadvantages through competition law or other public policy avenues is likely to be unachievable, but an ongoing focus on: maintaining high quality competition law and institutions; competitively neutral government trading and procurement; and minimising domestic and international barriers to competition, is likely to deliver the best long term outcomes for consumers. The addition of a market studies power for the Commerce Commission and moving international shipping into the Commerce Act support this overall strategy.

In markets with little or no competition, the economic regulation provisions in Part 4 of the Commerce Act 1986 are delivering outcomes similar to those in competitive markets following a considerable bedding-in period. The regulatory framework is now well understood by industry and investors. For this reason, the Part 4 regime will form the basis of a new regime for regulating fixed line telecommunication services. The Commerce Commission participates in the Council of Energy Regulators to promote effective coordination of regulatory efforts across the competition and energy regulatory systems.

Despite the controversy that often surrounds individual regulatory decisions, the Commerce Commission is highly regarded internationally and is respected by domestic competition and regulatory experts. These findings were reflected in the regulatory system assessment completed in 2015.

The competition regulatory system and its processes are generally well understood by stakeholders despite the inherent complexity in some of its components.

Recognising the strong impacts system regulatory decisions can have on firms and sectors in the New Zealand economy, the competition system puts a premium on getting the best possible decision through strong accountability/decision review mechanisms and consultation processes. This does have timeliness and cost trade-offs for some regulatory decisions, but multiple evaluations suggest stakeholders do not believe the balance between quality and timeliness/cost should be altered.

Funding for the Commerce Commission is a generally a fraction of comparable overseas jurisdictions, but the outputs delivered are of a high quality based on international rankings of competition and economic regulators. The Commerce Commission completed a self- assessment in 2015 using the State Service’s Commission’s Performance Improvement Framework.

Resilience

System has some issues against criteria

The competition regulatory system takes a principle based approach and has stood up well to recent technological and market developments. While ongoing evaluative and environmental scanning is required for effective regulatory stewardship, there are no obvious immediate issues threatening the efficiency, or effectiveness of the system. However, the emergence of the digital economy, changing inward and outward trade flows, and greater integration of international supply chains is increasing complexity of some clearance and authorisation decisions is likely to see the time taken to assess these applications continue to extend consistent with the experiences of comparable regulators in other jurisdictions. In the economic regulation area, the impact of emerging technologies on the electricity market is likely to be an area requiring ongoing monitoring and evaluation to ensure the current regulatory settings are able to deal with any different industry and market structures.

Fairness and accountability

System performing well against criteria

Independent decision making and substantive decision review and accountability mechanisms are hard-wired into the regulatory system. A substantial amount of clear and detailed guidance about the operation of the regulatory system is published by the Commerce Commission. The Commerce Commission processes are recognised as being open and highly transparent through the use of conferences for interested parties and the publication of issues papers and draft decisions where submissions are sought. The Commission also undertakes regular reviews of its processes and guidance material to support ongoing improvement. We see these kinds of evaluations as making a significant contribution to the ongoing health of the competition regulatory system.

Planned regulatory changes

The timeframes for improvements noted in this section are indicative and may change. We will review this information at least quarterly and update timeframes as required.

Legislation received Royal assent on 14 August 2017. These provisions will come into effect on 14 August 2019.

Matter name Policy implementation Planned consultation Status

Transition of international shipping to the Commerce Act

Matter type: Act

On coming into force, the Commerce Amendment Act 2017 will repeal Parts of the Shipping Act 1987 and make international shipping agreements subject to the Commerce Act 1986.

Completed

Legislation received Royal assent on 14 August 2017. These provisions will come into effect on 14 August 2019.

Commerce (Criminalisation of Cartels) Amendment Bill

Matter type: Bill

Introduces a new criminal offence for intentional cartel conduct.

Completed

Legislation is awaiting its third reading in the House. The new offence will come into force 2 years after Royal assent.

Review of Section 36 of the Commerce Act and Other Matters

Matter type: Bill

This review will:

  • Ensure the prohibition against taking advantage of substantial market power is well-targeted and effective

  • Assess the need for the exemption for intellectual property

  • Clarify the treatment of covenants that are anti-competitive.

Submissions on a discussion document close on 1 April 2019.

Further consultation will occur once a Bill is introduced to the House through the Select Committee processes.

Discussion document released for consultation. The next step is to seek Cabinet decisions on the content of a Bill. This is expected before the end of 2019.

Review of Civil Aviation Act 1990 and Airport Authorities Act 1966

Lead agency: Ministry of Transport

Matter type: Bill

This review impacts on the competition regulatory system through:

  • Assessing the merits of the sector-specific regime for authorisation of international civil aviation agreements

  • Reviewing the obligations of airport authorities as it relates to setting prices for specified airport services

Further consultation is planned with the release of an exposure draft of a new Civil Aviation Bill in the first half of 2019.

Awaiting release of exposure draft.

 

Electricity Price Review 2018-2019

Lead agency: MBIE Energy Policy

Matter type: Bill

This review impacts on the competition regulatory system as it looks to improve competition and regulation of electricity markets. The options under consideration include:

  • Strengthening the Commerce Commission’s powers to regulate distributors’ performance

  • Strengthening consumer voice in regulatory processes

Submissions on an options paper released by the independent Expert Advisory Panel closed on 22 March 2019.

Further consultation in 2019/20 is anticipated in developing the government’s response to the Expert Advisory Panel’s final report.

Options paper prepared by Expert Advisory Panel released for consultation.

 

Film Industry Working Group

Lead agency: MBIE Employment Relations Policy

Matter type: Bill

This review impacts on the competition regulatory system as it looks to allow for collective bargaining by film production workers, who are independent contractors. A Commerce Act exemption is likely to be required.

A bill is to be introduced in 2019 and consultation will occur through the normal Select Committee process.

Working Group reported in October 2018. The Government is preparing its response.

Three Waters Review – economic regulation

Lead agency: DIA

Matter type: TBD

This review may impact on the competition regulatory system as it assesses the case for economic regulation of water infrastructure and services to ensure that consumers’ long term interests are protected and services are value for money.

The Minister of Local Government is leading engagement with stakeholders, iwi and Māori through various forums and processes.

On 5 November 2018, Cabinet invited the Minister of Local Government and the Minister of Commerce and Consumer Affairs to report back to Cabinet’s Economic Development Committee in late 2019 with policy proposals for the economic regulation of three waters services.

Dairy Industry Restructuring Act 2001 review

Lead agency: MPI

Matter Type: TBD

This review may impact on the competition regulatory system as it assesses open entry and exit for farmers, the raw milk price setting process, contestability for milk, the risks and costs for the sector, and the incentives or disincentives for dairy to move to sustainable, higher-value production and processing.

The Minister for Primary Industries is leading engagement with stakeholders including farmers, dairy processors, consumers and the wider public.

Submissions on MPI’s Dairy Industry Restructuring Act (DIRA) discussion document closed in February 2019. The document sets out the key issues relating to the DIRA and its impact on the performance of the New Zealand dairy industry over the past 17 years.

Planned service and operational changes

The timeframes for improvements noted in this section are indicative and may change. We will review this information at least quarterly and update timeframes as required.

Timeframe Change

September 2018 to June 2019

Appointment of new Chair of Commerce Commission

After an open recruitment process, a new Chair of the Commerce Commission will take up the position in mid-2019.

October 2018 to ongoing

Governance arrangements

The Commission understands the role of having a high performing board. To help continue to ensure this, the Commission Board has implemented a new cycle of strategic dialogue and is increasingly focusing on strategic risks and opportunities.

December 2018 to April 2019

Information gathering and public trust

In December 2018, the State Services Commissioner issued model standards for information gathering associated with regulatory compliance, law enforcement and security functions.

The Commission is working to ensure that it is fully compliant with these new standards.

April to December 2019

Baseline Review of Commerce Commission

MBIE, in collaboration with the Commerce Commission, is to commission a baseline review of the Commerce Commission’s level of funding. An independent contractor will be appointed to assess the Commission’s efficiency and effectiveness and the required level of funding to meet its current and anticipated work. The review is likely to be completed by late 2019. The contractor is expected to consult with key parties in conducting the assessment. Any resulting proposals for changes to baselines that relate to levy-recoverable activities will be subject to a separate policy process and consultation.

November 2018 to December 2019

Market studies

On 24 October 2018, the Commission was provided with new powers to undertake studies to consider how well competition is working and whether it can be improved. Following a request from the Minister of Commerce and Consumer Affairs, the Commission initiated a market study into the retail fuel market. The final report is expected to be published in December 2019.

2019

Research - Updates to measures of competition

MBIE, in collaboration with the Productivity Hub, has commissioned research on measures of competition. The measures include price elasticity, price-cost margin Herfindahl-Hirschman Indices, and data from the Business Operation Survey (BOS). The research papers are to be published by mid-2019 and will further our understanding of the state of competition in New Zealand.

End 2019

Commerce Commission updating guidance

In terms of the Commission’s competition enforcement work, the Commission is in the process of updating the following guidance which will be published on their website:

  • Mergers and Acquisition Guidelines

  • Authorisation Guidelines

  • Enforcement Response Guidelines

Further information is available in the Commerce Commission’s Statement of Intent(external link)

Last updated: 28 March 2019