Competition regulatory system

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

Regulatory agencies and their roles

Policy advice

Operational policy and regulatory determinations

Advice, education and information

Compliance and enforcement

Monitoring and evaluation

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. 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

• Learn more about the fitness-for-purpose assessment and ratings
• Date of assessment: June 2017

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.