Commerce Amendment Bill

I present a legislative statement on the Commerce Amendment Bill.

ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Commerce Amendment Bill be now read a first time. I nominate the Economic Development, Science and Innovation Committee to consider the bill.

The Commerce Act sets out the ground rules that enable businesses to compete on their merits. In so doing, it ensures both that consumers benefit from competitive markets—as undoubtedly they do if a market is appropriately designed and appropriate to the circumstances—but also sets out the parameters within which businesses operate and are able to maximise the returns to their shareholders. It is critical that laws are up to date, are functional, and are fit for purpose. The Government has introduced changes to the Act around competition law, and that’s what I am speaking to today.

The changes that are contained in the bill can be roughly summarised under four headings. The first of these is a strengthening of the provisions around the misuse of market power. So, currently, market power can be prosecuted by the Commerce Commission (ComCom) on the basis of developing a hypothetical model. That has proven very difficult in practice, and what we are doing here with the bill today, the Commerce Amendment Bill, is bringing our law into line with what they do in Australia, and that introduces a different kind of test for the abuse of market power by a dominant player in the market. So that bill reforms the provision to prohibit firms with substantial market power from engaging in conduct that has the purpose, effect, or likely effect of substantially lessening competition.

The second thing which the bill does is it empowers the Commerce Commission to authorise any activities which may contravene this prohibition but which are, indeed, in the public interest, and they will develop guidelines to that effect. But this bill empowers them to do that. Next, the bill repeals the exemption in the Act for some intellectual property (IP) - related conduct. That really brings things up to date, because it was thought previously that intellectual property law and competition law were essentially anathema and that intellectual property law should be protected from competition law. That is old thinking. It is now the view that is widely held that intellectual property law should also be subject to competition law where appropriate. Both of them are actually complementary, because they encourage innovation and they encourage investment, and those things, of course, are critical for business. Interestingly, the existing provisions really have not been tested at law and are probably narrower in their scope than most people realise—in fact, probably narrower in scope than most professionals realise. It may be the case that this change is not really tested at law either, but it does bring it up to date with current thinking around intellectual property law.

The next thing the bill does, and the final really significant thing, is to make some changes to improve the functioning of the Act. Those are actually more minor changes. They are things that I certainly won’t speak at length to, but, of course, it’s good hygiene when you’re tidying things up with a bill, when you’re making the changes like we’re making with section 36, to look at what else needs to be done, could benefit from being done, to make the bill a better bill and the Act a better Act for the purposes that are laid out in it.

Now, I’m particularly delighted to see this bill progressing, because I have a little bit of history with this. When I was the Opposition economic development spokesperson—quite some time ago—I did become concerned about section 36 issues as I sat on the Commerce Committee and heard stories about market power and, certainly, became concerned across different industries that market power was at times being used and was very difficult to address. At the time, I went and spoke to some intellectual property lawyers and competition experts in large firms and came to a view myself that the Australian law was more fit for purpose than ours.

Now, this was quite some time ago. I ended up putting some of those people in touch with the Hon Clayton Cosgrove, who I think at the time might have been our commerce spokesperson, and he developed a member’s bill along these lines, to change section 36 of the Act to bring it into line with the Australian law. Now, as it happens, I don’t think that was ever drawn from the biscuit tin. History will tell me, or somebody in this House will tell me, if I’m wrong, but it certainly didn’t become law. Now here I am, as the Minister of Commerce and Consumer Affairs, passing a law that does bring us into line with the Australian law, setting that test in a way that will actually, I think, be more effective at ensuring that we do have a competitive market that will make sure that we get the benefits of that in terms of both the clarity for business, so they can maximise their opportunity, but also the benefits for consumers that accrue from having good competition in the market place.

I do want to put on record my thanks to the previous commerce and consumer affairs Minister, the Hon Kris Faafoi, who has done the real heavy lifting here. He oversaw the review of the Commerce Act, and that review has produced the main policy changes which we are considering here today in the House. That review included consultation in 2019 with business, industry organisations, competition and intellectual property specialists, law firms, and other bodies like the Commerce Commission and Consumer New Zealand. So I do want to acknowledge the hard-working Hon Kris Faafoi here in the House today.

Now, some concerns have been raised around the change in the IP provisions, a fear that there might be some chill on competition and investment that could result in false positives. I have looked at this, and I think these concerns, personally, are overstated. The reform prohibition should not suppress any innovations in business practices in concentrated markets that ultimately pose no threat to the competitive process. I want to acknowledge, however, those concerns, acknowledge that probably the law as it was was much narrower than most people realise, and, again, as I said earlier, I find it quite likely that we won’t even test these provisions, because, actually, the two are often in harmony. Historically, this hasn’t become an area of debate at law. I’m also satisfied that the benefits of the change to economic performance and consumer welfare will outweigh any risks to incumbent firms.

The other thing to say in that regard is that there will be an implementation period of 12 months, and there will be ComCom guidance around that. So firms will be able to adjust any arrangements they do have as the law comes into effect.

Ultimately, I think people generally, fair-thinking New Zealanders, will be very pleased with the bill’s passage. As I said at the outset, the purpose of it is to ensure that businesses can compete on their merits. We want the kind of competition that enables firms to thrive, that have the most innovative practices and products, that do run their businesses well and do things that are in the interests of consumers. Having clearly spelt-out law describes the playing field in which they operate, and, ultimately, those benefits from competition do accrue to consumers, and that’s about fairness—both fairness for the businesses in understanding the environment, knowing where they’ve got to put their efforts, but also fairness, of course, for consumers themselves, who deserve to have products available that are at the best price and the best quality across the board.

So I will end my contribution there, other than to say how delighted I am to be taking this section 36 change through, which is the main part of the bill; to note the IP changes; and also to note, again, the ability of the Commerce Commission, where they have any concerns about section 36, to authorise any activities that may contravene the prohibition on the use of market power that might be deemed to be in the public interest, and there will be guidance developed around that as well. Thank you very much for the opportunity to speak to this bill, and I commend it to the House.

Madam Speaker, thank you very much. This is quite a detailed bill in parts, so it is important that real scrutiny is applied to it, because, of course, competition law is extremely important. Much of what we do in New Zealand for businesses to grow and thrive is dependent upon that. There have been gains as far as competition and how that helps consumers and a market function adequately and properly over time—that has been good for New Zealand. But in itself, rule change in this area doesn’t necessarily mean that there will be benefits in as far as the market or companies are concerned—large or small—or consumers. National supports sensible, transparent, and straightforward regulation, and indeed we kicked off some of this work some period of time ago. However, when it comes to the misuse of market power, we need to make sure that we get it absolutely right.

The Minister said that we have good competition rules and laws and that the benefit accrues to consumers. That often can be the case, but what also happens to consumers when there is extra bureaucracy or red tape or burden placed upon a market, as a result of a desire to make it better where it may not make it better or there isn’t a significant gain, is those consumers don’t necessarily benefit or accrue a benefit; there is cost placed upon them. So in everything that this House does when it comes to the business community, we need to weigh up the outcome and benefit of what we’re trying to achieve against the actual cost there would be to business. When you place a cost upon a business, it must find a way to meet that cost—and they either do it from their bottom line or often through putting prices up. It is not often that it would be the case that they get to make a change without there being an additional cost, and where that cost is passed on in any environment or any situation, then, ultimately, consumers are not better off; they’re worse off.

Actually, the Commerce Commission has a number of tools already that I’m not sure they use to their full extent or as adequately as they do. So when the Minister talked a little bit around, you know, how hard it is, in the briefing notes in his speech, for the Commerce Commission to get the outcome they want in the court sometimes, taking away an intention test and changing that to make it easier for the Commerce Commission to get prosecutions in itself is not always the right thing, actually, to do. So what we need to do is decide whether there is a real problem here or if it’s just something that the ministry and the Commerce Commission and the Minister have seen overseas that they think would be a better idea. Is there a problem we’re trying to fix here, and is it demonstrable? Actually, where are the real examples of where the Commerce Commission hasn’t been able to meet an intention test but the practice has been anti-competitive, or where they didn’t use other tools—they didn’t have them—to make a change, in the case of the market power provisions that they have, or where the company concerned didn’t make a change?

Take an example of Air New Zealand. There is a lot of talk and a lot of complaint about that at the moment. Well, actually, what would happen, ultimately, in this case and as far as Air New Zealand is concerned, if they have no intent but they are a large player and want what inevitably is a very, very small market—and we need to be careful that in looking for ways to have greater competition, we don’t find that consumers end up being worse off, also, sometimes through choice.

So there is a lot of detail here. I notice that when we were in Government, when we announced to start looking to do some work here, The New Zealand Initiative had some very, very strong views on this. I don’t know whether they’ve had an opportunity to speak further since the consultations took place and the draft legislation was published. Now that it’s been brought forward to the House, it will be very interesting to see their views.

As far as the safe harbour of intellectual property is concerned, this too is quite important. We do need to find a way to get the balance right. I think the documentation has said that, you know, some of the provisions that were not put in place around competition at the time is because it was felt to be quite new. But if there is a chance that that innovation will be stifled as a result of this, it deserves a full and frank hearing. The Minister has said that he thinks that they are overstated, but I think we’ve got to be a little bit careful not just to look at what happens overseas where markets are much larger than ours—and others have a greater comparative advantage to us, particularly new entrants to the markets—but also it is not just what our officials tell us. I am not sure that it is overstated, the concerns from the sector. This is a sector that has the opportunity to provide a huge amount to New Zealand.

If we take the America’s Cup at the moment and a company that has a lot of innovation around intellectual property, which is Southern Spars—would not exist without the America’s Cup having been here. One of the larger players in the world is certainly much more dominant than any other player in New Zealand—well, I’d like to hear from them to see whether they think that, number one, this is a challenge or a problem; number two, whether they think there is or there isn’t adequate protection; and, finally, whether this weakens their ability to attract investment to grow their part of the market in New Zealand. When it comes to a lot of things around intellectual property, we don’t start with a level playing field compared to Australia—I mean, there aren’t many other countries. We can be innovators if we want. We can do all sorts of things and talk about how wonderful New Zealand is, but, ultimately, it is the business environment that attracts investment, and if it makes it harder, it must be considered.

Finally, I want to talk a little bit about what the Government can do itself rather than looking only at competition rules and law. The reason for that is, actually, when it comes to competitive or anti-competitive practices and market powers and if we are talking directly to cost and to price upon a consumer or a competitor, then the Government has a very large role to play in this. It’s not in this part of legislation—this Minister is not responsible—but, actually, in a cross-Government approach to how we make it easier for businesses and better for consumers so that they have more choice and, at the same time, actually, costs are not put up. So if they can afford more comes to all the things that a Government does. The Government has a raft of other legislation it is bringing in through the House in other areas that are going to have an impact upon businesses large and small, those who have a competitive advantage, those that may have a degree of market power, that in the end will be passed on to consumers, nothing to do with this at all.

So I would say to the Minister that, actually, we will be supporting this in first reading so that we can hear from those that are likely to be most affected, large companies and small, and then we’ll make a decision as to whether we can support it further, because if the intention is just to be like other countries around the world because they’re doing it, well, actually, that is not a necessity for New Zealand business. If it is that there is an actual problem there that needs to be fixed and that can be demonstrated and this will go some way to fix it, then, actually, the House would consider it. But if it is merely that the Commerce Commission find it hard to find prosecutions when it comes to market power of a dominant player in the market, because we are small, then we shouldn’t just be changing the rules to make it easier for them; they should do their job better, because they have so very many tools at their disposal. The outcome will be one that isn’t good for consumers—even though the Minister has said that when it comes to competition, the benefits accrue to consumers. Actually, more regulation and greater rules and more court cases and more investigations, when there is not necessarily a need for that, will just put cost upon those businesses. Guess what! Businesses pass those on to consumers. This bill should only go forward if it is good for consumers, and the Minister in his introduction has not made that case yet. Thank you.

Madam Speaker, thank you for the opportunity to take a call on the Commerce Amendment Bill. I’d like to acknowledge the Minister, the Hon David Clark, for bringing this bill to the House and also acknowledge the aspect that he has been working on this for quite a while. I also acknowledge the previous Minister, the Hon Kris Faafoi.

I’d also like to mention, as the chair of the Economic Development, Science and Innovation Committee, the recommendation from the Minister that this bill does come to that committee. On behalf of the committee, we certainly welcome that bill and look forward to the many submissions that I’m sure will follow on this bill.

The previous speaker, the Hon Todd McClay, made some good points around supporting businesses and consumers in terms of ensuring that we get the legislation right for our market economy, and I’m confident that the legislation that the Minister has brought to the House does strike the right balance. And at the same time, we look forward to hearing from a range of submitters in terms of their views around this piece of legislation. I will talk briefly around what the bill does, and then I’ll talk a little bit about how it links into New Zealand’s free market economy and the importance of strong competition within our economy.

The Commerce Amendment Bill amends the Commerce Act 1986 to improve the reach and functioning of competition law, and that’s the key point—the aspect around competition—with the Act’s purpose of promoting competition in markets for the long-term benefit of consumers in New Zealand. There are four key ways that the bill does this. The first one is by strengthening the Act’s section 36, the prohibition against the misuse of market power. And as I’ve said, we do have a market economy in New Zealand, and an incredibly successful market economy, and it’s important that we continue to support our market economy to do what it has been doing well for a number of years. Also, even through the challenges of COVID, our market economy has held up relatively well.

The second thing the bill does is empower the Commerce Commission to authorise conduct that may contravene the section 36 prohibition but is also in the public interest. The third one is repealing safe harbours in the Act for intellectual property, and I’ll touch on that later in my speech. And the fourth one makes a number of technical changes.

As I’ve said, New Zealand has a free market economy, and competition plays a key role in prices and in terms of consumer behaviour. Five of the key features in terms of New Zealand’s economy are economic freedom, voluntary and willing exchange of goods and services, private property rights, the profit motive, and the fifth aspect, which specifically relates to this bill, is the aspect around competition.

Those watching this speech at home might be asking: why is competition so important to an economy, and why would the Minister bring a bill to the House to ensure that there is a good, strong amount of competition within an economy? Why is that important? I’d like to speak to the House for those people watching at home in terms of just highlighting a few aspects around why competition is important, and hence why this bill is important.

The first point is that competition is clearly good for consumers in terms of prices. If you don’t have competition, then the prices tend to balloon up. If we have good, strong competition within a market economy, then the prices stay relatively low, which is good for consumers. It means that money freely flows throughout the economy as consumers make purchases, and, ideally, the more purchases that consumers make is obviously better for the free flow of money.

The second reason why competition is important and why this bill is important is because it encourages businesses to produce and boost the economy. So if a business has a monopoly within an economy, then there is no incentive particularly for them to actually work to boost the economy, to grow the economy, because they’ve got their share, and there’s no incentive for them to look forward—which causes growth in the economy.

The third reason why competition is important is because it encourages businesses to improve the quality of goods and services that they sell, and I’m sure all members in this House would agree that our very diverse economy produces a number of good-quality and high-value goods and services. The high-value goods and services that we produce certainly adds to our standard of living. So competition is important in terms of those services.

Another reason why competition is important is around innovation. When there is competition, businesses are forced to innovate. The reality is that over many years, we have had a number of Kiwi businesses, that I’m sure we’re all very proud of, who have innovated very well and increased the quality of their products and increased our standard of living. Actually, from a personal point of view, both my uncles and my grandfather were dairy farmers down in the South Island, and my grandfather in particular was constantly innovating as a business owner. He was constantly looking for new tools and new products to help his business innovate. There is a local company in the Hamilton region—and I acknowledge my colleague the Hon David Bennett; I’m sure he would agree with me—the Gallagher Group, who are world-leading in terms of innovation and last year turned over $300 million.

💬 Hon David Bennett: Why didn’t you guys help out Pacific Aerospace?

What?

💬 Hon David Bennett: Why didn’t you help out Pacific Aerospace?

We are supporting all businesses, on this side of the House, and this is one of the ways we are supporting businesses, I say to the Hon David Bennett. We are supporting businesses by bringing about competition in the market, encouraging those businesses to innovate, and also supporting them with R & D tax credits, but that’s for another time. I will return to the bill.

This aspect around competition is policed by the Commerce Commission. I’d like to acknowledge the work that the Commerce Commission does across New Zealand. This bill provides further support for the Commerce Commission. The Commerce Commission ensures that consumers are protected and ensures that clear and accurate information is provided to them so that there’s a level playing field for competitors, the rules are known, they are monitored, and market power is not taken advantage of and used for anti-competitive purposes.

The previous speaker mentioned the Commerce Commission and talked about how they are well resourced, and I acknowledge that they are, but at times it falls on us as members of Parliament to ensure that the legislation is fit and right so that the Commerce Commission can do their job. One of the key roles of the Commerce Commission is to ensure that there is a strong level of competition within our free market economy, and this piece of legislation does further work to empower the Commerce Commission to do their work.

Back in 2016, there was an example of anti-competitive behaviour in Australia. I know that that example, which I’ll elaborate on soon, has featured into the thinking on this bill. In Australia, there is a piece of legislation very similar to the piece of legislation that the Minister is bringing into the House today. What happened over in Australia was there was a company called Cement Australia Ltd, and they effectively had a monopoly on a product called fly ash. Fly ash is a product that’s used towards making cement products. So this company had control over all of the fly ash in the Queensland area. So it meant that other companies weren’t able to compete with this product, and the Federal Court of Australia actually ordered penalties totalling $18.6 million against Cement Australia because of their anti-competitive behaviour in terms of this fly ash. Justice Greenwood over in Australia found that the conduct had the purpose and effect of preventing a competitor from entering the market by preventing them from obtaining direct access to the source of fly ash. That is exactly an example of what we don’t want to happen here in New Zealand in terms of anti-competitive behaviour. I know that that example certainly formed part of the work that has been done around this legislation.

I will just summarise by saying that we have an absolutely fantastic free market economy here in New Zealand, and, as a Government, we are working hard to continue to support our economy, and one of the ways we are doing that is through encouraging competitive behaviour. I look forward to calls from the other side of the House, and I commend this bill to the House.

Thank you, Madam Speaker. Of course, there’s one particularly strong piece of competition going on at the moment, as we speak, in the Hauraki Gulf, in Auckland. Two yachts are racing against each other and, of course, as we know, one of the great drivers of innovation—probably the great driver of innovation—across the economy and in sport and in every element of life is competition. It’s a good thing, and so it’s important that we need to maintain—there is a role for Government to ensure that competitive spirit is alive and well across the economy, and so the Commerce Amendment Bill, and the Commerce Act itself, is focused on trying to deal with abuse of market power, which occurs, obviously, in certain parts of the economy and all around the world.

If we focus on this question of section 36, taking advantage of that power as a test, Australia and New Zealand had that similar piece of law. The Australians have changed that law to focus in more on the purpose or the effect or the likely effect of decisions made by a company to lessen competition. So there is a good argument for us getting in line with Australia, although it’s not necessarily a slam-dunk case, and so National, of course, is going to support this bill at its first reading, but we’re not guaranteeing that further on. It will depend on what we hear in the select committee process. Just because it makes sense in other, larger economies around the world, it doesn’t necessarily mean that, in the context of New Zealand’s economy, with its very large preponderance of small businesses, it automatically makes the same sense here in New Zealand. But we all are very focused on the need to ensure that there is active competition throughout the New Zealand economy, and it comes fundamentally back to the cost of living and the prices that we pay.

We all know, as New Zealanders, that there are some things—many things—for which we pay a lot, in the international context, and I was struck by this powerfully when in Germany a couple of years ago and going to a local supermarket, an Aldi supermarket or Lidl supermarket—I can’t remember which one—in Germany and being blown away by the prices available there. Large economies obviously have more scope for competition and more scope for efficiencies of scale, and New Zealand, with its small economy, suffers from a lack of efficiency of scale, and it has flowed on to the impact, in many areas of our economy, that two or three large players dominate. So these issues of competition are important. It always occurred to me that the most important thing you can do to advance competition—and you can pass all the laws that you like here, and this is worth considering, and we’ll look at this in detail—the most important thing for Government policy, it seems to me, in competition is to focus on removing barriers to new entrants coming into any industry that you’re talking about.

Quite often, the barriers to new entrants coming in and competing are regulatory barriers, put up with the best of intentions, and sometimes they’re quite unrelated to the industry that you’re talking about. It may well be, for supermarkets, that the Resource Management Act and the sheer difficulty of getting land and getting into business and being competitive creates such a barrier that new entrants from overseas don’t get involved. So that, I think, is the most important thing we can do in competition, and I’d encourage the new Minister, the Hon David Clark, to look closely at that broad issue and be assured that he would have support from across the House if he was rigorously focusing on removing barriers to new entrants coming in, competing, so that New Zealanders have—

💬 Hon Dr David Clark: The threat of market power is a pretty big barrier for many.

Yes, and ensuring that we have access to the best prices.

In terms of the debate, this has been a long-held debate between specialists in the competition law zone, as to the effectiveness of section 36 and whether we should adopt the Australian approach; there are good arguments for both sides, but I’m very much looking forward, and we on this side are looking forward, to the select committee discussion, because, just bear in mind, in these areas of legislation in the competition field but also in many financial areas, it quite often turns out that the effect—and we’re talking about the effects of decisions in this piece of legislation—it often turns out that the effects of legislation passed in this House are the exact opposite of what was intended by the parliamentarians when they passed the law, because life is much more complex, much more complicated, and things aren’t easily predicted. So that requires a little bit of modesty on the part of lawmakers and a real commitment to listen in the select committee processes to the considered views of a wide range of actors in this space. And so, with those comments, I’ll finish. Thank you, Madam Speaker.

Thank you, Madam Speaker. I wanted to start my contribution to this bill today by looking at the end to which I see this bill as a means to achieving. I think we can all safely say that we came to this House in hopes that we would help New Zealand maintain a really, really strong market, in being a free market, and that competition would freely flow through that market, and always that we would offer the best products, the best services, and we would have the best businesses running inside of that market, so that our consumers would get the best in the whole entire world.

So with that vision in mind, I really want to commend this bill, because this bill is fixing some of the loopholes that we’ve discovered since its enactment in—and I remember this because it’s way before my birthday—1986. This is quite an old bill, and I think today we’re patching up some of those loopholes that we’ve since discovered, one of them being the section that primarily this amendment is speaking to—section 36, which is to do with competition. In this competition space, I think it’s really important that we look at how fair our rules are right now for the players in our market. Right now we can see that incumbent, dominating players are given an advantage to keep new players out of market, and I think that is absolutely unfair.

Also, I just wanted the House to note the decisions made by the two Justices, Justices Blanchard and Tipping—this reminds me of my law school days—in their statement saying that “Anyone asserting a breach of s 36 must establish there has been the necessary actual use (taking advantage) of market power. To do so it must be shown, on the balance of probabilities”—and we all know that that’s actually quite a hard test; it’s very subjective to the judges that are presiding over that case, and also the lawyers that are arguing it—“that the firm in question would not have acted as it did in a workably competitive market; that is, if it had not been dominant.” So there’s a lot of presumption, there’s a lot of room for argument, and we know that this case in particular—the Commerce Commission v Telecom in 2010, in the New Zealand Supreme Court—failed because it was really hard to argue up to that standard. This is, I think, a waste of taxpayers’ money in terms of having to go through the Supreme Court, which is a really lengthy legal process, to hire lawyers and to argue this, when what we’re trying to achieve is just better competition in our markets.

So I thought this amendment to this bill would be really, really good to see more effectiveness and more efficiency come through our system, especially through our Commerce Commission and through helping consumer affairs in New Zealand to be better. I thought this is really, really amazing in terms of actually making the whole process more simple. This is giving more assurance to the players in the market, to all of our firms and businesses who are participants in the market, that they are absolutely sure that what they will do will, or will not, get them into trouble with the law. So this is giving really good clarity so that they know what they’re doing won’t harm the market, because we all know that once we go through the court system and once they get a result from the court, it’s already too late: the harm has already been done, and the inefficiency and the ineffectiveness has already happened. So that’s almost like the ambulance at the bottom of the cliff, and what this is doing is making sure that that anti-competitive behaviour isn’t happening in the first place. So this is, I think, a really, really good place for us to start fixing this loophole.

I also wanted to note that, while I just mentioned at the beginning this Act was enacted in 1986, there has been a recent history from both sides of the House of comments and commitment to make changes and to look into possible changes of this Act, starting in 2014, and I recognise that there was a different Government then, and also in a statement made by the Hon Jacqui Dean in terms of her commitment to re-examine this Act. She states in her media statement that “These proposals would include empowering the Commerce Commission to undertake market studies and improve its enforcement actions without having to go to court”, and I think that also speaks to what I just mentioned in terms of making the legal process a lot easier and giving the Commerce Commission a lot more power to make policing the market a lot clearer.

I just wanted to really tautoko what my colleague Jamie Strange spoke about just before me, saying that competition brings innovation. I want to recognise my work with him recently on the Economic Development, Science and Innovation Committee. I love how Parliament has put these three different subject groups, if you like, or titles, together into one select committee, because it is about that. It’s almost in one area that we recognise that there’s flow-on effects and synergy and harmony in that. So there’s economic development, science, and innovation, and to bring about innovation I think it’s really, really important that if we have a really good, innovative, competitive local market here in New Zealand, it actually helps our firms to put out better products on to the international market as well, and so that our firms, our products from Aotearoa New Zealand, become much more attractive on the international market. I think that helps, as well, to make sure that our consumers here in New Zealand get the best first, and we also export and show the world that we have the best businesses and the best firms as well.

I would also like to turn your attention to intellectual property (IP). I thought that was really important, as well, that we address that intellectual property should be seen as a normal property right. Just because a firm has IP over a particular idea or particular technology, that doesn’t automatically give them market right. We see that with a lot of the drug buyers, the pharmaceutical companies, when we see IP and they have IP and it gives them an unfair advantage in the market. We see that creates a lot of problems. This bill and this change, of removing intellectual property as being a safe haven from being prosecuted for anti-competitive behaviour, gives our market a really good chance—like Jamie Strange has just mentioned—to bring about more competition so that we have better incentives to encourage our firms to innovate. I think that’s really important because, in New Zealand, as a small country, not only do we start on the back leg in terms of our size, our quantity in our economy, we have to be smart about the way that we place ourselves in the global market, as well as setting up our domestic market. So fresh, new ideas that really would be high value are really important, and innovation, I really think, is the key road in terms of achieving greater economic success for our country, and achieving greater welfare for all of us who live in Aotearoa New Zealand.

I also just wanted to recognise the Hon David Clark, the Hon Kris Faafoi, and—like I said before—the Hon Jacqui Dean for having contributed in different ways to this bill, so that we finally have it here in this House today. I do really look forward to hearing all the submissions on it through the select committee process. And could I just thank, as well, the Ministry of Business, Innovation and Employment and the Commerce Commission for all the work that they’ve done throughout the years. I think we’ve commissioned a lot of reports from them in order to give us the insight that we have today, as I stand here in this House, looking at all of the market research they have done to really show us what we can do to make New Zealand a better market for all of our competitors, for all of our firms. But, like how I started this speech, ultimately it’s to be a better market for all New Zealanders living here. So, on that note, I commend this bill to the House. Thank you, Mr Speaker.

Kia ora, Mr Speaker. Before I begin my contributions on the Commerce Amendment Bill, I want to make it clear that I yearn for a world where we’re not relying on competition so that people can access basic commodities such as food. And while we work towards that, it’s important, though, that we do emphasise the importance of fair competition between the big players and the small players in the market, because, as our member here on the right pointed out when he mentioned supermarkets, we do have a system here where we have a few big players dominating competition, creating barriers for consumers to access fair prices. So we do welcome the move towards amending section 36 of the Commerce Act as well as looking into empowering the Commerce Commission.

We do want to highlight, though, some issues that have been raised, particularly when it comes to empowering the Commerce Commission, that were brought by the Privacy Commissioner, particularly around notifying people when sharing information. And we do know that if we were to follow those recommendations, we may have to look at broader reforms as to not, sort of, single out the Commerce Commission when it comes to how it handles private information. But we do think that as we head on to select committee, we should be listening to these concerns and issues brought by the Privacy Commissioner.

I also want to acknowledge the move towards changing intellectual property rights and removing the safe havens. That’s quite important, as intellectual property rights actually are one of the most aggressive tools by capitalism to prevent people from accessing goods and services. And, actually, in many ways, it can stifle innovation. So I do look forward to a really robust conversation on how we can make competition a lot fairer as we amend intellectual property rights. One of the other things that I wanted to mention was ensuring that as we discuss this bill, we are taking into account Māori intellectual property rights and land rights as well, because if we are to look at addressing anti-competitive behaviour, we need to make sure that we’re also ensuring that we’re meeting our Te Tiriti obligations. So that is one of the things that the Green Party is wanting to ensure is looked into at the select committee stages and that makes us comfortable providing our provisional support of this bill.

The Green Party does make really clear that we do support a regulatory framework in our economy that ensures fair competition, but we’re also very clear that access to essential goods and services is a basic right that should not be reliant upon our market. So I do want to make sure that we do not lose scope of the fact that innovation and competition alone won’t bring us to a world where people are not being deprived of these basic services. So once again, the Green Party is really keen to provide that provisional support to make sure that we look at the information-sharing safeguards as well as meeting our Te Tiriti obligations regarding Māori intellectual property and land rights. Kia ora.

Well, thank you, Mr Speaker. I rise on behalf of ACT in support of the first reading of this Commerce Amendment Bill, and I say “first reading” because the ACT Party’s view is that these issues by their nature are very technical and they deserve to go to a select committee for examination. People who participate in the market and who are potentially regulated under this legislation—they’re certainly regulated under the current legislation—deserve to be able to come to select committee and have their say on it. So that’s the reason for supporting this legislation to first reading. However, we’d also say that on the face of it, it doesn’t sound like a particularly good idea.

Let me start by putting this into the context of recent politics and the legislation of, I guess, competition regulation and the Commerce Commission in this House. We have had for years the Commerce Commission going along to whoever is the Minister of Commerce and saying, “Set us free. Let us do market studies and poke around in any market we want.”, with incredible powers to request information—more than the police would have—and try to set the world to rights, try to tell people how a particular market should be structured. For years and years, my good friend and constituent the Hon Paul Goldsmith, as commerce Minister, would tell them exactly where to go with that proposition. But, of course, the Civil Service are relentless and they are often here for 40 years. We mere functionaries are elected for only three, and eventually they get their way. They find a weaker Minister, and they got a bill that allowed them to be able to go off and do their own market studies, self-initiated inquiries into markets.

So, of course, the first one we had was into the market for fuel, and what did it find? Well, basically, not much. They really discovered that, actually, it’s not obvious what the price of fuel or the market structure should be for a mountainous country 1,500 kilometres long, and they couldn’t really tell us much of use at all. Happily for the Government, having seen that study be done, a combination of the oil price and the New Zealand dollar had changed so that fuel prices were no longer a political concern. It turned out that that market study had achieved absolutely nothing. But no doubt the Government will now set a market study on another industry that’s politically hot.

I just give that Cook’s tour of recent activism by the Commerce Commission and recent accession to it by this House under certain Ministers that have politicised, in quite a futile way, the market and the regulation of competition in New Zealand. What we see in this legislation again, or, well, if we listen to the members who have just spoken, they were saying that, somehow, giving the Commerce Commission more power is automatically good and that removing the requirement to actually show that a particular firm is wilfully exploiting its market power—to remove that requirement is somehow automatically good, that it will make it simpler. Well, actually, if you read the early commentary on this particular move—and I want to commend Buddle Findlay for producing a very good commentary so far, and I’m sure there’ll be more in select committee. What Buddle Findlay have said is, actually, if you look at the proposal for the new section 36(1) in clause 14: “A person that has a substantial degree of power in a market must not engage in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in—(a) that market; or (b) any other market in which the person, or an interconnected person,—(i) supplies or acquires, or is likely to supply or acquire goods or services;”, what you have is that if you innovate and your market share grows and there’s a lot less competition, well, potentially, what you’ve done is squeezed out competitors by doing a job well and you could be liable under the Commerce Act for an investigation by an activist Commerce Commission. That doesn’t sound very helpful.

By the way, if the objective here is to reduce transaction costs to increase certainty, well, it’s going to take several years for the courts and the sector and the commission itself to work out how these new rules actually work. So we’re moving to what is probably a less certain paradigm and we have the uncertainty of the transition. So the idea that this is automatically good and is going to get us a more competitive market doesn’t stand up to a great deal of scrutiny prima facie. Buddle Findlay also identify the possibility that if there was to be a purchaser of goods, perhaps a State sector purchaser, and they don’t spread around their purchasing in a sufficient way, then they might actually be liable for distorting the market. Now, they’re not willingly exploiting their power, but what they are doing is having the effect, or doing something that’s likely to have the effect, and are liable under this legislation. So what it’s going to do is it’s going to mean people are going to have to watch their back all the time to make sure they’re not too successful or occupying too much of a market, because they could become liable. Despite having good intentions, just trying to do their job, people could become liable under this legislation.

Then you move on to the intellectual property (IP) safe harbours. Well, the legislative statement the Minister presented said that it’s now an outdated view that intellectual property can’t be subject to competition law. Well, this, again, is going to lead to an enormous amount of jostling in the transition to this new paradigm, and possibly the new paradigm won’t actually be any better than what we have now because the Commerce Commission is going to have to determine whether somebody holds too much intellectual property to allow competition. I would argue that the Commerce Commission, as often is the case—as was the case with the market study into the fuel market—simply does not have sufficient knowledge to know whether or not it’s making the market more or less competitive. By the time it figures it out, particularly in the world of IP, chances are the answer will have changed anyway. So it seems very unlikely that the Commerce Commission is going to be able to improve matters in intellectual property, simply due to a lack of knowledge and the sector that it’s trying to regulate likely moving faster than it is.

If you want another example of that, we had the Commerce Commission’s blocking of the StuffMe merger. The knowledge that the commission assumed—it assumed it knew whether or not either of the existing entities would survive or whether the merged entity could survive; nobody knew that. Nobody envisaged the developments that have subsequently taken place. If you’d bought into NZME around the end of the lockdown last year, you would have made a lot of money because, actually, NZME have done very well, but I couldn’t have predicted that. I wish I had—I might be richer not standing here. But the point is that when you look at interventions the commission’s made, often it’s intervened in markets where things change very rapidly, they don’t have a lot of power to anticipate what developments will happen in the future, and, therefore, the assumptions behind their findings often turn out to be false before they are delivered or before their reports are delivered, and their ability to actually improve competition or improve overall welfare is much more modest than those in the commission who lobby the Ministers to bring legislation to this House to get more power will concede.

So those are all the reasons why we’re very sceptical about this legislation. But as I said at the beginning of the speech, I also feel that when there’s highly technical matters such as this, then the people who have real, practical day-to-day expertise should be the ones that come before the committee and are able to actually give their perspective so that members of this House, and particularly those on the select committee, are able to understand what is going on and, hopefully, do their job as a select committee and improve the legislation. So I look forward to that happening.

My colleague, Damien Smith from ACT, who is a lot more experienced than I am in these kinds of commercial matters, will be on the committee examining it, I understand. And I look forward to his and other MPs’ feedback on how that committee examination went when we return to debate the second reading of this Commerce Amendment Bill in this House. In the meantime, ACT will be voting for it to go to select committee. Thank you, Mr Speaker.

Thank you, Mr Speaker. I rise with enthusiasm to speak on this piece of legislation. I think my fourth form economics teacher will be very excited that I’m in this place talking with such wisdom today. Well, I was so hopeful as I heard David Seymour get up and speak and the ACT Party in full support, and, of course, then the scepticism came in. But that’s OK, because we in this House are able to explore ideas, legislation, and bills, and I’m really looking forward to going to select committee and being part of the Economic Development, Science and Innovation Committee. I look forward to unpacking and learning more about the views of people within our nation, be that companies, be that economic development agencies, whether it be individuals, and hearing what they have to say about the Commerce Amendment Bill.

I look forward to us exploring more how we do our economic development here with commerce better and how we ensure—actually, I’ve got three things that come to mind. I thank the Hon David Clark for bringing this bill to the House and bringing a few of these concepts earlier in his speech. What I heard from that was that this bill is around fairness. I’ll go into that a bit more a little bit later on. Also, it’s speaking against ensuring that there isn’t the misuse of market power that comes into place, which we need to address in this House and as a nation. I also thought about—this isn’t overly exciting but it’s really important—good functioning legislation and good functioning Acts that create and provide tools that are fit for purpose so groups like the Commerce Commission can do their job and do it well.

Fairness—well, I live in a small place called Taranaki. We’re a powerhouse in this economy, but we are small, and us as a nation of Aotearoa are small fish in a big pond. We’re remote, but we want our economy to be fit for purpose, ensuring that companies and businesses do the right thing. We want to ensure that consumers and businesses have a fair go and that it’s a fair playing field for all.

The other thing that Minister Clark talked about was strengthening the Commerce Act’s prohibition against the misuse of market power. Now, the challenges of the market and how power doesn’t crush others in the market is very important for myself. Again, living in a small community where we have many, many businesses, whether it be mum and dad operators or whether it be large construction companies, but we don’t have as many jobs as other parts of the country. We don’t have as many as other parts of the world. So how do we ensure that those who are there don’t misuse their market power?

The other thing this legislation does—it’s not the sexiest part—is it makes minor changes to improve the functioning of the Commerce Act. Now, I know that the Commerce Commission, under the current law, finds it difficult for them to enforce in this space. I know the main difference in this bill is amending section 36, which will prevent businesses from harming their competitors in ways that also harm consumers. Now, that must be a good thing: ensuring and preventing businesses from harming their competitors in ways that also harm consumers. We need to protect all people, businesses and consumers. This makes it clearer, makes it function better, and will help deter anti-competitive conduct. So I support this because it makes it fairer. It ensures it deals with market power and it’s just a good, functioning piece of legislation.

Now, the previous Minister, who we want to acknowledge, the Hon Kris Faafoi, obviously got the ball rolling in terms of seeing the review back in 2019. In this review, they produced some main policy changes that they want to implement on this bill. The review that they undertook included consultation with businesses, with industry organisations, with competition and intellectual property - focused law firms and other bodies, including Consumer New Zealand and the Commerce Commission. So the fact that the legwork, that consultation, has already taken place before we even get to the first reading I think shows that this piece of legislation, this bill, will stack up when it comes to select committee and then to the second reading.

As I said at the start, I look forward to being on that select committee and hearing the submissions and understanding where things fit in terms of ensuring that New Zealand is fair, that market power ensures that all people have a chance, and that there is good, functioning legislation.

In closing, I guess I just want to refer back to the purpose: strengthening the Act. As my colleague to my left, Naisi Chen, said, this was legislation that was before she was born, and that makes—I thought I was quite young. But, obviously—I was 11 years old, but let’s not talk about that.

💬 Rachel Brooking: It’s been a long time coming.

It’s been a long time coming. I don’t remember, as an 11-year-old, this piece of legislation particularly, but now it’s about strengthening the Act’s section 36, it’s about empowering the Commerce Commission, it’s around repealing safe harbours in the Act for intellectual property, and, of course, it’s making a number of technical changes.

So I support and look forward to the many submissions, the many emails, the many nights of reading people’s ideas, opinions, hopefully not too many theses on this piece of legislation. But it’s my pleasure to stand here and my pleasure to go to select committee in supporting this bill to the House. Kia ora.

This is a split call.

I rise to speak on the Commerce Amendment Bill. I want to begin by just setting out some context for why this bill is so important, particularly for New Zealand, and that is that in New Zealand we have a small market. Now, here on this side of the House, we believe strongly in the principles of competition, of private enterprise, of the benefits that are gained from firms, entities, and individuals competing against each other to innovate, to create new products, to bring products more cheaply to consumers and to market.

But we’re also conscious that while we ultimately want a free market to operate as efficiently and effectively as possible, there are potentially behaviours in a small market that can limit the effectiveness of that market. That is particularly the case in New Zealand, where we can have cases where duopolies emerge, where cartels can emerge, and where, due to the small nature of the consumer base, you can have a consolidation of market power. It is for that reason that National, in principle, supports what this bill is trying to do, which is looking at how we change the current prohibitions on misuse of market power to more closely align them with recent changes in Australia—specifically, looking at considering the effect of the conduct, rather than just the purpose.

Of course, this is important because what we’re talking about here is firms of great size, who are dominant in a market, behaving in a way that can actually distort the way that market operates for consumers and for those wishing to purchase products. Of course, this goes across all parts of our economy. When we look at the way we regulate firms and their market power, it includes everything from people supplying building products, through to supermarkets, through to those selling petrol. So it’s very important that our law is up to best practice in terms of aligning with what other jurisdictions have found to be useful and providing the Commerce Commission with the tools it needs and the scope it needs to properly explore these matters.

However, having said all of that, National is also acutely conscious that if we get this sort of drafting in the law wrong and we make these provisions too broad, in fact, they can impose a considerable compliance cost and an imposition on firms in a way that doesn’t actually further the interests of competition or consumer interests but simply creates an uncertain operating environment for firms in which they may feel that they are subject to undue witch hunts. So we will be working very hard in the select committee process to hear from experts on all sides of this debate to hear about how they think these amendments will operate in practice and to understand what additional compliance burdens they might bring, and, equally, what benefits they may bring to competition in the market.

The Commerce Act is a piece of legislation that must evolve and adapt in response to what is happening in our competitive market. This is work that National has long supported. I note that there are other provisions in this bill around safe harbours for certain intellectual property rights and other measures around the taking advantage test. All of these matters are matters that National believes are worthy of exploration, and we look forward to further submissions on the bill. I commend this bill to the House.

Tēnā koe, Mr Speaker. It’s my pleasure to take a split call on the Commerce Amendment Bill and to follow the member Nicola Willis, who has just resumed her seat. It was great to hear that the start of her contribution was very positive, but then, of course, we get the “however”, or if it’s not the “however” it’s the “but”. But I hope that that perhaps won’t be the case moving forward.

Colleagues before me have already spoken as to why the Government believes that this is a good piece of legislation and they said that it is timely, perhaps setting aside the length of time that it’s taken since the first enactment of this piece of parent legislation. But I would like to acknowledge the Hon Kris Faafoi, the former Minister who did a lot of work in this space, and, obviously, the Minister of Commerce and Consumer Affairs currently, the Hon David Clark, who is shepherding this amendment bill through the House in its current form. I agree with the Minister’s initial comment in that this is about the responsibility for setting the groundwork, setting the parameters, setting the boundaries by which businesses in our country are able to compete. We all know that commerce is a really important part of the way in which our society and our community is able to function on a day-to-day basis. So it’s really important, then—actually, it’s very important that there is the element of fairness when it comes to setting those boundaries, the groundwork, and the parameters as well, and the Commerce Commission have a key role in undertaking this work.

Just on the Commerce Commission, when I look at the elements of the bill in front of us, often perhaps there is a tendency to dismiss just technical changes to legislation, but they are really important, and one in particular is around aligning the maximum pecuniary penalties that could be imposed for anti-competitive behaviour. That word “pecuniary” sort of tweaks my mind, because in the ballot I have a member’s bill that I have taken over from my colleague the Hon Priyanca Radhakrishnan, around the Local Government (Pecuniary Interests Register) Amendment Bill. So the alignment there is really important that we have an open and transparent opportunity, whether it’s in the local government sector—and, in this sense, the way in which those penalties might be set. It’s good and pleasing to see that that is a technical component to this proposed legislation, but it is an important one none the less.

The other technical change is around the flexibility for the commission and its full suite of commissioners. My own background prior to entry to Parliament was as a Criminal Cases Review Commissioner. Commissioners up and down the country undertake really important work and, in this commerce sense, what I like about this bill is that it provides the flexibility for the Commerce Commission to actually look at its workload and to modify its appointment process to accommodate that, so that’s really important.

We’ve heard, in terms of what’s opposite as well, that there is a need to support consumers, and absolutely there is a need to support consumers. This piece of legislation fundamentally is good for consumers, because it is the very people for whom this legislation will actually protect and the mechanisms that will allow that protection to flow through. So I hope that as part of the select committee process, the select committee does actually hear from consumers and that it hears from other key players—but, in particular, consumers, I would like to think.

Just upon my entry to the House earlier this afternoon, I heard members of the Opposition indicate about, “Well, where are the real examples of failure?” I think perhaps that line of argument is missing the point. This piece of legislation is looking to prevent failure. The very protection that this legislation provides will actually mean that we don’t have to cite real examples, because the bill will be doing its job; it will be doing justice in that sense. So while the bill is fairly limited and narrow in scope in that most of it focuses on realigning the section 36 components along with those technical changes, I think that this piece of legislation is on a good path through to select committee, and when the select committee hears from those that wish to submit on it, then I’m hopeful that that will come back to the House and we can move things to the next step. But for the time being, I am very happy to commend this proposed bill to the House.

Mr Speaker—oh.

💬 Anna Lorck: You go.

💬 DEPUTY SPEAKER: It’s actually a Labour call, but, Melissa Lee.

It is a Labour call, Mr Speaker, so I was waiting for a speaker on the other side to actually take a call. But nobody—

💬 DEPUTY SPEAKER: It is their call, but they missed out, so Melissa Lee.

As long as people don’t recognise me as a Labour member, I think I’m OK.

It is a pleasure to rise to speak on the Commerce Amendment Bill. I have taken note of what Mr Tangi Utikere has said, and he was actually rather surprised that we were positive in our support to select committee, but he was a little bit despondent about the way that we raised some issues with the bill. I would have thought that a member would support that action—that we move very carefully when we’re dealing with legislation. Earlier, one of my colleagues said—and I take his word very carefully; it was Hon Paul Goldsmith—that in this House, we pass legislation sometimes with the effect of the legislation which is often opposite to the intent. This bill is actually dealing with those issues of whether a business had actually intended, or did the effect of their actions have different effects, and this bill changes the margins. This bill will replace the taking advantage test with an explicit provision on the firms with a substantial degree of market power from engaging in conduct that has the purpose of effect. So it goes from intention: did it actually have the intention to actually be a major force and change the effect? Or they may have had the intention but didn’t have the effect, so you can’t actually prove that they actually had the intention. Now we’re actually changing the margins to only looking at the effects. It doesn’t matter whether they actually had the intent or not. If it has an effect, then it actually becomes something that is against the rules, apparently.

I think sometimes when you’re looking at commerce bills, it is rather dry. Often, people don’t quite understand how it’s going to impact them, and what Mr Tangi Utikere said was that consumers need to be considered, and I agree completely. But under the changes in this bill, it is when businesses have to consult lawyers, for example, or the very fact that every time they want to change prices, which doesn’t necessary mean that they’re actually acting against the bill in the guidelines of the bill, they are becoming more—for example, if they’re presenting competition by setting a new price on their particular item or business, they may have to consult a lawyer to see if, in fact, they are breaching the rules of section 36 in this new amendment bill. If that is the case, that is an additional cost to the business, and what happens to additional costs to a business? Businesses never want to own those costs. They always pass it on to the customers. So, effectively, what it means is that the fee that the businesses have to pay will be passed to the consumers. So this bill has, potentially, the end result or the effect of the changes in the bill being more cost for the consumers, and I think that’s one of the reasons why on this side of the bill we are moving a little bit cautiously.

Competition law is very important. We need to make sure that in our market, particularly in a very small country like ours, we don’t have a situation of monopoly or duopoly that controls prices, which are actually very high for consumers. We believe in having sensible and transparent regulation—straightforward regulation—that people actually understand. We provide the settings where businesses can compete fairly, and we don’t want the market forces to create a conglomerate or a big monopoly that controls and sets prices for consumers that are actually prohibitive. We want to make sure that it is effective competition, and I think we all agree with that.

But, as I said, rule changes in this House setting regulations or legislation—any rule changes aren’t always right or often needed. The reason, I guess, why I’m cautious in my view of this bill and why I look forward to the submission process in the select committee—and I saw earlier that my colleagues in Labour, Mr Strange and Ms Chen and Mr Bennett, have spoken on this bill, and we all agree. We look forward to the discussions that we will have in select committee, because often select committee is where the true effect of the bill can be highlighted. Because we are not in those businesses, we as members of Parliament are able to hear their submissions to see how much of an impact this will have on people’s businesses and potentially the consumers as well.

When we change rules in regulation or legislation, we don’t want to create an inadvertent effect on people, on businesses, and on consumers. I hope that members in Labour, in Government, and in other parties will also share with me the concerns that I’m raising. Just because we cannot prove that the intent in this existing bill, which we are now amending—we can’t prove it and we can’t take it to court. And there is a higher bar that the Commerce Commission can’t actually prosecute. We’re changing the bar so that we have a different set of rules. Instead of looking at the intent to prevent competition, we are now looking at the effect, and I’m not so sure if that is always the right way to go.

But, as I said, I support this bill, with my colleagues on this side of the House, to take it to select committee for a robust examination of the bill and the submission process. I look forward to that and I commend the bill to the House.

I rise to speak on the Commerce Amendment Bill, and as I do so, I’d like to talk as a business owner. We’ve talked a lot today about the impact on business and how business will respond to competition, but I can speak from the heart. I can speak as a business owner for over 25 years, and I can tell the people of this House that competition is the best thing we can do to grow business. Without competition, we don’t keep being innovative, we don’t enable ourselves to grow, and we don’t include the number eight wire thinking that comes with being good Kiwis in business. But I do agree with a member of the other side of the House: because we are a small country, we can see the creation of duopolies, cartels emerging and the consolidation of market power, and we have firms of great size and how they behave and the purchasing of those products.

But it does go across all of the community and across the economy, and we must make sure that when we do look at this bill that we don’t get caught up in what the other side of the House seem to think we will do. But I can assure you, as a business owner with this in mind, I don’t think we’ll see that bogged down in legislation. This is about free markets. This is about growing a greater way of doing business.

Now, the people that spoke before me talked at length about many of the things that are going to change under section 36. When I looked at what I could talk about at this late stage in the debate, in the first reading, I thought about talking about some of the things that were technical and small, things that talked about loopholes, because as we know, people will find loopholes if we leave them there. So I looked at one that talks about closing a loophole that was inadvertently created in 2017, by extending the prohibition against cartels, which deprive consumers of fair deals, to covenants that create or implement a cartel, as well as contracts that do so. So I started to look through quite a bit of the information that was given to me on what I could speak about here, and when it came to the cartels and what covenants are, I thought I’d give people a little bit more information about it as a couple of examples.

Now, the Act defines covenants as relating to land. A covenant on land generally restricts the way in which the land can be used. For example, as we are looking for examples, a supermarket may place a covenant on land of its surplus land to prevent the land from being used for a competing supermarket. Now I can tell you, in Napier, we have two Countdown supermarkets side by side. Why are they side by side? Because it breeds competition and—

💬 Hon David Bennett: No, it’s the council rules around where you can build them.

No, it breeds competition, Mr Bennett. How about you come and shop in Napier and check out the two Countdowns? Then, not far away from that Countdown is also another supermarket, a Pak ’N Save supermarket, and we start to see how competition builds competition and business and growth. So what happens when we go into another area of business and we look at where the central business district is? Businesses go together, because it breeds business. It’s because I’m in business that I can actually talk about this type of stuff, Mr Bennett.

Now I would like to talk about another part of this, clause 24. In 2017, when the Act’s price-fixing prohibitions were repealed and replaced with new cartel prohibitions, covenants were inadvertently excluded from the new prohibitions. This was an oversight rather than any change in policy position. So it’s good that we’re coming back and we’re working through these minor, minor details. But loopholes—people find them and people use them to their advantage. We’re going to get through those by doing really good submissions through select committee. We’re going to encourage as many people as possible to make submissions, because this is how we create better laws and better bills. I believe that it’s because of this side of the House, and how we conduct our business, that this is how we will get better bills happening.

Now, I just wanted to refer to a couple of things about the very reason for this bill: effective competition between firms tends to stimulate productivity, innovation, better-quality goods and services for consumers, and better prices. We’ve talked a lot about consumers, our customers. We are all customers of different businesses. We want to do business with those businesses who do play fair. But let’s not confuse fairness with competition and driving hard to be better at what we do, ensuring that we do keep growing and innovating with that number eight wire thinking—that’s what makes Kiwis good at what we do.

On the whole, the Act does this effectively and is well regarded internationally. However, the scope of some such prohibitions is unclear, difficult to enforce, or insufficient to deter certain anti-competitive conduct. The bill seeks to address this and takes other opportunities to improve the functioning of the Commerce Act.

Now, it is so important when we are creating these bills, especially for business—and I can understand some of the struggles that businesses have with compliance. I can understand those things. That’s why we need to make sure that bills and law are fit for purpose. We have to have a seamless way of working through things.

Now, I’d also just like to talk about why it’s so important that we ensure the communication of how we do these bills works through the system. That’s why I’m really calling on businesses to make submissions and be part of this. We need to be able to adapt and respond to our competitive market. We need to make sure we do introduce bills that are beneficial to growing business, and we need to make sure, as well, that we do protect and are a safe harbour for those matters.

Now, this is also really important when we talk about how good we can be, and I am confident—I am more confident than any of those members on the other side of the House—about how good we will do this bill. I know that it’s in my heart, and it’s in business owners’ hearts, and it’s in the right hearts of consumers to do what’s right for business. Business does better when there is competition in the market. Let’s not stifle competition. Let’s make sure we have the best competitive open market we can in this country and lead by example. That’s what I hope we do through the entire process of this bill, and I would like to commend it to the House.

I rise today in the House to take a call on the Commerce Amendment Bill. As the member of Parliament for Hamilton West, I want to acknowledge MP Jamie Strange, who spoke just a few minutes ago. I was also looking forward to a discussion from my other colleague on the other side of the House, David Bennett—

💬 Hon David Bennett: Well, why did you let Pacific Aerospace go under?

—who I thought was speaking today but apparently isn’t. What’s good? What I’m excited to see here today is that the three of us on this side of the House—at least Jamie Strange, myself, and MP Nanaia Mahuta—all agree that the bill should go ahead to the select committee. It would have been nice to know what David Bennett thinks about it, but I gather—

💬 DEPUTY SPEAKER: Sorry to interrupt, Dr Sharma. The microphone that you’re at is not working and is therefore not coming through the—is not being broadcast, and probably not being recorded, either. So sorry to interrupt you, but if you could move, that would be great.

Would you like me to start again? Oh, that sounds better, doesn’t it?

💬 DEPUTY SPEAKER: That’s much better.

All right. Well—déjà vu—I stand here once again in the House to take a call on the Commerce Amendment Bill. As the member of Parliament for Hamilton West, I just want to acknowledge Jamie Strange from Hamilton East, who spoke about this, and I was looking forward to my colleague on the other side of the House, MP David Bennett, who I thought was going to speak on the list, but has changed the speaking order. On our side of the House, the three of us, MP Nanaia Mahuta, Jamie Strange, and I, are in support of this bill and look forward for the bill to go to the select committee. From what I gather from the other side, they’re also interested in the bill going to the first reading, but I’m not sure if they want to support it all the way through.

Now, it’s an interesting bill. The proposed Commerce Amendment Bill amends the Commerce Act of 1986. The bill aims to strengthen the prohibition against the misuse of market power, which is in section 36, and make other changes to improve the function of the Act. The original Commerce Act came in 1986. I know some of the other members have mentioned their ages, and, in the public interest, I’ll say that it came in a year before I was born—just to let it out there.

According to section 1A of the Commerce Act of 1986, the purpose of the bill was to promote competition in markets for the long-term benefit of consumers within New Zealand. In May 2014, the Productivity Commission published a report called Boosting Productivity in the Services Sector at the request of the then National Government. The Government asked the Productivity Commission to undertake an inquiry into the services sector and to identify any opportunities to improve its productivity. I’m a bit surprised that it’s taken so long—between 1986 and 2014—for this to happen, but in its report the Productivity Commission concluded, amongst other things, that section 36 of the Act should be reviewed.

I want to acknowledge the then Minister of Commerce and Consumer Affairs, the Hon Jacqui Dean, from the other side of the House, who in 2017 in a press release said, “While the consultation process demonstrated that section 36 does not work, it is not yet clear what the alternative would look like.” And in that regard, I do want to thank you, Minister Kris Faafoi, as well as Minister David Clark, who have found that alternative for us, which we are talking about today.

Now, new section 36 in this bill provides that a person that has a substantial degree of power in a market must not engage in conduct that has the purpose, or is likely to have the effect, of substantially lessening competition in the market. Section 36 of the Act prohibits persons with a substantial market from taking advantage of that power for any anti-competitive purpose. This is New Zealand’s anti-monopolisation prohibition. It is not unlawful in New Zealand to be a sole supplier or acquirer in a market for goods or services or to hold substantial market power. Rather, persons that hold a substantial market power must not use that power for anti-competitive purposes. Effectively, this prohibition seeks to prevent firms with market power from having the competitive process by maintaining or extending their market power in a way that limits the ability of other firms to compete and in turn reduces the benefits to consumers and the economy associated with competition. Examples of conduct that may be covered by this prohibition include exclusive dealing, refusal to supply or predatory pricing. When this conduct is carried out by a firm with market power, it can lead to higher prices, lower-quality goods and services, and weak incentives for investment and innovation.

The bill is informed by a review that identified three main problems with the operation of this provision in the following ways. Firstly, it has the potential to fail to deter or penalise some forms of anti-competitive conduct; secondly, it is costly and complex to enforce, which reduces the incentives for businesses to comply with the law; and, thirdly, it creates some unpredictability as to its application to business conduct. To address these concerns, the bill amends section 36 to make explicit that conduct by persons with substantial market power that has the purpose, effect, or likely effect of substantial market power to effect monopolisation be changed.

Now, one of the things that people have often worried about is the intellectual transfer—

💬 DEPUTY SPEAKER: Sorry to interrupt the member, but it’s come time for me to leave the Chair for the dinner break. The House will resume at 7 p.m.

Sitting suspended from 6 p.m. to 7 p.m.

ASSISTANT SPEAKER (Hon Jenny Salesa): Dr Gaurav Sharma, you have four minutes and 15 seconds left.

I just want to continue from where I left before we all went for dinner. A lot of us had a good kai at the DairyNZ event, so thank you for hosting us.

So we were talking about the Commerce Amendment Bill, and the point I was making was that one of the concerns people might have had was around intellectual property. Now, the Act contains three provisions that, effectively, provide safe harbours for certain intellectual property rights from specified provision in the Act. These provisions, which are unclear in scope and untested in the courts, are repealed in the bill. This amendment reflects the increasing acceptance that intellectual property rights and competition law are generally complementary, with both seeking to encourage innovation and providing long-term benefits for consumers, and this is quite important.

In my previous life, I used to have a medical device company and the intellectual property was a core part of it. So I’m quite glad that the bill, as initially championed by Minister Kris Faafoi, and then by Minister David Clark, does address that while also closing the loopholes around the anti-competitive behaviour that we’ve had since the Act came in, in 1986—and I just want to remind the House again—a year before I was born.

So in closing, the bill has my full support and I look forward to it going through the select committee process, and am hoping that they will also get more of the National Party members on board in supporting this great bill. Thank you.

Motion agreed to.

Bill read a first time.

The question is, That the Commerce Amendment Bill will be considered by the Economic Development, Science and Innovation Committee.

Motion agreed to.

Bill referred to the Economic Development, Science and Innovation Committee.