Commerce Amendment Bill

Mr Speaker, I present a legislative statement on the Commerce Amendment Bill.

💬 SPEAKER: 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 second time.

The Commerce Act is to promote competition in the market for the long-term benefit of New Zealand consumers. Ultimately, competition generates price benefits. It generates quality benefits. It generates opportunities for new innovation in the market, and consumers see a wider range of products available in the market when there is healthy competition. I’ve spoken previously about the benefits of competition as they apply to performance, productivity, innovation, and the like, but healthy competition in the market demands carefully thought-through competition law. And that is what we are seeking to accomplish with this bill.

The most notable change in this bill is the change to section 36 of the Commerce Act, and, up until this point in time, section 36 has used a hypothetical test for assessing whether dominant firms in the market were abusing market power to retain or strengthen their position in the market. What we are proposing here in this bill—what this bill will do—is set a different test to ensure that different rivals in the market, including new players who might arrive in any given market, can compete on their merits. And that new test would prohibit any unilateral conduct by a firm with substantial market power that has the purpose, effect, or likely effect of substantially lessening competition in a relevant market. So what we will see, hopefully, as a result of this change that we’re making to section 36 is a more competitive market, and with that will accrue benefits to consumers and benefits to other smaller businesses.

Now, I understand that the select committee heard two concerns with respect to this change and considered two concerns. The first was really a range of scenarios where submitters argued that the new prohibition would be overly inclusive. And the second range of concerns that the select committee considered was a risk around overly conservative decision-making by dominant firms because they would find it too difficult to know when the test was likely to apply to them, and that they thought that that would modify the way that they acted in the market. Well, what I note from the select committee’s report is that, ultimately, the majority of members on that committee were satisfied, once those scenarios were worked through, once they received the advice, that those criticisms or concerns did not justify a change in approach to what was being suggested here, in terms of section 36.

Those concerns didn’t suggest that we should retain the status quo, which, effectively, is a situation where nobody has been able to be successfully challenged on behaviours as a dominant player in the market. And I think members opposite who raised some of those concerns ongoing know very well that the current dominant status of some really big players in the market has not been able to be challenged under the current provisions of the Act. So I’d be very interested to hear what they might have to say about what alternative provisions they would put forward and own—or put forward should they even get to be in Government in the future—because I think they just really want the status quo, where those big firms with market power can indiscriminately apply that in the market to the detriment of small and innovative new businesses coming into market places. So we’ve got this new provision, we’ve got the new scenarios that have been looked at, and officials have also worked through and convinced themselves, as they’ve worked through the detail, that the reformed prohibition won’t penalise unnecessarily dominant firms unless they are causing substantial harm in the market and that competitive process that we all, I think, in this House would want to see.

There are, of course, then, some complexities as those dominant firms have to work through what the new changes might mean for them, and there has been attention given to how section 36 would apply in particular situations. So the bill alleviates some of the concerns that might be raised in a couple of ways. Firstly, it adopts a test that already operates elsewhere in the Commerce Act. So it is a familiar test. And I’d also note that the test is what is used in Australian law. So we have law there, we have records of proceedings, we have some case law to assist in the interpretation of the prohibition already. The second thing that will alleviate some of those concerns is the delaying of the commencement of the new section 36 by 12 months, which will allow time for the Commerce Commission to develop guidelines and for those firms which feel they may be affected by the change in the law to be able to assess whether and how they will meet the new guidelines that the Commerce Commission will propagate. And I believe that those changes are important, and the select committee is right to emphasise the importance of that Commerce Commission guidance as to how section 36 will apply for those dominant firms.

Now, the second main policy area covered in this bill involves practices around intellectual property (IP). The current Act contains three provisions that require us to assume certain practices are never anti-competitive, just because they involve intellectual property. That is outdated thinking. That is in the Act because that was the dominant thinking of the day when the Act was put together, but, in fact, now that thinking has been discredited. And we should have in the law, in my view, provisions that ensure that we can have scrutiny as to whether IP practices are coming in to challenge the way competition law should rightly function. I understand that most submitters supported the repeal of these provisions. Others argued the provisions are necessary to prevent beneficial uses of IP innovation from being unlawful, but, again, these submissions were carefully analysed, worked through. The challenges that might sit in there were outweighed by the benefits of making the change. So, ultimately, the Government’s view remains that intellectual property rights should be treated no differently under competition law to any other form of property right that might exist. And, as I explained when I appeared before the Economic Development, Science and Innovation Committee, ultimately, we want the benefits to accrue to consumers and to other small businesses that we see will accrue with this change. So, again, the Commerce Commission guidelines will be instrumental in enabling affected IP owners to realistically assess their obligations.

There are a range of other suggestions that the committee itself has made, which I think will improve the functioning of the bill overall, and I do want to thank the committee for its work on this particularly important piece of law. Some of the changes it will create: I’d like to briefly mention three. It will create equivalent reforms as those we are proposing to section 36 but in trans-Tasman markets. The Australian Treasurer has given an undertaking that they—or agreed to the prohibition of the misuse of market power in those markets. I think that’s a very good thing for trans-Tasman trade, and dominant firms, no matter which side of the Tasman they’re on, should have a clear understanding of how they are to behave. The committee has also recommended a range of reforms to the authorisation scheme, and that, again, gives the Commerce Commission greater scope in terms of how it applies authorisations in the public interest. And I think that’s appropriate and should, again, allay some of the fears that have been raised by some submitters with genuine concerns.

And, lastly, the committee has recommended a short transition period for intellectual property arrangements affected by the repeal of section 45 and covenants brought within the Act’s cartel regime. So the provisions as they were originally proposed, at three years, I think were too long. I agree with the committee that three years is unhelpfully long, and so the 12-month period suggested on top of the 12-month delayed commencement period, I think, strikes the right balance. So I think those things are excellent. We have a number of other small tidy-ups that are going to be put through to make sure that we have strong competition law in this country, because, ultimately, we want the consumer surplus that strong competition law generates. I would welcome support around the House for stronger competition in the markets, but I fear we may hear from some members that they would rather protect the interests of large, dominant firms in the market, perhaps with whom they are close, at the expense of new and innovative firms that come into challenge the status quo, that come in to generate new products and better prices for consumers. Let’s see who supports the status quo and who, indeed, wants to see consumers better off and see innovation in our markets. I commend—

Order! The member’s time has expired.

Mr Speaker, thank you. The Minister’s not taking his job seriously with his comments at the end here, because competition law is important. There’s not a single party in this Parliament when in Government that hasn’t looked to have good competition law. And for him simply to say let’s see whether everyone agrees with him suggests that either he thinks that he’s the only one that knows best when it comes to competition law—and if that is the case he needs to talk to competition lawyers who have a range of views on this issue about how to get it right, not just what the Government’s doing—or actually he just wants to bring a simplistic political argument to what is an important debate.

The reason this is important is if the Government gets it wrong, ultimately businesses and consumers will be harmed. Competition doesn’t just go one way, and if the Minister thinks that, actually, without these changes large companies are going to be bad in New Zealand, he should get out and have a closer look at the way that our economy operates. It’s not just good enough to say Australia’s doing it so we should do it here, because the Australian market is very different than New Zealand, both for consumers and for businesses. They have many much larger businesses than we do in New Zealand, and, when it comes to intellectual property, particularly rights holders who want to bring things in from overseas, it is a more attractive market than New Zealand is. So when we look at this law, we need to balance out what’s best for consumers, so there is competition which is lower, fairer prices, but at the same time not just assume, as the Minister has suggested with some of his comments, that actually making businesses not undertake normal business practice will achieve that. And so we are supporting this, but we’ll be bringing forward Supplementary Order Papers (SOPs) in the committee stage to make what we think are small changes but practical ones that will achieve what he wants to with the legislation, but actually not create uncertainty and in many cases not alter behaviour so that consumers will be worse off.

The three areas particularly we will focus on are the areas that the Minister has mentioned in his intervention, and it comes to effect or foreseeable consequence for a dominant player in a market and their activities. Currently, the Commerce Commission says it’s too hard for them to get prosecutions when they believe somebody has wilfully or purposefully been anti-competitive with their practices, and they’ve said that’s a result of the interpretation of the courts. Now, there are two ways to look at this. The Commerce Commission is saying, “It’s a bit hard for us to do our job”, so they’ve asked the Minister to make it easier so they can get prosecutions, or the court has interpreted differently than Parliament intended when it passed this law a long time ago. The Minister hasn’t said which of these two he thinks is the issue, he’s just come forward with what I believe is a sledgehammer that actually will tilt the scales too far in the other direction. And if I accept for a moment the Commerce Commission’s view that it is too difficult for them with existing legislation to seek prosecutions and therefore they’re not taking the cases that they would otherwise, there is an imbalance against them towards large business practices, what the Minister is doing is creating an equal imbalance in the other direction against businesses.

So currently for the Commerce Commission to seek and gain prosecution, they need to demonstrate that a business with a dominant market power had the intention of acting anti-competitively and to harm others. I remember asking the Minister, when he came to select committee around this legislation, his views of Air New Zealand as a dominant player and what that meant in as far as their activity and pricing and so on is concerned, and he wouldn’t offer an opinion at that time over Air New Zealand. But, ultimately Air New Zealand would be captured by this legislation if the effect of them offering cheaper prices to consumers as a result of trying to stimulate travel post-COVID had the effect of harming other companies. Now, it wouldn’t be their intention to do that, but it could be the effect of doing that, in which case Air New Zealand would say, “Well, under the Commerce Act, we take our responsibility seriously. The Government must be sending us a signal that they don’t want cheaper rates for people to fly at different times of the year so we won’t do that.”, which means that New Zealanders would pay more when they travel. The SOP that we’ll bring forward will, actually, not alter the intention of the Act but it will also mean that if there is an intention or foreseeable outcome of anti-competitive behaviour, then they can’t do it, it is against the law, but if the effect is that it has harmed somebody else but it wasn’t foreseeable or it wasn’t their intention, then prosecution shouldn’t be able to be brought against them.

I take the case that, actually, this certainty will be good for consumers. If you take a truck manufacturer or trailer manufacturer that has a reward scheme for businesses that have given them a lot of business—a loyalty scheme over an extended period of time—it is not their intention to alter the market, it’s to reward good customers because of a good practice that they have with them, a good relationship, and if that is in as far as incentives and pricing and so on, then actually that could distort the market or there could be someone else locally that’s not able to offer the same conditions who would be harmed, and that would mean under the legislation the Minister’s brought forward that company couldn’t do that, and therefore the price would be higher for a longstanding client. That can’t be the intention of this, to alter normal business practice. It should be where someone has the intention to distort a market to harm others, or it’s foreseeable that their actions would, that should be against the law, not the effect of them doing something that a normal business practice is. And so we will seek to bring forward an SOP, not to alter the intent, to make sure we have good, fair competition here, but also to protect normal business practice and at the same time consumers, because where businesses have to become more cautious than we would want them to be otherwise or make different decisions because of uncertainty created by the law, it is the consumer that will be worse off—it is the consumer that will be worse off. Certainly that’s the case with airlines. It’ll be the case with many things.

The second area here is around normal business practice. There will be normal business practices that, actually, won’t be possible any more under this law, and that shouldn’t be the case, because they are normal business practices. A large firm does it, it’s not OK; a small firm does it, it is OK? That doesn’t make sense. There’ll be a number of normal business practices actually that should be exempt from this and it’s a very small change that would allow that to give certainty. The reason for that is not to protect large businesses or large enterprises as the Minister fancifully is trying to suggest those who have a different view than him are trying to do, it’s not about protecting any businesses. It’s about a fair, level playing field when it comes to competition law and, actually, people having certainty, both in business and better results for consumers. So we’ll be seeking changes there.

The third area where we’ll be seeking changes will be around the IP protections. Minister, I think that officials have made the case, but I think they have got it wrong here. There are reasons in a small economy that we would want to keep the existing protections that are there. They should be safeguarded because they were put in place to help a small industry to get on its feet in New Zealand, and it is still a small industry, and they need that protection. I do note in the US and the EU, they provide IP protection already. They haven’t taken it away, it is there, and New Zealand, therefore, would be an outlier. We would make a decision that is different than many other larger economies of the world, and we could well suffer in that. If we were as large as them, it would be different, but those who have rights over intellectual property when it comes to software, as an example, don’t have to come to New Zealand. We are not larger enough that they will care enough about us. There must be a middle ground here that provides a protection but also allows competition or fairness in a market place, and merely taking these away won’t achieve that. In effect, I think those that came before the committee and spoke of their concerns were not doing so to protect their own positions. They were experts in the field and said this will be the consequence of this change. And so I do think, Minister, I’d ask you to go and have a look at this, not from a political point of view, not for a fight, but to get it right, because, actually, if harm is done through this legislation, if a future Government was to reverse it and change it, in the intervening period of time that harm cannot be fixed.

National proudly supports good, positive, strong competition law. In fact, much of these processes were started under us and have come forward under this Minister. But, actually, competition law is complex. Many countries of the world have got it wrong. New Zealand, actually, should not be an outlier. We should not be at the front of the queue. We shouldn’t just be doing things because Australia has. We should be doing things that actually are right and fair for New Zealand, which includes very strong rules on large companies with a dominant market position who do not act appropriately, who have the intention to use their large position to better themselves, but when it comes to normal practice and certainty, we shouldn’t be penalising them, because if you penalise them and make it too difficult, Minister, ultimately it is the consumer that will pay through less choice or through higher prices.

Kia ora, Mr Speaker, thank you very much. Thank you to our previous speaker the Hon Todd McClay for your contribution, for contributing both at the select committee and, obviously, here in the second reading. I’m glad to hear that you support good, positive, strong competition laws. I feel that this is a piece of legislation that will do that.

I’m grateful to the Hon Dr David Clark and his comments earlier around how this benefits consumers, benefits other small businesses, and also benefits and encourages new and innovative firms who challenge the status quo.

Now, this piece of legislation is around the sharpening up of our Commerce Act. When we finished with our select committee process, I was reading the New Zealand Herald and the headline around this piece of legislation read like this: “Law tweak … to make sure giants play fair”. I think that’s pretty clear around what this bill is about and what it will do, and how it amends section 36 of the Commerce Act around the misuse of market powers, around the one sided anti-competitive behaviours for firms with a substantial market power.

I’m really grateful for the submissions we heard in our select committee. Thirty submissions were written, 11 submitters appeared in person. This, very much, is around promoting competition, protecting New Zealand. We’re a small nation, and we need to ensure that we have good, robust law, and we have good, positive, strong competition law, and that’s why I support this bill.

Thank you, Mr Speaker. It is a pleasure to speak on this Commerce Amendment Bill. I didn’t have the pleasure of sitting on the Economic Development, Science and Innovation Committee, which heard the evidence on this particular bill, but I am delighted to have the opportunity to speak on it because I certainly have had some dealings with the Commerce Commission in terms of that—

💬 Hon Member: Oh.

Yes, which is quite a long story, which I won’t go into, but—

💬 Hon Members: Aw, go on.

Oh, OK. If you want to know, I was—

💬 SPEAKER: No, let’s stay with the second reading of the bill.

I’m coming to that and I’m giving some—I was going to give you a bit of detail and that was in regard to an allegation of fixing the market. And I was alleged to have fixed the market because I had advised grape growers that if they grew too many grapes, they would suffer some market consequences. I, perhaps foolishly but wisely, put in an estimated number that would be quite acceptable that the market could accept. And lo and behold, they actually produced that amount of grapes. Therefore, the allegation. Fortunately, it was so spurious and, actually, the people investigating it had no idea about what they were talking about. And I thought that’s what really worries me about the Commerce Commission, when they get to the point of investigating it. I advised them to charge me, I said, “Charge me” because, actually, it would be so much fun tearing them to bits because they had no evidence to back up what they were talking about. And so I thought if that happened to me, what’s happening in the real market out there? And I think that is what we’ve got to be concerned about.

So I’m absolutely against, as I think my colleague has just mentioned and gone into great lengths about, that there should be an imbalance of power here. There is always an imbalance of power in the market. I think we have to accept that. Anyone who’s been in business will know that—you’re either on the right side of it or you’re on the wrong side of it. It depends on whether you’re a desperate seller or one who’s not that keen to sell. Either way, you have more power or less power than the other party—by definition. That’s how it works. But we have to ensure we do as much as we possibly can to ensure that the market is as fair as possible, whatever your definition of fair happens to be.

I think it ironic that this has come forward at this time, in some respects, given that we’ve just gone through a period of lockdowns where very large market players, that is, supermarkets, were being criticised by the Government—they had a short inquiry into whether they had too much market power or not—while at the same time the Government drove the market to them by shutting all of the butcher shops and all of the greengrocers. So that had a completely opposite effect to what this bill is supposed to do. And I think the Government members might want to reflect on that. I think it’s a point that is not lost on the public.

But to this bill, my colleague mentioned the Supplementary Order Papers (SOPs) that we want to bring forward, and I think that that is absolutely needed, to do that. I think there are different things; the effects test is a valid test, but I think we have to be careful—well, that’s been struck out. We have to be careful that we don’t end up with the rule of opacity, where you get a disconnect between the conduct rules—and I’m sure Dr Webb would have a lot more to add on this than I have—which is relatively obscure, whereas the decision rules are quite not knowable to the general public. We have to ensure that the way this is interpreted by the powers that be is something that can be understood by those in the market every day—those businesses that will rub up against this one way or another, either as someone who is a complainant or those that are being complained against, in terms of their market power.

I think one of the SOPs we’ll do is on that effects test, and we use an example here of the market power of a large truck manufacturer that gives discounts to the big companies that—obviously the largest companies, but the effect of that is that a small company goes out of business. And, of course, the truck manufacturer didn’t set out to put the small operators out of business, but the effect actually was just that. So we feel that needs to be taken in account of, and so we’ll be putting an SOP up on that one.

The other one is a legitimate business justification defence should be included. I think that that’s also a very good one that we should be looking at. So, for example, refusing to supply a downstream customer for reasons perhaps of their credit record or outstanding debt or otherwise, that may well put them out of business: how is that affected by this particular bill. And I see Duncan Webb taking some notes now, and he’s getting really fired up, ready to go, and I’m pleased to see that because we need these sorts of things to be explored. And when we get to the committee of the whole House and we table our SOPs, I’m really looking forward to having that debate. I wasn’t on the select committee, I don’t know whether these things were covered or not in the detail that I think they need to be, but it appears, to a certain extent, that they weren’t.

The reinstating of intellectual property safe harbours—I think that is something that has to be looked at and that’s what we’re going to be putting an SOP in on. We’ve got to be careful that we don’t discourage the innovation that goes along with intellectual property. If you can’t protect that intellectual property why would you do it in the first place? Intellectual property is a difficult thing for many people to get their heads around. It can be as simple as an idea, effectively, that you are trying to protect, and I think that we need to ensure that that is taken care of. We could be making New Zealand an outlier, an international outlier, as the United States and the European Union allow the enforcement of intellectual property rights. So we can’t be out of step with our international trading partners, because this is such a mobile world nowadays, particularly with these low-weight products such as digital products. All the laws that we have today really were set up to deal with manufacturing businesses of heavy goods such as vehicles, all sorts of things like that.

Nowadays, we’re moving more and more to that digital-type economy, albeit that New Zealand is almost being propped up at the moment by the agricultural sector in terms of our exports. But it just shows how we need to protect all of those other assets because a lot of our technological assets now are coming out of that agricultural sector, where the research is going in to innovate, to make agriculture a more efficient and world leading—although it already is a world leading—sector. So a lot of those innovations are around things like climate change and reporting and verifying the practices that primary producers claim to make, and also—

💬 Hon Member: What about Australia?

Well, what about Australia? Yeah. I think that the Minister alluded to working across the Tasman with the Australians and having some parallel and accepted standards between both countries. That’s a very good and laudable goal to have, and we do support this bill. But we see three areas that need SOPs to bring it up to scratch, and we will be arguing very forthrightly for those in the committee of the whole House. So with that, I commend the bill to the House.

Kia ora, Mr Speaker. Thank you. Look, this is a small but important change and it’s been recognised for a long, long time that the purpose test hasn’t worked because when dominant players in the market were using their market power, they could easily point to any number of purposes other than reducing or eliminating competition or destroying emerging players. It’s well documented that they would point to things like “We were simply seeking to protect market share. We were simply seeking to ensure our long-term profits were adequate.” And in a sense those things were true and the fact that they destroyed small, emerging, and innovative players along the way was simply a by-product of that. But the fact was that it was always going to be the case that if a dominant player makes a short-term loss to eliminate an emerging player, that was going to be anti-competitive in the long run.

So the purpose test—the test which says “What is the corporate intent in this conduct?” was never going to work. Now, two of these things are really important to go together because the one is the changing of the test to say that if the effect of that conduct is to reduce or eliminate competition then it’s a breach of section 36; that’s really important. But the Opposition has raised a number of situations which in their mind may be predatory conduct under the test but are excusable and they use an example of the trucking firm having some kind of rebate scheme. I struggle to see how that meets the test but even if it did there’s an authorisation process under the Act. The problem with the authorisation process historically has been it’s been time-consuming and expensive, but this bill introduces a provisional authorisation power, and I understand the Commerce Commission also has a particular process that’s a lot easier and cheaper for smaller businesses. So those two things in tandem absolutely make it workable. Competition and innovation are at the heart of a thriving economy. That’s what this bill upholds, so I’m a little surprised to hear some of the comments from the Opposition. I absolutely support this bill.

E te Māngai, thank you for this opportunity to speak on behalf of my colleague Ricardo Menéndez March, who is helping hold it down in Tāmaki-makau-rau, on behalf of all of us. We thank the Economic Development, Science and Innovation Committee for the work that they’ve done; hearing submitters; and listening to the concerns, especially for us, around privacy safeguards.

The bill seeks to amend the Commerce Act so it can better fulfil its purpose of promoting competition. In particular it would strengthen the prohibition against misuse of market power in section 36 of the Act. It also seeks to address problems with how those provisions are interpreted and applied. The bill would replace the current test in section 36 that focuses on whether a company’s conduct takes advantage of its substantial power and instead would prohibit people—

💬 SPEAKER: Order! Order! I apologise for interrupting the member, but, frankly, reading the explanatory note of the bill is not debating a bill. If the member has matters to discuss about the bill, she may. But to date, all she has done—and it might have been something that’s made its way into a research unit note—is read the front page of the bill, and that is not satisfactory.

Kia ora. Thank you for that. The key thing we wanted to note was supporting the select committee in some of its recommendations, particularly about reducing the transitional period from three years to one year, as it brings it into line with the agreements affected by the repeal of section 45.

We wanted to acknowledge concerns from some submitters with the scope of personal information-sharing powers between Government agencies that the bill will authorise. We note that the Ministry of Business, Innovation and Employment has disputed those concerns, suggesting that all information will be subject to the Privacy Act. Because of that, we are concerned that each agency will be required to design its own privacy and internal processes for that. We’ve seen different privacy breaches in Government departments, so we want to make sure that the Privacy Act cannot be seen as the be all and end all for protecting the personal and business information of New Zealanders. So no reira. We commend this bill to the House. Kia ora.

Well, thank you, Mr Speaker. I rise on behalf of ACT in support of this Commerce Amendment Bill but, as at my first reading speech, with some considerable reservations. We feel that if competition law is worth doing, then it’s worth doing right and that’s why we’d like to give the Government another chance in the committee of the whole House stage to fix up what are some real difficulties in our view with this Commerce Amendment Bill. Central to the bill is the change to shift the onus on to a business to show that whatever it’s doing doesn’t have the—quote—“likely effect” of lessening competition.

Now, if I was to point to two themes in the New Zealand economy that are holding us back one is the enormous amount of bureaucratic activity where instead of actually doing work and producing goods and services to provide for New Zealanders’ needs, we find time and again that we are spending more of our time either getting permission to do work under some regulation, demonstrating that work’s done, showing that we’re people that are allowed to do work—we spend a huge amount of time doing just about anything but actually doing work. I would argue that this change in interpretation where the law says you can’t do anything that has the likely effect of reducing competition means that there’s going to be a whole lot more time spent by businesses on the compliance side and Government on the administration side working out exactly whether or not competition is likely to be reduced by somebody doing something or making a business decision.

The second big trend that I think is a real problem for commerce in this country is the creeping empire building of the Commerce Commission and this legislation—no doubt drafted if not by them then very closely monitored by them—will again increase the amount of work for the Commerce Commission. The repeal of safe harbours for intellectual property means there’s a whole new cottage industry for the Commerce Commission, trying to work out whether or not a particular business has too much market power because of the intellectual property they hold, and that links back to our first big problem that more of New Zealand’s activity ends up on rule-making, administration, and compliance of rules made, and not enough on actually making New Zealand wealthier. So those are some serious problems with the bill that I would say need to be addressed and perhaps may be addressed by the Government in the committee of a whole House stage and that is why we support it only so far.

To address those two themes, first of all, we have got—well, actually, let’s start with the second one. We’ve got this trend of the Commerce Commission empire building and increasing the power that it has in the New Zealand economy. And let me give you an example. Not so long ago, my good neighbour Paul Goldsmith was the commerce Minister, and the Commerce Commission repeatedly—repeatedly—went to him and said, “Minister, we would like to be able to do what’s called market studies.” And Minister Goldsmith said, “Well, would you be responding to a complaint? Who would initiate it?” They said, “Oh, we’d would like to initiate these market studies ourselves.” How would that work? “Well, we would just go out to business or a sector and we’d start working out: well, do we need more competition? Is there enough competition? How much competition should there be? And we’ll probably produce a big, thick report and then we’ll tell people if the market structure is right and if there should be more competition and so on.” Minister Goldsmith asked some very good questions—“How would you know?”—being one of them and they got knocked back. They got knocked back by Minister after Minister, particularly Ministers like Minister Goldsmith—very well educated, very sharp-witted, and very thoughtful—and he said no. But then along came another Minister named Faafoi. Minister Faafoi came along and Minister Faafoi said, “No problem. You can have your market studies.” And so the Commerce Commission went off and did this market study, the first one into the petrol prices. You see, petrol prices were very high.

Mr Speaker is holding up the bill saying, “Can you talk about this?” I just want to be clear that this bill can’t be understood without the context of a Commerce Commission that is behind it, lobbying the Government to grow its power. And that’s why some of the powers given to the Commerce Commission under this bill should be opposed. That’s right, Mr Speaker. And in any case, the reason the petrol prices were high was because of the US dollar and the price of oil, basically. They did the market study. Nothing happened. The oil price went down. The New Zealand dollar went up. No one was worried. Now the dollar and the oil price are appreciating for a variety of reasons, and we’re back to the same position. The problem hasn’t been solved.

So I make the point that this empire building by the Commerce Commission has a track record of failing to serve the interests of New Zealanders. And when the intellectual property rights safe harbour is taken out and when the Commerce Commission has the right, as it does with the market studies—the last trophy they got—to go around saying, “Oh, I think this company has too much intellectual property and it’s excluding other people from entering the market”, even though overwhelmingly the markets move far faster than the Commerce Commission can ever keep up with, and are far more global than the Commerce Commission’s jurisdiction affects, nevertheless, people running businesses will have to think, “How do we protect ourselves against the regulatory risk of being investigated or face a complaint in front of the Commerce Commission for our intellectual property?”

And that goes back to the first theme: far too much time in New Zealand spent complying with rules, making sure that you’re covered against liabilities for regulatory risk, not enough time actually generating wealth, providing better goods and services so that New Zealanders can provide for themselves and their families, and pay an enormous amount of tax that is necessary when a Government borrows 100 billion bucks to get through a very prolonged mismanagement of a global pandemic.

💬 SPEAKER: Order!

Mr Speaker, productivity and paying taxes will be impinged by this legislation. I think the connections—I think people have a right to hear what some of the ramifications of this legislation are.

Then you come back to the question of what happens when people have to decide whether or not it is a likely effect of a particular business decision to reduce competition. Now we’ve heard from the Labour members that at the moment it’s too easy to justify a purpose as being to do something other than reduce competition. So instead of just the purpose, actually you have to prove that not only you had a purpose but you have to prove that you weren’t likely to have the effect of reducing competition by making your business decision. Now, if the Labour members think that it was too difficult to decide whether or not a purpose was resulting in a reduction of competition, wait until the massive new array of jurisprudence we’re going to face when people try to work out what are the likely effects of a business decision are. So, again, we’re back to this problem that if this bill goes through we are going to find that there’s going to be more time spent working out what the rules are, arguing with officials, getting permission from officials, going to court, producing internal documents in companies to protect from regulatory risk—all of that is going to be increased and yet actual productivity, actual productive behaviour, will reduce.

Now that might not be a bad thing if the Commerce Commission had knowledge that was adding value to those decisions. If the Commerce Commission knew what the correct market structure was for a specific industry on a country that’s about 1,500 kilometres long in the South Pacific far from any other country, quite mountainous with most of the population living in the top 400 or 500 kilometres of the island chain, if they knew what the correct market structure in different sectors was, then they could probably provide some helpful advice and information. The only problem is that they didn’t and that is why we support this bill with great reluctance.

Now, Mr Speaker, I noted on the weekend you said you didn’t like members that just read out bill notes. You wanted people to make a wide-ranging contribution and I hope that I’ve done that for you and you’ve appreciated this Cook’s tour of competition law in New Zealand. I commend this bill to the House for the second reading but if it’s not fixed at the committee stage then wait and see. Thank you, Mr Speaker.

I want to thank the member for his comments. He waved in the direction of speaking about the bill but a little bit of focus in reading it would have helped.

I just rise to take a short call on this bill, which really is, if one looks at it, actually about reducing Machiavellian behaviour—so the types of behaviour that are designed to be anti-competitive, that have anti-competitive intentions. So this bill does go towards supporting increasing competition in New Zealand. It is very timely. We need to have this in order to make sure that we continue to have a thriving economy. I commend this bill to the House.

Thank you, Mr Speaker—is this a split call?

💬 SPEAKER: Yeah—five-minute call.

Thank you, Mr Speaker. Look, competition, enterprise, free trade, and commerce are the very foundation stones of our economic wealth in this country and are to be lauded and commended.

I didn’t have an opportunity to sit on the select committee that heard submissions from, I think, not very many submitters, actually, at all—30 submissions in total, and oral evidence heard from just 11. But, actually, this piece of legislation, as speakers on this side of the House have already indicated, is quite important because it seeks to change some pretty fundamental things about competition law in New Zealand.

Now, I listened carefully to the contributions of my colleagues the Hon Todd McClay and Stuart Smith, and then more recently the member for Epsom on this side of the House about the impacts of the change in this legislation, in this bill, of “likely effect” in section 36 of the principal Act, the Commerce Act. Why is this a problem? Well, it is a particular problem because it goes to the very meaning of business and commerce and the ability for enterprises and businesses to do business in a way that allows them to be creative, to be imaginative, and to be energetic in a small market place like New Zealand.

Now, one of the challenges that we have in our small market place is that it is, by world standards, international standards, a very, very small, intimate little market place. For goodness’ sake, we are a market that is, in fact, smaller than metropolitan Sydney. So what that means is that, by definition, businesses that command a significant percentage of market share in a particular sector are going to be very careful—and if not careful, they are going to come across the impacts of the creeping growth of the Commerce Commission that the member for Epsom raised in his contribution, because they will be chilled by the effect of this legislation. The trick that needs to be adopted here by the Government is that the balance needs to be right. The balance needs to be about not stifling enterprise and entrepreneurism and the growth of businesses, whilst, at the same time, not allowing for anti-competitive behaviour.

Most of my working life before coming into this place was running New Zealand divisions of Australian-owned businesses. It became very clear to me over a long number of years that much of what happens in New Zealand enterprise is actually dominated and decided not by businesses and business decision-makers here in New Zealand; much of it actually occurs in Australia. That’s just the nature of the geography and our closeness as nations together, but also of our economic and commercial environments on both sides of the Tasman. So what occurs in Australia does have an impact here. The impact of the “likely effect” definition in this legislation means that those decisions will be made with a lens that is a trans-Tasman lens, and that is always going to be something that is a reality of our small market place.

To think that we stand alone, isolated, glorious, and immune from the currents of international markets and trans-Tasman markets is to just, really, deceive ourselves. What we want to be doing, as a small, eager, keen, and enthusiastic economy, is to encourage enterprise and competition. But we want to do it on the basis of a level playing field.

Now, the thing that concerns me most about this legislation—and we will also be moving Supplementary Order Papers at the committee of the whole House stage—is the likely potential for judicial activism on interpretation of what the term “likely effect” will mean. I would much prefer, as a member of this Parliament, that it was us as legislators that made definitions about what was going to be good competition law and what was going to be bad competition law than leaving it to an activist judiciary. My fear and concern is that in terms of the definition that has come from the select committee, reported back by the majority—which was the Labour Government’s majority on that select committee—they don’t quite understand the potential impacts or the potential for judicial activism that will cause perverse outcomes.

We support this bill but with reservation.

This debate is interrupted and set down for resumption next sitting day. The House stands adjourned until 2 p.m. today.

Debate interrupted.

The House adjourned at 12.59 p.m. (Wednesday)