Commerce Commission

The Commerce Commission is a New Zealand government agency charged with enforcing legislation that promotes competition in the country's markets and prohibits misleading and deceptive conduct by traders. It is an independent, quasi-judicial body, established under the Commerce Act 1986. The purpose of the Act is to promote competition in New Zealand's economy. It prohibits conducts that restricts competition (restrictive trade practices) and the purchase of a business's shares or assets if that purchase leads to a substantial lessening of competition in the market.

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Introduction

The Commission is accountable to the Minister of Commerce and Associate Minister of Commerce for its performance. It is intended to be an independent and impartial promoter and enforcer of the law, with a purpose of achieving the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders.

The Commission undertakes investigations and where appropriate, takes court action. It considers applications for authorisation in relation to anti-competitive behaviour and mergers.

The Commission also enforces pieces of legislation specific to the telecommunications, dairy and electricity industries.

Specific roles of the Commerce Commission

The Commerce Commission has specific roles under various Acts, as follows:

Fair Trading Act 1986

The Fair Trading Act 1986 was developed with the Commerce Act to encourage competition and to protect consumers from misleading and deceptive conduct and unfair trading practices. The Act applies to all aspects of the promotion and sale of goods and services – from advertising and pricing to sales techniques and finance agreements.

The Act also applies to pyramid schemes, and provides for consumer information standards covering country of origin (clothing and footwear labelling, fibre content labelling, care labelling and supplier information notices relating to motor vehicles. The Commission also enforces six product safety standards relating to baby walkers, pedal bicycles, flammability of children’s night clothes, cigarette lighters, household cots and toys for children aged up to three years.[1]

Dairy Industry Restructuring Act 2001

The Commission has both enforcement and adjudication roles under the Dairy Industry Restructuring Act 2001. The Act provides for the Commission to undertake enforcement action and requires the Commission to issue determinations to resolve disputes between Fonterra and other parties.

Telecommunications Act 2001

The Commission has two primary functions under the Telecommunications Act 2001 that help to ensure broadband and mobile markets are competitive. The first is to regulate certain fixed-line and mobile services by setting the price and/or access terms for that service. The second is to monitor and report on competition, performance and developments in telecommunications markets. The Commission is also responsible for allocating the exact amount telecommunications providers must pay in Government levies each year. [2]

Credit Contracts and Consumer Finance Act 2003

The Commission assumed responsibility for enforcing the major provisions of the Credit Contracts and Consumer Finance Act 2003 on 1 April 2005.[3] This Act repealed the Credit Contracts Act 1981 and the Hire Purchase Act 1971, placing obligations on creditors with respect to disclosure requirements; calculation of fees, charges and interest; and oppressive conduct. It also enables consumers to seek reasonable changes to credit contracts on the grounds of unforeseen hardship. The part of the Act which relates to oppressive contracts known as buy-back transactions was enacted on 14 October 2003 and was already enforced by the Commission prior to April 2005.

In 2011, former National Finance director and convicted fraudster Trevor Allan Ludlow was the first person to be indefinitely banned by the Commission from working in the consumer finance industry.[4]

Cartel leniency policy

The Commission has a cartel leniency policy to assist in the investigation of anti-competitive arrangements between competitors that are often secret and difficult to detect. The Commission wishes to encourage those involved in cartel conduct to report the cartel to the Commission. The Commission will grant immunity from Commission-initiated proceedings to the first person involved in a cartel to come forward with information and formally apply for leniency, provided they co-operate fully with the Commission in its investigation and prosecution of the cartel.[5]

The leniency policy applies to arrangements between competitors which substantially lessen competition. It does not include conduct which amounts to a company taking advantage of a substantial degree of market power.

Regulated industries

The Commerce Commission has a role in the regulation of some markets where there is little or no competition. [6] The markets where the Commission is currently involved include: electricity transmission and distribution, gas transmission and distribution, telecommunications, airports and the dairy industry. The Commerce Act Part 4 contains specific provisions for regulation in these markets with a purpose of promoting outcomes that are consistent with outcomes produced in competitive markets such that suppliers of regulated goods or services:

  • have incentives to innovate and to invest, including in replacement, upgraded, and new assets; and
  • have incentives to improve efficiency and provide services at a quality that reflects consumer demands; and
  • share with consumers the benefits of efficiency gains in the supply of the regulated goods or services, including through lower prices; and
  • are limited in their ability to extract excessive profits

Input methodologies

The Commission defines input methodologies as part of applying regulation on monopoly businesses under Part 4 of the Commerce Act. These input methodologies provide the basis for setting price-quality paths for electricity lines and gas pipelines services, and also how information disclosure requirements will be set for electricity lines, gas pipelines and certain airport services. [7]

Commission members

The members of the Commerce Commission are appointed by the Governor General, on the recommendation of the Minister of Commerce and Consumer Affairs. A Telecommunications Commissioner is appointed on the recommendation of the Minister of Broadcasting, Communications and Digital Media. [8]

The Chair of the Commerce Commission is Anna Rawlings, appointed for a three year term in 2019. [9]

References
  1. "Product safety and consumer information standards". Commerce Commission. Retrieved 31 Mar 2020.
  2. "Commission's role in telecommunications". Commerce Commission. Retrieved 31 Mar 2020.
  3. "Credit Contracts and Consumer Finance Act 2003". legislation.govt.nz. Retrieved 31 March 2020.
  4. "Ludlow banned from finance industry". stuff.co.nz. 2011. Retrieved 7 December 2011. Convicted fraudster Trevor Allan Ludlow has become the first person to be banned from working in the consumer finance industry under the Credit Contracts and Consumer Finance Act.
  5. "Cartel Leniency Policy and Guidelines". Commerce Commission. Retrieved 31 Mar 2020.
  6. "Regulated industries". Commerce Commission. Retrieved 31 Mar 2020.
  7. "Overview of input methodologies". Commerce Commission. Retrieved 31 Mar 2020.
  8. "Our board". Commerce Commission. Retrieved 31 Mar 2020.
  9. "Commerce Commission appointments support focus on consumer protection". Hon Kris Faafoi. 2 Apr 2019. Retrieved 31 Mar 2020 – via Beehive.govt.nz.
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