Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698839049588.pdf (New Zealand)
Commerce Amendment Bill Government Bill Explanatory note General policy statement Overview This Bill amends Parts 4, 4A, 5, and 6 of the Commerce Act 1986 (the Act) and makes other consequential amendments.

The primary focus of the Bill is to fundamentally reform the regulatory control provisions in the Act.
Other amendments include imposing enhanced information disclosure regulation on certain services supplied by 3 international airport companies and providing for the enforcement and variation of undertakings given under section 69A of the Act in relation to clearance or authorisation of mergers.

Background Regulatory control provisions Part 4 of the Act has generic provisions enabling price and quality control to be imposed where competition is limited and control would be in the interests of acquirers.
The gas pipelines of Powerco and the Auckland pipelines of Vector are currently under control.

Part 4A empowers the Commerce Commission (the Commission) to impose control on electricity lines businesses where they breach thresholds set by the Commission.

The Commission has entered into 201—1 2 Commerce Amendment Bill Explanatory note or is negotiating “administrative settlements” with several electricity lines businesses following breaches of thresholds.
Sections 70–74 of Part 5 provide for the Commission to determine requirements for the supply of controlled goods or services.

The Government undertook a review of Parts 4 and 4A between May 2006 and December 2007 in close consultation with interested par­ ties.

There was general agreement that the existing legislation needs amendment.
As part of the review, the Government also considered the effectiveness of existing regulation of aeronautical­related ser­ vices supplied by 3 international airport companies.

Clearance and authorisation provisions Section 69A of Part 5 provides for merger parties to give an under­ taking to divest assets or shares which, if accepted by the Commis­ sion, is deemed to form part of a clearance or authorisation granted by the Commission for the merger.
Section 69A undertakings cannot be varied or enforced separately under the Act.

Section 62 of Part 5 sets prescriptive time frames for the Commission to hold a confer­ ence when consulting on a draft determination for a restrictive trade practice authorisation.

The Government is currently carrying out a review of the clearance and authorisation provisions in the Act.
The issues related to en­ forcing and varying section 69A undertakings and conference time frames have been identiﬁed in that review for early consideration and addressing in this Bill.

Reasons why price and quality control are required The key reason for providing for price and quality control, or “eco­ nomic regulation”, is to counter the ability of ﬁrms that are not faced with competition or the threat of competition to charge excessive prices and/or reduce quality.
Such ﬁrms may also have weak incen­ tives to improve efﬁciency and to make investments in a timely man­ ner.

In practice, there are relatively few sectors that are not faced with competition or the threat of competition.

These sectors tend to be those supplying core infrastructure such as electricity lines, gas pipelines, and airports.

All OECD countries regulate such sectors, particularly where they are privately owned.
Explanatory note Commerce Amendment Bill 3 Reasons why the Act requires amendment The reviews found general (though not unanimous) agreement that the main problems with the existing legislation are as follows: • absence of a speciﬁc purpose statement for Part 4.
This has led to dispute and uncertainty, since the general purpose statement of the Commerce Act (section 1A), which seeks to “promote competition”, does not work for sectors where competition is not possible: there is no speciﬁc requirement for any regulation to incen­ tivise investment and innovation: separate inquiries are required on “whether to regulate” and “how to regulate”: there is uncertainty about the rules governing regulatory deci­ sions (such as the cost of capital): there are no powers to implement alternative forms of regula­ tion (such as information disclosure) other than price control: the Part 4A thresholds regime is generally regarded as creat­ ing too much uncertainty for businesses and does not provide adequate incentives for investment in infrastructure: the accountability regime for the Commission is limited (pri­ marily judicial review): the lack of a credible information disclosure regime to con­ strain the exercise of market power by 3 international airport companies in the supply of aeronautical­related services: an inability to enforce and vary section 69A undertakings could result in inefﬁcient outcomes.
• • • • • • • • Objectives of the Bill The objectives of the Bill are to address these issues, and in particular to— • provide an efﬁcient and credible regime to address the poten­ tial to exercise market power in markets where competition is not possible: improve clarity, certainty, timeliness, and predictability for businesses: tailor the regime to New Zealand’s small size (with small ﬁrms and limited resources): • • 4 • Commerce Amendment Bill Explanatory note provide speciﬁcally for incentives to invest in infrastructure.
Certainty is considered a pre­requisite for this.

Purpose statement The proposed purpose statement is to promote the long­term interests of consumers (in markets where there is little or no competition and no likelihood of a substantial increase in competition) by promoting outcomes consistent with competition.
The purpose statement spells out that this requires suppliers to— • • have incentives to invest and innovate: have incentives to improve efﬁciency and provide services at a quality required by consumers: share the beneﬁts of efﬁciency gains with consumers: limit excessive proﬁts.
• • • Test and processes for imposing regulation The Bill provides a new and clearer test for when regulation may be imposed, namely,— • there is little or no competition and no likelihood of a sub­ stantial increase in competition and there is substantial scope for the exercise of market power, taking into account the ef­ fectiveness of existing regulation or arrangements (including ownership arrangements): the beneﬁts of regulation (in meeting the objectives of the pur­ pose statement) clearly exceed the costs of regulation.
The Bill retains current provisions for the Commission to undertake inquiries on whether regulation should be imposed on its own voli­ tion or on request from the Minister.

However, it speciﬁes that any inquiry recommending regulation should comprise a qualitative ana­ lysis of all material long­term efﬁciency and distributional consider­ ations.
As part of this analysis, the Commission should, as far as pos­ sible and practicable, undertake quantitative analysis of material ef­ fects on market efﬁciency, distributional and welfare consequences, and the costs and risks of regulation.

Decisions on whether to recommend the introduction of regulation (by Order in Council) rest with the Minister, as at present, who must consult with any sector Minister.
However, unlike the current legis­ Explanatory note Commerce Amendment Bill 5 lation, the Minister may not decide to recommend regulation unless the Commission has ﬁrst undertaken an inquiry and made recommen­ dations.

Any Commission recommendation to regulate must include the detailed regulatory provisions which would apply.

Following any Order in Council imposing regulation, the Commission must make determinations setting out the details applying to individual suppliers.
These provisions may not materially differ from the Commission’s recommendations to the Minister.

Input methodologies The term input methodologies refers to the rules, processes, and re­ quirements relating to regulation, such as how to calculate the cost of capital, value assets, allocate common costs, comply with regulatory speciﬁcations and so forth.

The Bill requires the Commission to set input methodologies by 30 June 2010.
The purpose of setting input methodologies is to give greater certainty, transparency, and predictability to businesses (including businesses not subject to regulation) and their customers.

This certainty is expected to help improve the climate for investment in infrastructure.

Forms of regulation The Bill provides for lighter­handed forms of regulation as well as for conventional price control.
This is designed to allow “ﬁt for purpose” regulation to meet the circumstances of speciﬁc suppliers and sectors.

The forms of regulation provided for in the Bill are as follows.

Information disclosure Information disclosure is a relatively light­handed form of regula­ tion, although it can be quite powerful in setting standards on what is acceptable and for early identiﬁcation of trends that may raise con­ cerns.
The powers in the Bill include the ability to require forward­looking information (such as asset management plans, investment intentions, prices, and quality standards) and that the Commission be empow­ ered to monitor compliance and outcomes.

6 Commerce Amendment Bill Explanatory note Negotiate/arbitrate regime This form of regulation requires the parties (suppliers and their cus­ tomers) to negotiate a settlement on matters such as investments, quality of service, and prices.
If they fail to agree within a speci­ ﬁed time frame, they may agree on an arbitrator, or the Commission may appoint an arbitrator.

The Commission would have powers to set processes and time frames for negotiation and any arbitration and the input methodolo­ gies to be used.

Any enforcement of settlements would be by the parties.

This form of regulation has encouraged parties to reach negotiated It is most likely to be settlements in some overseas jurisdictions.
considered for sectors where there are a relatively limited number of customers.

Default/customised price­quality regime This form of regulation builds on (and replaces) the Part 4A thresh­ olds regime.
The main features of the regime are: • the Commission must set default price­quality paths for sup­ pliers based on readily available information such as historic productivity rates or information disclosed under information disclosure regulation: a supplier, if it is unable to operate within the default path (for example, because it needs to make a step­change investment) may make a proposal to the Commission for a customised path.
The Commission sets the requirements for qualifying propos­ als, the supplier may not relitigate input methodologies, and the Commission must make a determination on the proposal within 12 months.

In making a determination, the Commis­ sion may set a path tougher than the default.
• The advantages of this regime over the current Part 4A regime are that ﬁrms will have greater certainty as to their obligations (including the consequences of breaches) and they have an up­front, time­bound opportunity to seek a customised path if the generic default path is unsuitable for them.

The Bill places electricity lines businesses (except for consumer­ owned businesses) and gas pipelines on to this regime.
Explanatory note Commerce Amendment Bill 7 Individual price­quality regulation This is a conventional price control regime for individual businesses.

Merits review Because of the importance of input methodologies, the Bill makes provision for merits review of input methodology determinations by the Commission.

This is in the form of an appeal to a High Court judge assisted by 2 expert lay members (in most circumstances).
The appeal provides accountability for the Commission, helps ensure that input methodologies deliver on the purpose statement, and promotes business conﬁdence.

Submitters and the Select Committee are invited in particular to con­ sider whether there should be speciﬁc criteria for such appeals.

The Bill as drafted provides for a right of general appeal by way of re­ hearing.
This is in line with other parts of the Act and would allow the High Court to apply well­established principles when consider­ ing and deciding such appeals.

It can be argued, however, that spe­ ciﬁc and narrower criteria may be appropriate to help reduce gaming risks and to help ensure that only Commission decisions that are un­ reasonable (rather than unsatisfactory in the view of the Court) are overturned.
The Government gave careful consideration to whether merits review should also be available on ﬁnal decisions of the Commission apply­ ing to individual ﬁrms.

The pros and cons of merits review are set out in the Regulatory Impact Statement attached to this Bill.

On balance, after taking into account costs and gaming risks, and the availability of merits review on input methodologies (which are the detailed de­ cision­rules), the Government decided to limit appeals to points of law.
Firms will also have judicial review available to them.

Speciﬁc sectors The Bill makes provisions for regulation to apply to the following speciﬁc sectors.

8 Commerce Amendment Bill Explanatory note Electricity lines businesses Electricity lines businesses (ELBs), which are currently subject to Part 4A, are to be subject to the following arrangements from 1 April 2009: • 100% consumer­owned ELBs will be subject only to informa­ tion disclosure and to monitoring by the Commission.
The reason for this relatively light­handed regime is because con­ sumers, as owners, are able to ensure that the business acts in their interests.

However, provision is also made for consumers of individual ELBs to petition the Commission to recommend to the Minister that the ELB be subject to the same regime as other non­consumer­owned ELBs: other ELBs will be subject to the default/customised price­ quality regime (as well as information disclosure).
The initial default path will be the current thresholds under Part 4A rolled over for 12 months until 31 March 2010.

ELBs will be able to apply for customised paths following the setting of input methodologies in mid 2010.

• Administrative settlements entered into by the Commission and ELBs by 1 April 2010 for breaches of Part 4A prior to 1 April 2008 will be preserved for their term.

Should a business be placed under control it will be as if it were subject to a customised path.
There are special provisions applying to Transpower to recognise its unique position among ELBs.

Existing provisions in the legislation to enable transfer of jurisdiction for administering provisions relating to ELBs from the Commerce Commission to the Electricity Commission are retained.

Gas pipelines The Bill imposes information disclosure and, from 1 July 2010, the default/customised price­quality regime on gas pipelines.
The pipelines of Powerco and the Auckland pipelines of Vector, which are under Parts 4 and 5 control, will transition to the default/cus­ tomised price­quality regime at the expiry of the Order in Council imposing control (2016) or any earlier date agreed with the Com­ mission.
Explanatory note Commerce Amendment Bill 9 Auckland, Wellington, and Christchurch International Airports The Bill imposes information disclosure on the Auckland, Welling­ ton, and Christchurch International Airports from 1 July 2010.

These airports, which have strong natural monopoly characteristics, are cur­ rently subject to information disclosure under the Airport Authorities Act 1966, but the Commerce Act regime is expected to be more de­ manding including specifying input methodologies.
The Bill also requires the Commission to report to the Minister as soon as possible after the start of the next pricing period in 2012 on the effectiveness of the information disclosure regime and whether an inquiry is needed.

Section 69A undertakings The Bill provides that merger parties may apply to the Commission for variations to section 69A undertakings after the Commission has given clearance or authorisation to the merger.
The Commission may accept the varied undertakings if the variation is not material to its clearance or authorisation decisions.

A new prohibition, distinct from the main prohibition against anticompetitive mergers, is estab­ lished to enable the Commission to separately enforce the undertak­ ings.

Penalties and remedies The Bill provides for a range of pecuniary penalties and offences for breaches of information disclosure requirements and price­qual­ ity paths.
It also provides for orders for compensation for breaches of price­quality paths and for injunctions.

These provisions replace current powers for the Commission to impose penalties and remedies without reference to the courts, and the ability of the Commission to impose price control on ELBs that breach thresholds under Part 4A.

As noted, enforcement of settlements under the negotiate/arbitrate regime rests with the parties.
Conclusion The Bill seeks to put in place a modern, ﬂexible, and forward­looking regulatory regime in line with the OECD mainstream to allow for regulation of suppliers of core infrastructural services, which are not subject to competition.

In doing so it seeks to preserve incentives 10 Commerce Amendment Bill Explanatory note for suppliers to invest while at the same time protecting consumers, where required, from excessive prices and poor quality service.
Clause by clause analysis Part 1 Amendments to Commerce Act 1986 Clause 1 is the Title clause.

Clause 2 relates to commencement.

Most of the Bill comes into force on the day after Royal assent is given to it.

The exception is that the existing Part 4A relating to electricity lines business price control is repealed on 1 April 2009, and the new provisions in the new Part 4 apply to electricity lines services on and after that date.

Clause 3 says that Part 1 amends the Commerce Act 1986.
Clause 4 repeals and substitutes Part 4.

Subparts 1 to 7 of new Part 4 contain the generic provisions for the new regulatory regime.

They are described in the general policy statement, and can be read in the Bill.

Subpart 8 contains generic miscellaneous provisions (on levies and information gathering), which are the same as the existing pro­ visions.
Subparts 9 to 11 contain the transitional provisions for elec­ tricity lines, gas pipelines, and the 3 airport companies that are be­ coming subject to information disclosure regulation.

Clause 5 repeals Part 4A, which relates to electricity lines businesses.

The effective date is 1 April 2009.

Clause 6 amends section 62, which relates to the Commerce Com­ mission preparing draft determinations in relation to restrictive trade practices.
The amendment removes the 20­working­day restriction for the holding of conferences under that section.

Clause 7 inserts new sections 69AB and 69AC.

New section 69AB provides that if a person contravenes an undertak­ ing accepted under section 69A, the clearance given or the author­ isation granted in relation to the acquisition to which the undertaking relates is void and of no effect from the date it was given or granted.
This means that the protection created by the authorisation or clear­ ance will be removed.

New section 69AC authorises the Commerce Commission to accept variations of undertakings accepted under section 69A.

Explanatory note Commerce Amendment Bill 11 Clause 8 repeals sections 70 to 74, which relate to the powers of the Commerce Commission to make authorisations, and to accept undertakings, in respect of prices, revenues, and quality standards of regulated suppliers.
Clauses 9 to 19 amend Part 6, which is about enforcement, remedies, and appeals.

Clause 9 amends section 75(1) to set out the Court’s jurisdiction with respect to civil proceedings under new Part 4.

The clause also ex­ tends the Court’s jurisdiction to cover applications for orders under new section 85A or 85B (see clause 14).

Clause 10 consequentially amends section 76, which is about the jurisdiction of the District Court in criminal cases under the Act.
Clause 11 amends section 79, which is about evidence admissible in court.

It replaces a reference to the 2 speciﬁc sections that currently provide for proceedings for pecuniary penalties with a general refer­ ence to proceedings for pecuniary penalties.

This means that the new pecuniary penalty provisions proposed by this Bill will automatically be included in the reference.

Clause 12 inserts a new cross­heading and section 79A.
The new section sets out 2 standard provisions relating to pecuniary penalties.

They relate to the standard of proof applying in pecuniary penalty proceedings, and discovery and the administration of interrogatories.

It consequentially amends 3 sections that currently each contain the same provisions.

Clause 13 amends section 84 (which relates to injunctions) to au­ thorise the Court to grant injunctions in respect of contraventions of undertakings accepted under section 69A.
Clause 14 inserts new sections 85A to 85C.

New section 85A authorises the Court to order a person to pay a pecu­ niary penalty to the Crown if it is satisﬁed that the person has contra­ vened an undertaking accepted under section 69A.

The Court may also order a person to pay a pecuniary penalty if the person has at­ tempted to contravene such an undertaking or has been a party to a contravention.

The pecuniary penalty must not exceed $500,000.


New section 85B authorises the Court to make an order directing the person to dispose of assets or shares in accordance with the under­ taking.

12 Commerce Amendment Bill Explanatory note New section 85C speciﬁes matters that the Court must not take into account under new sections 85A and 85B.

Clause 15 substitutes new sections 86 to 87C, replacing the enforce­ ment provisions that applied to the former Part 4 with ones relating to the new Part 4.
The new provisions provide for the following: • new section 86: pecuniary penalties for contravening infor­ mation disclosure regulation, with a maximum penalty of $500,000 for individuals and $5,000,000 for bodies corporate: new section 86A: orders requiring a person to comply with particular information disclosure requirements: new section 86B: offences for intentionally contravening any information disclosure requirement, or for failing to comply with an order under new section 86A, with a maximum ﬁne of $1,000,000: new section 86C: orders requiring parties to negotiation or ar­ bitration to comply with a new section 52O determination, and orders requiring one party to pay another party an amount to compensate the other party for loss or damage suffered as a result of inadequately co­operating in a negotiation or arbitra­ tion: new section 87: pecuniary penalties for contravening price­ quality requirements, with a maximum penalty of $500,000 for individuals and $5,000,000 for bodies corporate: new section 87A: orders compensating any person who has suffered, or is likely to suffer, loss or damage as a result of a contravention of price­quality requirements.
An order under this section can only be made following an order to pay a pe­ cuniary penalty: new section 87B: offence for intentionally contravening a price­quality requirement or breaching an order under new section 87C, with a maximum ﬁne of $1,000,000: new section 87C: injunction restraining a supplier from supplying in contravention of price­quality requirements, and orders requiring a supplier to supply in accordance with price­quality requirements.
• • • • • • • Clause 16 amends section 89, which is about other orders the Court may make in response to various contraventions of the Act.

The amendment provides that a reference to a contravention of the Act Explanatory note Commerce Amendment Bill 13 extends to include a reference to contravening the requirements of any form of regulation under new Part 4.

Clause 17 recasts section 91(1), which provides for appeals to the High Court from determinations by the Commission.
At present, section 91(1) provides a general right of appeal in respect of all de­ terminations other than— • determinations under section 57F (that goods or services sup­ plied by large electricity lines businesses are controlled); and determinations under sections 70 and 71 (in respect of author­ isations in respect of prices, revenues, and quality standards).

Sections 57F, 70, and 71 are proposed to be repealed by this Bill as they are being replaced by new Part 4.
New section 91(1) now provides that, as before, there is a general right of appeal against determinations by the Commission, but not against— • • section 52O determinations; and input methodology determinations (for which a separate right of appeal is provided in new section 52Y).

• Section 91(1)(b) presently provides that there is a right of appeal, by way of case stated for the opinion of the Court on a question of law only, against authorisations given under section 70 or 71.
New section 91(1A) replaces this with a general right of appeal to the High Court on a point of law against any determination of the Commission.

An effect of new section 91(1) and (1A) is that the only form of appeal against a section 52O determination is an appeal on a point of law.

Clause 18 amends section 92 to provide that any supplier or con­ sumer may bring an appeal against a section 52O determination.
Clause 19 consequentially amends the opening words of section 93 of the Act, which is about what the High Court may do following an appeal.

Clauses 20 to 25 amend Part 7, which contains miscellaneous provi­ sions.

Clause 20 amends section 98A, which gives a power to search for the purpose of determining whether there has been a contravention of the Act.
The amendment provides that a reference to a contraven­ tion of the Act is extended to include a reference to contravening the requirements of any form of regulation under new Part 4.

Clause 21 consequentially amends section 103, which creates of­ fences relating to the Commission’s enforcement powers, by insert­ 14 Commerce Amendment Bill Explanatory note ing references to failing to comply with notices given under any of new sections 53D, 53N, and 53ZC.
Clause 22 consequentially amends section 105 by omitting refer­ ences to sections 70 to 74.

Clause 23 makes 3 types of amendment to section 106, which sets out various privileges.

The ﬁrst type replaces the references in subsec­ tion (5) to proceedings under sections 80 and 83 (which provide for pecuniary penalties) with a general reference to proceedings for pe­ cuniary penalties.

The second type omits references to spouses from subsections (4) and (5).
This is for consistency with the Evidence Act 2006, which does not extend privileges against self­incrimin­ ation to spouses or others in close relationship.

The third type is an amendment to subsection (6)(b) that changes a reference to section 103(1)(b) into a reference to section 103.

The effect is that the pro­ tection against using certain statements in criminal proceedings will not apply to any criminal proceedings under section 103.
At present, the protection does not apply only in respect of proceedings under section 103(1)(b).

Clause 24 replaces a regulation­making power that relates to the Commission’s power to refund fees when accepting undertakings.

At present, the power relates only to undertakings in respect of con­ trolled goods or services.

Under the new Part 4 regime, there will be no such undertakings, but the power is retained and now relates to any undertakings under the Act.
Clause 25 repeals sections 116 to 118, which are spent.

Clause 26 adds 2 new Schedules.

New Schedule 5 relates to the abil­ ity of the Commerce Commission to incorporate other documents by reference in certain determinations.

The Commission currently has this power when setting thresholds under Part 4A.

New Schedule 6 lists the gas pipelines that are exempt from regulation under subpart 10 of Part 4.
Part 2 Amendments to other Acts Clause 27 amends the Electricity Act 1992, mainly to replace redun­ dant references to the Corporation.

Clause 28 amends the Electricity Industry Reform Act 1998 to re­ move an obsolete reference to Part 4A of the Commerce Act 1986.

Explanatory note Commerce Amendment Bill 15 Clause 29 amends the Gas Act 1992 to replace redundant references to the Corporation.
Clause 30 amends the Airport Authorities Act 1966, mainly so that regulation of Auckland, Wellington, and Christchurch airports under the Commerce Act 1986 is recognised in that Act.
Regulatory impact statement Executive summary The discussion document released in April 2007 and subsequent sub­ missions have identiﬁed a number of problems with the current le­ gislation, including, unclear policy objectives, inefﬁcient decision making processes, regulatory uncertainty, constraints on regulatory approaches, lack of certainty for efﬁcient and timely investment for electricity lines businesses under Part 4A, and a relatively weak ac­ countability regime for the Commerce Commission as regulator.
To address these problems the following key amendments are pro­ posed: • • specifying a speciﬁc purpose statement for Part 4: a more conventional, qualitative test for when regulation may be imposed: broadening the range of forms of regulation available under the Act to include information disclosure, a negotiate/arbitrate regime, and a default/customised price­quality path regime to replace Part 4A: a requirement that input methodologies (how to determine the weighted average cost of capital, value assets, allocate com­ mon costs, etc) should be set as soon as possible by the Com­ mission with the aim of improving certainty and predictability for businesses: providing for merits review of Commission decisions on input methodologies.
• • • It is also proposed that 100% trust­owned electricity lines businesses be subject to information disclosure only, while the default/cus­ tomised price­quality path regime would apply to non­trust electri­ city lines businesses, and to gas pipeline businesses.

16 Commerce Amendment Bill Explanatory note Adequacy statement The Regulatory Impact Analysis Unit has reviewed the RIS and con­ siders the RIS is adequate according to the adequacy criteria.
Objectives The objectives are to provide for a regulatory regime for businesses not subject to competition that— • is credible and coherent, provides sufﬁcient disciplines on ﬁrms in markets with natural monopoly characteristics, and provides for incentives to invest in infrastructure: timeliness, and provides clarity, certainty, predictability for businesses, and appropriate accountability mechanisms: is appropriate for New Zealand’s small size (with small ﬁrms and limited resources).
transparency, • • Status quo and problem Electricity lines businesses (ELBs) have argued that the Part 4A regime has increased uncertainty in the sector.

This uncertainty can affect their cost of capital, thereby deterring investment.

While industry complaint is not by itself proof of a problem, analysis of the current regulatory mechanisms indicates that the current regulatory model in Parts 4 and 4A has not kept pace with changes in the regulatory environment and international best practice.
For instance, Part 4A devolves a signiﬁcant amount of discretion and ﬂexibility to the regulator, but that has come at the cost of increased uncertainty for business.

The purpose of the review was to identify whether the regulatory control provisions within the Act were achieving the intended regu­ latory objectives.

The following issues were identiﬁed as part of the Review.
Unclear regulatory objectives Currently there is no speciﬁc purpose statement for the generic regu­ latory control provisions in Part 4 of the Act, while the overall Com­ merce Act purpose statement is to promote competition (which is not feasible in natural monopoly markets).

Submissions on the Commis­ Explanatory note Commerce Amendment Bill 17 sion’s 2 draft price control inquiry reports to date indicate that the purpose of the regulatory provisions may be unclear.
In particular, there has been debate around whether Part 4 requires consideration of economic efﬁciency only, or whether consumer protection/distribu­ tional considerations should also be taken into account in the context of regulating ﬁrms and, if so, what the relative weighting between these objectives should be.
There is also debate about whether the current purpose statement for Part 4A of the Act is appropriate given that there is no explicit reference to a key regulatory objective of pro­ viding for incentives to invest.

Such debate and uncertainty does not ﬁt well with the key regulatory objectives of clarity, certainty, trans­ parency, and predictability.

Inefﬁcient decision­making processes The review identiﬁed weakness with the current tests for whether or not to impose regulation.
The existing competition test is relatively low and it is likely that it applies to many markets in New Zealand in­ cluding where control is clearly undesirable, and thereby fails to pro­ vide business certainty for when regulation is likely to be imposed.

The current acquirers beneﬁt test (whether there are net beneﬁts to acquirers from control) may not be appropriately targeted as it does not require explicit consideration of efﬁciency effects.
Currently the Act requires separate processes for decisions on whether and how control should be imposed.

This means that a Minister’s decision taken on whether to regulate will be based on incomplete information with regards to how control would be applied.

If a Minister decides to regulate, the Commission is charged with doing the analysis again in order to identify how to regulate.

This largely duplicative process can be costly and time consuming.
The Act currently does not require that the key technical decisions (input methodologies) relating to how regulation will be imposed be set in advance of control inquiries and the imposition of control.

This has resulted in uncertainty and dispute throughout the regula­ tory process (such as the airports and gas inquiries).

Inadequate accountability arrangements The Commission’s regulatory decisions are subject to judicial review only.
There is a general perception that the accountability regime for 18 Commerce Amendment Bill Explanatory note the Commission is weak, as judicial review applies to questions of law and process only and not the substance of a decision.

Thus the regime is less capable of correcting regulatory error or improving the regulator’s decision making over time.

This can impact on busi­ ness/investor conﬁdence in the regime.
Constraints on regulatory approaches The Act only allows a choice between no control or conventional price control.

Broadening the choice of regulatory options provides a wider range of regulatory tools to ensure that the most “ﬁt for pur­ pose” form of regulation is implemented in a given circumstance.

Part 4A failing to achieve policy objectives Part 4A is generally regarded by electricity lines businesses as unsat­ isfactory.
The key weaknesses include as follows: (a) uncertainty for ﬁrms over what happens in the event of a breach and the process, time frames, and criteria for assessing administrative settlement processes: absence of a mechanism for ex ante approval for major capital expenditure: lack of timeliness in decision making.

There is no set time frame for when the Commission can open an inquiry following a breach or for making decisions.
Once a ﬁrm has breached a threshold they can remain open to Commission action for a number of years: unusual penalties for a breach.

Breaches may be minor, tech­ nical, and historic while the consequences can relate to any aspect of a ﬁrm’s activities: administrative settlements do not provide sufﬁcient trans­ parency, consistency, or precedent for the sector going forward.
(b) (c) (d) (e) Investors are less likely to make long­term investments spanning multiple regulatory periods under a regime where the rules are un­ clear or applied inconsistently.

Alternative options Various options were considered for addressing the speciﬁc prob­ Individual proposals could be packaged in lems identiﬁed above.
Explanatory note Commerce Amendment Bill 19 several different ways, for example, retaining the Part 4A thresholds while improving regulatory certainty by including the feature of input methodologies set in advance.

The different options and the associ­ ated costs, risks, beneﬁts, and opportunities are discussed below.

Status quo The status quo was considered for each of the proposed changes out­ lined below.
In each case the failure of the current arrangements to meet the quality of regulation objectives listed above has counted against retaining the status quo.

It is considered that the short­term regulatory uncertainty resulting from change is mitigated by the long­ term beneﬁts of a well­functioning regulatory environment.
Preferred option The preferred option contains the following features: (a) (b) a regulation speciﬁc purpose statement for Part 4: a more conventional qualitative test for when regulation may be imposed: provision for additional forms of regulation, including a de­ fault/customised price­quality path regime for sectors to re­ place Part 4A: a requirement that input methodologies should be set ahead of any major decision making, as a stand­alone process: provision for merits review of Commission decisions on input methodologies.
(c) (d) (e) Purpose statement for Part 4 The following options were considered: (a) (b) no purpose statement for Part 4 (status quo): a purpose statement that focuses only on improving efﬁciency upfront, with the implicit expectation that over time all con­ sumers will beneﬁt: a purpose statement that explicitly states that the objective of regulation is to improve efﬁciency and to protect consumers from excessive prices, similar to the Part 4A purpose statement (preferred approach).
(c) 20 Commerce Amendment Bill Explanatory note Analysis It is considered unsatisfactory for there to be insufﬁcient clarity about the objectives of economic regulation so option (a) was discarded.

Option (b), on balance, is problematic in the context of natural monopoly sectors.

A key objective of economic regulation in New Zealand is the protection of consumers from excessive prices over the long term.

This is achieved by explicitly providing for this objective in regulation.
Thus, variants of the purpose statement de­ veloped in the context of option (b) were not considered appropriate and were discarded.

Option (c) includes both efﬁciency and distributional objectives, to provide for an appropriate balance between the protection of con­ sumers and that of producers and investors.

The proposed purpose statement is similar to the Part 4A purpose statement.

Building on the Part 4A purpose statement will mitigate the risk of losing case law.
New test and process for imposing regulation/new processes Several options were considered— (a) for the test when regulation may be imposed: status quo, com­ petition/market power only, or both market power and dis­ tributional considerations and net beneﬁts (preferred option); and for the form of analysis: status quo, quantitative cost bene­ ﬁt analysis, qualitative assessment only, or qualitative with quantitative analysis where possible and practical (preferred option); and on the number of inquiries: A separate inquiry for whether to control/regulate and a separate inquiry for how control will be imposed (status quo), or 1 inquiry only (preferred option).
(b) (c) Analysis The beneﬁt of the preferred options for the test for when control may be imposed is that they improve clarity and certainty for busi­ ness.

They also move away from the more controversial net acquirers beneﬁt test which requires a trade­off between 2 things (ie, net eco­ nomic cost against beneﬁts to consumers) that cannot be compared in a meaningful way.
Explanatory note Commerce Amendment Bill 21 Providing guidance to the Commission provides comfort that quali­ tative analysis (with quantiﬁcation wherever possible) is appropriate and will allow for timely and transparent analysis.

The main argument against a single process for the decision on whether and how to regulate is that it risks predetermining the processes and outcomes relating to control before a decision has been made to regulate.
It could also result in the initial inquiry being more intrusive than if the 2 processes are considered separately.

This risk is considered relatively low and is outweighed by the beneﬁts of having more complete information for the decision on whether to control and the avoidance of costly and largely duplicative processes, ie, essentially 2 separate inquiries into the activities of ﬁrms.
Providing additional forms of regulation It is proposed that a range of regulatory tools be provided for under the Act.

Analysis The availability of different regulatory options will enable the Com­ mission to ensure that the most cost effective, “ﬁt for purpose” form of regulation is recommended in a given circumstance.
A number of submitters were concerned that providing speciﬁcally for less costly, lighter­handed forms of regulation may lower the threshold for intervention, noting that even lighter­handed forms also impose additional costs on business.

This risk is mitigated by the le­ gislative test for whether to impose regulation.

The test will require the Commission to conduct an analysis to ensure that the beneﬁts of regulation exceed the costs, taking into account the purpose state­ ment.
The exact cost of enhanced information disclosure and negotiate/ar­ bitrate options will depend on the ﬁnal design detail.

While there is general agreement regarding the beneﬁts of information disclosure as a low cost tool to constrain the abuse of market power, the case for negotiate/arbitrate is more contentious.

The costs and beneﬁts for negotiate/arbitrate are outlined in the table below.
22 Commerce Amendment Bill Explanatory note Arguments in favour Arguments against Provides incentive for parties to negotiate a settlement Less costly for regulator Parties look to the end­game (ie, arbitration/regulation) and position themselves to get the best outcome from arbitration/regulation Some submitters argue it could stall and frustrate investment Parties able to customise settlement to meet own circumstances Arbitration can be complicated where there are multiple services and parties May improve relationships between suppliers and customers (some evidence from overseas) Arbitrator/regulator only involved if parties fail to agree Over time, parties get better at predicting arbitrated outcomes, speeding up settlement processes Very difﬁcult to get agreement of all parties, so arbitration is inevitable May be less efﬁcient than price control It is accepted that the negotiate/arbitrate model will not suit all cir­ cumstances.
But as there may be cases where the beneﬁts outweigh the risks (eg, where there are a few large parties) it is considered that the regime would be strengthened by providing speciﬁcally for this form of regulation.

Default/customised price quality path regime (within Part 4) A key feature of the new regime is the replacement of Part 4A with a default/customised price quality path regime (within Part 4).
It is proposed that ELBs (except for 100% consumer­trust­owned busi­ nesses) and all gas lines business, except Nova Gas and the Taranaki pipelines, will transfer to this regime.

The gas pipelines of Powerco and Vector (Auckland pipelines) that are currently controlled under the Commerce (Control of Natural Gas Services) Order 2005 will only be transferred to the new regime following the expiry of the order on 1 September 2016 or on such earlier date as may be agreed in the terms of any undertaking.
The 2 options considered were to— (a) retain the Part 4A threshold regime with a few changes such as requiring the Commission to set input methodologies in ad­ vance of the reset of price­quality paths; or Explanatory note Commerce Amendment Bill 23 (b) replace the Part 4A threshold regime with a default/customised price­quality path regime (within Part 4).
This would provide for the Commission to set a default price­quality path for a sector (similar to the setting of sector­wide thresholds under Part 4A), and in addition would provide an ex ante, time­bound opportunity for an individual ﬁrm to seek a customised path.

Under this regime, any breach of a ﬁrm’s customised price­ quality path (or the default price­quality path if a ﬁrm remains on it) would be subject to conventional penalties and remedies that are proportionate to the breach (preferred option).
The arguments that have been made in favour of retaining the status quo and for option (a) above are broadly the same.

These are that— (a) much of the current uncertainty for businesses with the Part 4A regime is due to the current regulatory regime still bedding in (the current regime was introduced in 2001 and has only been through 1 ﬁve­year regulatory period).
It has been argued that certainty will evolve over time as precedent is set, for example, as the Commission makes more decisions on administrative settlements; and as the Commission develops the regime further, future thresh­ old resets under Part 4A could take into account future invest­ ment requirements to address the need for ﬁrms to have cer­ tainty around making substantial capital investment.

(b) The main disadvantages with the retention of Part 4A are outlined in the problem deﬁnition above.
Most submitters thought that these ﬂaws were inherent features of the regime rather than issues that could be resolved over time.

For these reasons option (a) was dis­ carded.

There will be little additional cost to those ﬁrms that decide to re­ main on the default path as the default price­quality path will be set in a similar way to the current thresholds.

For customised proposals the ﬁrm may choose whether or not to put forward a proposal.
Firms that choose to put forward a proposal will face costs in the form of management/staff time and external expertise.

Many of these costs are evident in the status quo, for instance, the cost incurred as part of an administrative settlement process.

To minimise costs and poten­ tial for delay the proposal includes strict time frames, input method­ ologies set upfront, preset criteria for proposals, and statutory time­ frames.
24 Commerce Amendment Bill Explanatory note There is a risk that the Commission may be overwhelmed by propos­ als.

To address this risk the Commission will only be obliged to make determinations on 4 proposals a year, and prioritise its work.

Other proposals would be deferred to the following year, with the affected ﬁrms having to comply with the default price path in the meantime.
This creates a risk that some ﬁrms might make losses whilst their proposal is being considered because the default price path will ap­ ply.

This risk has been addressed through allowing the Commission to provide for revenue recovery by the ﬁrm where the Commission subsequently sets a higher price path.

There will be additional costs to the regulator of administering the new regime, relating to— (a) the preparation of input methodologies.
However, the Com­ mission already does much of this work anyway: administering a default/customised price­quality path regime for gas pipelines.

In this area, the Commission should also be able to use the extensive information gathered during the inquiry: processing proposals for customised price­quality paths for electricity lines businesses.
The additional costs from this compared to the current regime will be offset by Part 4A no longer applying to 17 trust­owned electricity lines businesses, and the Commission and ﬁrms no longer needing to negotiate administrative settlements: defending merits review on input methodologies.

The addi­ tional costs from this should also be partially offset by fewer judicial reviews.
(b) (c) (d) The beneﬁt of option (b) is that it builds on the strengths of the Part 4A regime (namely, setting sector­wide price paths based on available information) while addressing its main weaknesses through providing an opportunity for ﬁrms to seek Commission approval of a customised path.

The proposal will provide an effective regime that over time provides more timeliness, certainty, and incentives for investment.

Almost all submitters supported some sort of replace­ ment for the Part 4A regime.
On balance, these beneﬁts are con­ sidered to outweigh the incremental regulatory and business costs and short­term costs of uncertainty for regulated ﬁrms arising from changes to the status quo.

Explanatory note Commerce Amendment Bill 25 Input methodologies set in advance It is proposed that input methodologies be set up front in a stand­ alone process at the start of an inquiry and any reset of price quality paths.
The purpose is to provide greater certainty, transparency, and predictability to business.

Analysis A statutory provision that would require input methodologies to be set up front as a stand­alone process is consistent with approaches adopted in other jurisdictions such as Australia.

There was support from almost all submitters for this proposal.

Setting input methods in advance will reduce the ﬂexibility that is inherent in the current regime.
It is considered that this risk is out­ weighed by the signiﬁcant increase in business certainty.

The replica­ bility of the input methodologies will also beneﬁt those in non­regu­ lated sectors.

For instance, it will ensure that those negotiating with monopolies can point to a standard model.

It will also reduce the number of disputes and areas of contention when considering the ap­ propriate control terms.
There is a risk that having to set input methods in advance will delay the decision­making process.

Consequently, it is proposed to specify a statutory time frame for the Commission to complete input methods for the 3 sectors that are to be subject to regulation under the Bill.

The Commission will be required to complete these input methods by 1 July 2010, but this deadline may be extended by the Minister for a further 6 months on written request by the Commission.
In addition, any delay in setting input methodologies will likely be offset by the reduction of delays and disputes later on in the process of setting control terms.

Two main options have been considered for who should prepare the input methodologies, as follows: (a) (b) prepared and set by the Commission: prepared by an independent expert panel, and set as regula­ tions/rules.

There are speciﬁc beneﬁts and risks associated with each of the op­ tions relating to who prepares the inputs methodologies.
The per­ formance against key criteria is outlined in the table below.

26 Commerce Amendment Bill Explanatory note Criteria The Commission (Option (a)) Independent Panel (Option (b)) Availability of expertise Quality of outcomes Uses the Commission’s expertise and integrates well with the Commission’s current work streams.

The Commission is experienced at developing input methodologies and has extensive knowledge of the electricity sector.
However, the Commission is likely to have a more conservative approach to developing input methodologies than an independent panel.

It will be necessary to recruit the appropriate expertise to sit on the panel.

Would enable a fresh look to be taken at input methods and this approach is more likely to pick up suitable overseas examples.

There is a trade­off between striving for “best practice” and certainty and timeliness, and this option improves the chances of striking a good balance.
The availability of merits review of input methodologies provides a check of the quality of the proposed methodologies.

It provides for separation of rule making from rule implementation, thereby limiting conﬂicts of interest.

Political independence No Ministerial/political involvement.

The Minister would be involved in appointing the panel and accepting or rejecting the recommendation of the Panel.
Explanatory note Commerce Amendment Bill 27 Criteria Cost Timeliness The Commission (Option (a)) Independent Panel (Option (b)) It is estimated that the work would cost $3 million (over 2 years).

It is expected a Panel could make a recommendation by the end of 2009.

The Commission has estimated that the cost of developing the input methodologies will be $4 million over 3 years, depending on whether a form of merits review is available and the level of speciﬁcity required.
The Commission estimates a time frame of over 3 years to develop methodologies and frameworks.

Appeals to the High Court would involve additional time delays and costs to the Commission.

An independent panel has the advantage of separating rule making from rule implementation, thereby reducing the likelihood of regu­ latory bias.

However, a robust accountability arrangement (merits review) for the Commission is proposed.

There is also a reduced risk of undue political involvement under option (a).
It would be more difﬁcult to ensure the neutrality and quality of decisions issued by an independent panel.

On balance, the advantages of the Commission’s sector­speciﬁc knowledge, expertise in developing input methodologies, political independence, and proposed accountability arrangements outweigh the advantages of option (b).

The cost of the developing input methodologies could either be gov­ ernment funded (ie, tax) or levy funded.
As consumers will be the direct beneﬁciary of the proposed changes the use of levy powers is the most appropriate option.

Accountability mechanisms In addition to the status quo the review considered whether to make available limited merits review by way of appeal to the High Court for a rehearing.
Consideration was given to whether to provide merits 28 Commerce Amendment Bill Explanatory note review for decisions on input methodologies and control terms or for decisions on input methodologies only (preferred option).

Analysis Businesses submitters generally supported the introduction of merits review of the Commission’s decisions, noting the importance and far­reaching effects of regulatory decisions.
The main arguments for and against merits review can be summarised as follows: For Against Improves accountability for the regulator Gaming risk.
Though can be mitigated by providing for full implementation of decisions pending conclusion of appeals Likely better quality decisions over time Cost (most likely recovered by way of a levy on regulated parties) Allows for correction of errors of fact or judgement Ties the Commission up (time, resource, and management focus) in the courts Improves business conﬁdence in the regulatory regime Consistency with the rest of the Commerce Act Merits review is available on clearances and authorisations Courts lack the specialist expertise of the regulator (notwithstanding lay members) and decisions may be different as opposed to better Results in delays and uncertainty Likely pressure to extend to other sectors, such as telecommunications and electricity Judicial review provides an effective discipline on Commission processes and ensures that decisions are not unreasonable.
For accountability and transparency purposes some jurisdictions sep­ arate the rule maker from the rule enforcer, for example, in Australia, where the rule maker for the energy market is the Australian Energy Market Commission while the rule enforcer is the Australian Energy Regulator (AER).

Decisions on the rules are not merits reviewable, though Australia is in the process of introducing limited merits re­ view on AER decisions.
In other jurisdictions merits review is often available on regulatory decisions at the end.

For example, in the United Kingdom they do not separate the rule maker from the rule Explanatory note Commerce Amendment Bill 29 enforcer, but have merits review by the Competition Commission on regulatory decisions.

The associated risks of delay and gaming can be mitigated though careful design, for instance, by allowing the Commission’s decision to stand while the courts are considering the case.
The overall im­ provements to the decision­making process outlined above may have the effect that relatively few decisions would go to appeal, thereby limiting the costs of making merits review available.

Taking into ac­ count the ability to mitigate the risks of merits review and the high cost associated with regulatory error, there is a strong case for pro­ viding for merits review of Commission decisions relating to speciﬁc matters.
The proposals being recommended as part of this review, ie, clearer regulatory objectives, the ability for ﬁrms to propose control terms, and the provision of merits review of input methodologies, will strengthen the regulatory process and will limit the scope for error and dispute.

The resulting stronger regulatory process weakens the case for merits review.
The case for having merits review of input methodologies, before a decision on whether and how to regulate is made, is stronger than for review at the end for decisions on the control terms.

Decisions on input methodologies are considered integral to the regulatory process as a whole as they have a signiﬁcant impact on the ﬁnal outcome and apply to all regulated (and potentially regulated) businesses.

Different options for who should review input methodologies were considered.
The 2 main options considered were— (a) an independent expert panel appointed by the Minister chaired by a person with signiﬁcant legal experience; and appeal to the High Court (with specialist lay members) (pre­ ferred option).

(b) The pros and cons of each option are outlined below.
High Court Pros Independent Panel Pros Established processes and procedures Faster decisions than High Court Low risk of further appeals (process or proper interpretation of law) May allow for more tailored expertise No suggestion of political involvement Costs met by affected parties (levy) 30 Commerce Amendment Bill Explanatory note High Court Cons Timeliness issues (may take up to 2 years) Courts may prefer to deal with case­speciﬁc applications rather than methodologies in the abstract Independent Panel Cons Higher risk of further appeals Perception of political involvement May be difﬁcult to assign judge with specialist expertise More difﬁcult to manage conﬂict of interest issues Need to develop rules for processes and procedures Levy design may be difﬁcult (fairness issues) Costs of members may be high There is a risk that any review of decisions about input methodolo­ gies is not suited for judicial decision making since they relate to fact, rather than interpretation and application of the law.
There may also be difﬁculties in assigning Judges with specialist knowledge in this area.

While many Judges have particular areas of interest and par­ ticular specialist knowledge, their role is to interpret and apply the law to a particular factual situation, rather than be a principal deci­ sion maker in matters which require highly specialised knowledge about input methodologies.
It can be argued that an independent body made up of specialists would have access to a greater level of expertise in this ﬁeld as an independent panel will enable the appointment of people with the appropriate technical knowledge and skills.

To mitigate this risk the proposal allows for the High Court to appoint lay members with spe­ cialist knowledge.

An appeal to the High Court is likely to take more time than an inde­ pendent panel which could dedicate resource to such reviews.
This could impact on the timeliness of inquiries under the Commerce Act as well as implementing regulation.

However, establishing a panel is also likely to be a costly and time­intensive process, with the in­ creased risk of subsequent appeal, when compared to the High Court option.
Explanatory note Commerce Amendment Bill 31 On balance, the consideration of appeals by the High Court is a more conventional approach, minimises the risk of further appeals and re­ views (because processes are likely to be better), and minimises the difﬁculties of managing conﬂict of interest problems.

There is also a reduced risk of undue political involvement.

It is difﬁcult to estimate the likely costs which will be demand­driven.
However, it is likely that there will be appeals for the ﬁrst set of input methodologies with the number and extent of appeals reducing over time.
One hundred percent consumer­trust­owned electricity lines businesses (ELBs) subject to information disclosure only The following options were considered for regulating 100% con­ sumer­trust­owned ELBs: (a) 100% consumer­trust­owned business subjected to the same form of regulation as other ELBs; and 100% consumer trust owned business subjected to lighter handed regulation (such as information disclosure) (preferred option).
(b) Analysis With respect to option (a), in principle the case for economic regula­ tion is relatively weak where the customers are the owners of the ﬁrm.

This is because the incentives of trusts to charge excessive prices are relatively low because excess proﬁts are returned to the customer.

Their relatively small size means that the cost of heavier handed regulation may outweigh the beneﬁts.
A number of risks were identiﬁed for option (b) including the follow­ ing: (a) the risk of cross subsidies where voters may vote for trustees favouring lower prices for residential consumers subsidised by business; and voters/consumers may favour lower price at the expense of long­term security of supply; and increased cross subsidy to other activities or investments; and discouraging efﬁciency­improving amalgamations (though there is little incentive to do so under option (a) or the status quo).
(b) (c) (d) 32 Commerce Amendment Bill Explanatory note The availability of information disclosure under option (b) will pro­ vide pressure on prices and efﬁciency.
The Commission will be able to make a recommendation to the Minister that the default/cus­ tomised price quality path regime be imposed on a trust ﬁrm under certain conditions, for instance, where it no longer qualiﬁes for the lighter regime or where a substantial proportion of its customers have petitioned the Commission and the Commission concludes that a change in the form of regulation would better meet the purpose state­ ment.
The ability for consumers to respond to increased prices or quality concerns by replacing trustees also mitigates the above risks.

Implementation and review Implementation of the proposals above requires amendment to the Commerce Act 1986.

It is proposed that the Commerce Act Amend­ ment Bill will be passed by mid 2008.

There will be a transition period for electricity lines businesses.
The following transitional arrangement is proposed: (a) eligible consumer­owned trusts will be subject to information disclosure regulation only from 1 April 2009: for remaining electricity lines businesses, the existing thresh­ olds set under Part 4A of the Commerce Act will be rolled over from 1 April 2009 to become the new default paths under the default­customised price­quality regulation regime: the new thresholds will apply until 31 March 2010, whereupon the Commission will be required to reset the default price­ quality paths under the new provisions: the Commission will set input methodologies by 1 July 2010 and electricity lines businesses will be able to submit cus­ tomised proposals for consideration from that date: breaches of old Part 4A thresholds up to 31 March 2008 will expire unless the Commission has issued a notice of intention to declare control by 1 October 2008.
If the Commission has made such a notice, the Commission has until 1 April 2009 to complete an investigation and determine whether to impose control under the old Part 5 of the Act or enter into an admin­ istrative settlement: breaches of thresholds after 1 April 2008 will be subject to the pecuniary penalty prohibitions in the bill: (b) (c) (d) (e) (f) Explanatory note Commerce Amendment Bill 33 (g) any administrative settlements or old Part 5 authorisations or undertakings in place as at 1 April 2010 would continue for their term.
The Commerce Commission will be responsible for implementing and giving force to the proposed regime.

Ofﬁcials from the Energy and Communications Branch will monitor the implementation and outcomes from the new regime as part of regular monitoring of the effectiveness of policy outcomes.

Consultation Ministry ofﬁcials undertook extensive consultation with industry and consumer representatives.
This included running an expert advisory group process to identify the key issues that should be addressed in the discussion document.

A discussion paper was released in April 2007 with a 3 month consultation period.

Submissions were received from 45 submitters.

Opportunity was provided for those submitters who wanted to convey their key messages verbally to meet with Min­ istry of Economic Development (MED) ofﬁcials.
The key messages relating to each of the proposals is discussed in the main body of the RIS.

Detailed consultations on design issues have been held with the Treasury, the Ministry of Justice, the Ministry of Transport, and the Commerce Commission.

In the light of the complexity of some of the design issues, a brief and informal period of consultation on design detail was carried out in concert with the legislative drafting process.
Eighteen submissions were received and ofﬁcials submitted advice to Ministers delegated by POL committee to make decisions consistent with the Cabinet decisions.

The Ministers of Commerce and Energy, in consultation with the Ministers of Finance and Transport, agreed to further amend­ ments including new transitional arrangements for electricity lines businesses and the adoption of a statutory time frame for the Com­ mission to complete input methods.
Regulatory impact statement: airport regulation Executive summary Many airports have strong natural monopoly characteristics.

A sound regulatory regime should enable the regulator to identify the extent of monopoly pricing which should encourage airports to price their ser­ 34 Commerce Amendment Bill Explanatory note vices in a manner consistent with the outcomes of a workably com­ petitive market.

The current regulatory regime for airports fails to do this.
In the context of the review of the regulatory control provisions in the Commerce Act, some members of the aviation sector made a number of submissions on the regulatory regime for airports.

MED received 8 submissions.

The key problem identiﬁed with the current regula­ tory regime for airports is the lack of a credible information disclos­ ure regime to constrain the exercise of substantial market power by major airports in setting airport charges.
This problem has been exac­ erbated by the lack of guidelines on both the desired outcomes from the regulatory regime, and on appropriate input methodologies (how to value assets, calculate the cost of capital, etc) to provide guidance on desired regulatory outcomes.

To address the inadequacies of the current regime a strengthened information disclosure and price monitoring regime under the Commerce Act is proposed for the Auckland, Wellington, and Christchurch airports.
Adequacy statement The Regulatory Impact Analysis Unit has reviewed the RIS and con­ siders the RIS is adequate according to the adequacy criteria.
Objectives The over arching objectives of economic regulation of airports are to— (a) provide a credible regulatory regime to address markets where competition is not possible: constrain the scope for exercise of substantial market power by airports: protect consumers from prices that would not be consistent with those in a workably competitive market: improve certainty, nesses; and provide for appropriate incentives for efﬁcient investment in infrastructure, taking into account the beneﬁts to end­users.
timeliness, and predictability for busi­ (b) (c) (d) (e) Explanatory note Commerce Amendment Bill 35 Status quo and problem The intention behind the 1997 introduction of the disclosure regula­ tions for airports under the Airports Authorities Act 1966 was to ex­ plicitly help guard against the possibility of monopoly pricing, and to help to better inform the statutory consultation process (refer to the second reading speech by Hon Jenny Shipley, Minister of Transport for the Airport Authorities Amendment Bill 6 March 1997, NZPD 729).
The current information disclosure regulations are ineffective in this regard.

Many airports, particularly larger airports, have strong natural monopoly characteristics.

This enables them to set prices above those that would prevail in a workably competitive market.

Whilst other smaller airport companies are, strictly speaking, natural mo­ nopolies, few if any have market power, and most only have 1 airline customer, Air New Zealand, which has substantial countervailing negotiating power.
Also, the recent review of the Commerce Act did not receive any comment relating to smaller airports.

Consequently we have limited information on the nature of and extent of the problem and possible solutions for the regulation of smaller airports.

The 2002 Commerce Commission inquiry undertook extensive ana­ lysis and found that Auckland Airport was earning excessive rents and if the regulatory regime remained unchanged this would con­ tinue.
The Commission also stated that the criteria for recommend­ ing control would also be met for Wellington Airport if prices were subsequently raised signiﬁcantly.

The Commission estimated that forecast excess returns for Auckland Airport would be $27 million over the 6 years from 2002.

These forecasts did not include any po­ tential revaluation gains that may have occurred in relation to land.

To the extent that there would have been revaluations, these excess returns are likely to have been understated.
The Commission also stated that while any countervailing power by airlines might constrain airport behaviour at the margin, it was un­ likely to be sufﬁcient by itself to prevent the exercise or even abuses of market power.

The Minister of Commerce in making her decision not to impose control, at the time, based her decision on analysis that overall efﬁciency costs were negative and consumer beneﬁts were relatively low.
Notably, in assessing the costs of regulation the as­ sumption was that the form of regulation was price cap regulation 36 Commerce Amendment Bill Explanatory note which is a high­cost form of regulation, and the only form of regula­ tion then available under the Commerce Act.

Since 2002, the regulatory regime for airports has not changed, and it is likely that the substantive analysis of market power undertaken in this inquiry is no less relevant.
The current regime lacks the requisite guidance around what infor­ mation is required to facilitate effective negotiations between airports and users on the level of charges.

This is likely to be a signiﬁcant con­ tributing factor (along with the lack of guidance) to the contentious and litigious features of the current regime.
For example, in 1997 and again in 2002, following the setting of airport charges by Wellington International Airport Limited (WIAL), Air New Zealand and WIAL respectively took proceedings against each other.

In 1997 Air New Zealand objected to WIAL’s investment programme, and in 2002 Air New Zealand refused to pay the charges set by WIAL based on its revaluation of its assets.
Again, following the latest round of pricing announcements earlier this year, Air New Zealand has sought judi­ cial review of the process undertaken by both AIAL and WIAL and BARNZ has been active in calling for a Commerce Commission in­ quiry (under Part 4 of the Commerce Act) into WIAL’s pricing.

The information provided is also generally insufﬁcient to help the regulator or ofﬁcials to determine whether excessive prices are being charged.
For example, a 2001 review by Arthur Andersen Consult­ ing for the Ministry of Transport found that the lack of clarity and speciﬁcity in the disclosure regulations meant that none of the dis­ closures would allow an interested party to understand the price­set­ ting process to such an extent as to make a meaningful assessment for example, of the appropriateness of cost allocations.
The current disclosure regime does not specify a sufﬁcient level of detail to determine whether airports are over­recovering or not.

Some of the crucial components in assessing whether airport user charges are excessive or not are the input methodologies relating to how the value of the asset base is calculated (including how asset revaluations gains are treated) and how common costs are allocated.
The disclos­ ure regulations do not specify any clear requirement in respect of the appropriate methodologies that should be used by airports.

The lack of speciﬁcity also contributes to contention, for example, about which assets should be included in the asset base for aeronautical pricing purposes.

Explanatory note Commerce Amendment Bill 37 The statutory requirement for airports under the Airport Authorities Act 1966 is to consult, not to negotiate.
Because airports have the right to make investment decisions and set charges unilaterally (after consultations) it is inevitable, absent an independent dispute reso­ lution mechanism, or credible and timely threat of heavier­handed regulation, that airports will tend to make decisions in their own inter­ ests.

Again the lack of pricing principles and binding input method­ ologies mean that these are a major source of contention between larger airports and airlines, along with the outcomes of consultation.
Furthermore, the current disclosed information is not monitored or reported on at the departmental or regulator level.

Thus, whether or not an airport is over­recovering based on the information disclosed is not compiled and presented by an independent body.

Status quo The option of taking no further action speciﬁcally on airport regula­ tion, but to let the proposals relating to the regulatory control provi­ sions of the Commerce Act take effect, was considered.
This option does not resolve the problems discussed above associated with inadequate information.

Also, when compared to the preferred option, it does not provide additional checks on the misuse of mar­ ket power and will not help facilitate effective negotiation between airports and airport users.
The threat of further regulatory action under the Commerce Act is likely to be a weak vehicle for constraining airports’ market power without an effective means of measuring and monitoring the infor­ mation disclosed by the airport.

Instead a costly inquiry would be needed to determine whether there are grounds for economic regula­ tion.
Alternative options In addition to the status quo there were 4 options considered for the regulation of airports as follows: (a) do further work through an independent consultancy study or a Commerce Commission inquiry to identify whether there is a problem, and if so make recommendation on the best solution; and 38 Commerce Amendment Bill Explanatory note (b) make a decision now to impose an improved information disclosure regime and a negotiate/arbitrate regime (for inter­ national airports) under the revised Commerce Act; and (c) make a decision to impose price control under the current Commerce Act on major international airports; and (d) make a decision now to improve the information disclosure regime and undertake price monitoring (preferred option).
Option (a): do further work through an independent consultancy study or a Commerce Commission inquiry to identify whether there is a problem, and make recommendation on the best solution The beneﬁts of this option are that it provides for a full review process to consider the nature of the problem to be addressed, the magnitude of this, and the options available to address this.

It would also be fully consistent with Government statements on quality regulation being based on evidence and rigorous analysis.
Commissioning an independent review by a consultancy ﬁrm or the Commission on whether airports are overpricing and whether there would be net beneﬁts in introducing further regulation, and on the best type of regulation, would cost up to $500,000 and take around 6 months.

A full inquiry under Part 4 of the Commerce Act by the Commission could take about 18 months to 2 years and cost around $2 million.
While there are advantages in taking additional time to identify more evidence and undertake further analysis, this will not necessarily lead to a different or better outcome.
There is sufﬁcient information from previous reviews, as well as in submissions made on the review of the Commerce Act, regarding the inadequacy of the current information disclosure regime and thus it is unlikely that a full review undertaken in the near future will reveal any signiﬁcantly or materially different issues that have not been raised previously.

Thus, it may just lengthen the process for making a decision for little further beneﬁt.

Therefore, this option was discarded.


Explanatory note Commerce Amendment Bill 39 Option (b): make a decision now to impose an improved information disclosure regime and a negotiate/arbitrate regime (for international airports) under the revised Commerce Act The beneﬁts of the improved information disclosure regime under this option would be the same as set out below in the preferred option (option (d)), although it can be argued that this would better facilitate effective negotiation.
A negotiate/arbitrate regime should provide incentives for parties to negotiate a settlement, and parties would be able to customise settle­ ments to meet their own circumstances.

As a result, it could improve relationships between suppliers and customers.

The arbitrator is only involved if parties fail to agree—this reduces costs compared to an option such as price control.

Also, over time, parties should get better at predicting arbitrated outcomes, which will again speed up settle­ ment processes.
The risks of such a regime are that parties look to the end game (ie, ar­ bitration) and position themselves to get the best outcome from the ar­ bitration.

This may not be conducive to constructive commercial ne­ gotiations.

The design issues such as the process for invoking arbitra­ tion would be important in limiting vexatious and/or trivial requests for arbitration.
Should arbitration be too easily invoked, it could be­ come the default form of regulation, rather than a form of regulation only resorted to after constructive commercial engagement.

Some airports also expressed concern that a negotiate/arbitrate regime would stall and frustrate investment, and pointed out that arbitration can be complicated where there are multiple services and parties.
As a result, it could be difﬁcult to get the agreement of all parties, which would mean that arbitration is inevitable.

To mitigate the risk of incumbent airlines refusing to pay for cap­ ital investment that would encourage or facilitate increased compe­ tition by new entrant airlines, it would be proposed that arbitration be required to consider the beneﬁts to end­consumers of investment in facilities reasonably required to improve competition among air­ lines.
Arbitration under the Commerce Act would also be subject to guidance from a proposed regulatory speciﬁc purpose statement that explicitly refers to incentives to invest.

Additional costs of arbitration are difﬁcult to estimate as it will de­ pend on the scope of any arbitration.

A rough estimate would be an 40 Commerce Amendment Bill Explanatory note average of $300,000 per arbitration.
This allows for 40 days (an in­ dicative time frame for the purposes of cost calculations only) for an arbitrator at $3000/day, plus $100,000 for specialist assistance, plus $80,000 for travel, accommodation, administration, and sundries.

On balance, given the potential risks and costs associated with the ne­ gotiate/arbitrate model, it is considered that further work on whether an alternative regulatory regime to the proposed information disclos­ ure regime is necessary.
Option (c): make a decision to impose price control under the current Commerce Act on major international airports It is considered that price control should not be considered without a full inquiry.

It is a relatively high­cost option when compared to the status quo and preferred option (option (d)).
Preferred option Option (d): make a decision now to improve the information disclosure regime and undertake price monitoring (preferred option) This option would involve moving the regulation of Auckland, Wellington, and Christchurch airports into the enhanced information disclosure regime provided for under the amended Commerce Act.

Under this provision, the Commission would develop input meth­ odologies that the airports would be required to use in preparing information for disclosure.
The Commission would also develop additional input methodologies on pricing principles and cost of capital that the Commission would use for monitoring and reporting on the information disclosed by airports.

This regime would be along similar lines to the Australian regime for larger airports which provides pricing principles, information dis­ closure, and price monitoring and reporting by the ACCC.
In most other OECD countries, larger privatised international airports are subject to some form of price cap regulation.

The advantage of this option is that it signiﬁcantly improves the value and relevance of the information disclosed.

Providing for speciﬁ­ cation of input methodologies provides better information to guide consultations between airlines and airports and pricing decisions.
The proposed regulatory speciﬁc statement under the Commerce Act Explanatory note Commerce Amendment Bill 41 would also provide guidance on desired regulatory outcomes.

This, together with providing an explicit role of monitoring and report­ ing by the Commission, should also create a more credible threat of further regulation if prices are shown to be excessive.

Improved in­ formation disclosure will also allow the regulator to identify whether regulation should be removed.
Speciﬁcation of binding input methodologies would also remove much of the contention under the current regime.

This reduces the scope for dispute, which could mean settlements are reached quicker, and at less cost, and that there are greater incentives to improve commercial relationships.
The input methodologies required for robust information disclosure (such as asset valuations, revaluations, and allocation of common costs) would be binding, while methodologies such as pricing prin­ ciples and how to calculate the cost of capital (which are required for monitoring and analysis) would be in the form of guidelines against which the disclosed information would be assessed.
This would al­ low airports and airlines and other customers to reach commercial agreements taking into account efﬁciency, productivity, investment, and other issues while providing clear guidance to assist commercial negotiations.

The application of this regime can occur under either the Airports Au­ thorities Act or the Commerce Act.
On balance, the preferred option is to move the regulatory regime for the setting of airport charges by Auckland, Wellington, and Christchurch airports into the Commerce Act.

The regulatory provisions of the Commerce Act are speciﬁcally designed to address monopoly pricing issues and the proposed regu­ latory speciﬁc purpose statement will guide decisions about appropri­ ate/desired regulatory outcomes.
The Commerce Act will also pro­ vide for cross­sectoral consistency and has processes and tests/cri­ teria for further inquiries on whether more (or less) regulation is war­ ranted.

The Commission estimates that the main one­off costs for it to pre­ pare input methodologies for information disclosure are estimated at $1.4 million with ongoing costs for administering the information disclosure regime of $400,000 per annum.

These costs would be able to be recovered by levy on the 3 relevant airports.
Airports and air­ lines would continue to incur the costs of consultation and litigation.

42 Commerce Amendment Bill Explanatory note Costs for airports and airlines are likely to be lower than currently as a result of fewer disputes about methodologies.

Implementation and review Implementation of the proposals in this paper requires amendment to the Commerce Act 1986.

It is proposed that a Commerce Act Amendment Bill will be passed by mid 2008.
The following transitional arrangement is proposed: (a) the Commission to develop and prepare generic input method­ ologies (including pricing principles) for airports to be ready by July 2010; and the Commission to specify the information disclosure require­ ments by July 2010 and for the information disclosure require­ ments to take effect from then; and disclosure for the regulated airports would be 3 months after the end of a ﬁnancial year; and until the input methodologies and information disclosure re­ quirements are ﬁnalised, the current information disclosure regulations under the Airport Authorities Act will apply.
(b) (c) (d) Consultation Major airports and the airline sector were active in making sub­ missions on the review of the regulatory control provisions in the Commerce Act, and speciﬁcally highlighted issues with the regulatory regime for airports.
Submissions were received from Air New Zealand, Auckland International Airports Limited (AIAL), the Board of Airline Representatives in New Zealand (BARNZ), Christchurch International Airport Limited (CIAL), the Inter­ national Air Transport Association (IATA), Peet Aviation, Virgin Blue, and Wellington International Airport Limited (WIAL).
After meetings during consultation with AIAL, WIAL, BARNZ, and Air New Zealand, these parties further submitted on questions posed, and on possible options for regulatory change.

Major airports (AIAL, WIAL, and CIAL) maintain that the current regulatory regime is largely satisfactory.

They say that consultation requirements are taken seriously with airports making adjustments to their proposals (in terms of input methodologies, proposed capital ex­ penditure, and charges) as part of this.
Judicial review also provides Explanatory note Commerce Amendment Bill 43 a check on consultation processes.

They also state that they take the threat of price control under the Commerce Act very seriously, and that their prices are not excessive and that their charges are generally mid­range compared to international airports overseas.
Airports also claim that some airlines, and in particular Air New Zealand, oppose investments in new facilities required to attract new entry by competing airlines and that this is to the detriment of the travelling public.

Airports have also expressed the view that the abil­ ity to set charges as they see ﬁt provide a “circuit breaker” when it does not prove possible to reach agreement.

This enables the airports to get on and make investments.
The airlines (BARNZ, Air Zealand, Virgin Blue) and IATA, on the other hand, argue that New Zealand’s regulatory regime lacks credi­ bility.

They argue that the information disclosure regime lacks rigour and value because there are no guidelines or methodology speciﬁed and the consultation process is unsatisfactory.

The absence of guide­ lines or binding input methodologies is a major source of dispute and means that consultation processes are time­consuming and costly.
The statutory power for airports to set charges as they see ﬁt appears to be unique and, as a result of the regime’s current design, the air­ ports can and do make unilateral decisions on investments and set charges as they see ﬁt.

Regulatory impact statement: miscellaneous amendments Executive summary The objective of the Review of the Authorisation and Clearance Pro­ visions of the Commerce Act 1986 is to improve the effectiveness and efﬁciency of the authorisation and clearance processes.
Three issues have been identiﬁed as suitable for inclusion in an amendment Bill.

The following amendments are being considered: • providing for the enforcement of undertakings that have been approved as part of a merger clearance or authorisation appli­ cation; and allowing the Commerce Commission (the Commission) to ap­ prove variations of undertakings; and removing the 20­day statutory time frame within which the Commission is required to hold a conference.
• • 44 Commerce Amendment Bill Explanatory note Adequacy statement The Ministry of Economic Development has reviewed the RIS and considers that the RIS is adequate according to the adequacy criteria.

Status quo and problem The objective of the review is to test whether some possible changes to Part 5 of the Commerce Act 1986 (the Act) could improve the ef­ fectiveness and efﬁciency of the authorisation and clearance systems.

The following issues have been identiﬁed.


Weak enforcement provisions for section 69A undertakings to divest assets or shares The inability of the Commission to separately enforce undertakings given under section 69A of the Act is unsatisfactory.
Weak enforce­ ment provisions provide an opportunity for parties to game the legal system as they can consummate a merger that was approved based on an undertaking, and later advise the Commission that they tried to dispose of the relevant shares or assets but were unable to ﬁnd a buyer that was prepared to pay a reasonable price.

This means that a merger would have occurred that the Commission may have other­ wise declined if it were not for the undertaking.
There has only been 1 example in recent years where a divestment deed to undertaking was not given effect to.

While the magnitude of the problem is small there is an opportunity to improve the effectiveness of the status quo.

Inefﬁcient processes The Commission does not have the ability to amend an undertaking once a merger clearance or authorisation decision has been made.
This can mean that the acquirer will lose the protection provided by the approval if it does not implement the merger strictly in accordance with the approved undertaking.

Thus, immunity from legal challenge by a third party would be lost even if a variation involved only minor changes that had no bearing on competition.
Section 62 of the Act provides time limits within which the Com­ mission would be required to hold a conference following the release of its draft determination for restrictive trade practice authorisation proceedings.

The process is inconsistent with the timing for merger authorisations.
This lack of consistency between the 2 processes can Explanatory note Commerce Amendment Bill 45 be problematic when an application has both merger and trade prac­ tice implications, as it can be difﬁcult to operate the procedures in parallel.
Objective The objective of the review is to provide for a regulatory regime that provides clarity, certainty, and transparency of decision making, en­ courages participation of interested parties and timeliness of deci­ sions, and reduces business and administrative costs.

Alternative options The retention of the status quo in each case is unlikely to result in signiﬁcant harm and were considered as viable options.
However, on balance, the preferred options present an opportunity to improve the efﬁciency and effectiveness of the authorisation and clearance processes and are unlikely to result in additional costs to government, businesses, and society.

Preferred option The following options were identiﬁed to address the problems out­ lined above.
Providing for enforcement of undertakings that have been approved as part of merger clearance or authorisation application It is proposed to allow for the Commission to apply to the High Court to enforce undertakings given under section 69A of the Act to divest assets or shares if the Commission can show that the parties failed to comply with the undertaking.

The objective of the proposal is to provide a strong incentive to comply with undertakings and reduce the administrative burden of enforcement.
Analysis The proposed option strengthens the current incentives for ﬁrms to comply with an undertaking and will reduce the risk of potential gam­ ing.

It will also reduce the costs and improve the timeliness of en­ forcing undertakings and will enable the Commission to have greater 46 Commerce Amendment Bill Explanatory note conﬁdence in accepting undertakings offered.
This amendment is also consistent with other jurisdictions, such as Australia, that pro­ vide for the separate enforcement of undertakings.1 As a general rule, law that includes provisions that cannot be eas­ ily enforced is unsatisfactory and ineffective.

A requirement on the Commission to demonstrate to the High Court that 1 or more orders should be made is also sound from a transparency and accountability perspective.
Under this option, the affected parties would not be able to put for­ ward the defence that the merger did not breach section 47 of the Act, because the question for the High Court will be whether the parties complied with the agreed undertaking only.

One submission iden­ tiﬁed the risk that the Commission may apply to the High Court to enforce an undertaking in cases where non­compliance has not led to an adverse effect on competition.

The risk outlined above is small.


The Commission is unlikely to make an order to the High Court to enforce an undertaking for an ac­ tivity that clearly does not raise competition concerns.

The proposal (outlined below) to provide for the Commission to accept minor vari­ ations to an undertaking will also alleviate this risk.
Allowing Commission to approve minor variations of undertakings It is proposed to amend the Act to allow the original applicant to seek a variation to an approved undertaking to divest shares or assets as part of a merger clearance or authorisation application.

The Com­ mission would be able to approve the variation if it were considered that the variation was minor, or would not otherwise defeat the ori­ ginal decision or the competition or public beneﬁt objectives of the Act.
Analysis Presently, an applicant who decides that compliance with an ap­ proved undertaking may be unnecessary or counterproductive has 3 choices.

It could comply with the undertaking in full, although this 1 Note that the Australian Trade Practices Act 1974 provides for the enforce­ ment of a wider­range undertaking than is being proposed here.

Explanatory note Commerce Amendment Bill 47 may result in assets being divested unnecessarily.
It could carry out a variation to the undertaking with the knowledge that the protection of the Commission’s approval will not apply.

This option does not rate well from a business or legal certainty standpoint.

Lastly, the applicant could reapply to the Commission for a clearance or an authorisation with the proposed revised terms.

This option rates poorly in terms of timeliness and cost effectiveness for a ﬁrm, and poorly in terms of the efﬁcient use of the Commission’s limited resources.
Greater ﬂexibility would provide the opportunity for minor variations to be made without losing the original protection.

The ability to vary undertakings after the event may encourage par­ ties to make spurious applications in the hope that it will be impracti­ cal to sell the assets by the time the Commission has made a decision.

This risk is considered to be minimal as long as the undertakings could be enforceable through correction, punitive, and compensatory orders.
Removing statutory time frames for holding conferences for restrictive trade practice authorisation proceedings It is proposed to remove the 20­day time limit within which the Com­ mission would be required to hold a conference following a request for a conference to be held.

Analysis The current time frames are arbitrary, unnecessary, and do not serve any purpose.
There is a lack of consistency between the time frames for the merger authorisation process (there are no interim time frames within the merger authorisation process) and this can be problematic when both processes must be considered as part of 1 application.

Implementation and review These amendments will require changes to the Commerce Act 1986.

The Ministry of Economic Development is responsible for reviewing the effectiveness of the Commerce Act 1986.
Consultation A discussion document on the authorisation and clearance provisions within the Commerce Act 1986 was published and 33 submissions on 48 Commerce Amendment Bill Explanatory note the issues raised within this document were received.

Ofﬁcials have also consulted with the Treasury, the Commerce Commission, and the Ministry of Justice regarding the administrative and low­level policy issues within the Part 5 review that are proposed to be pro­ gressed.
The majority of the submissions supported the proposals.
Hon Lianne Dalziel Commerce Amendment Bill Government Bill Contents 1 2 3 4 Title Commencement Part 1 Amendments to Commerce Act 1986 Principal Act amended Replacement of Parts 4 and 4A New Part 4 substituted Part 4 Regulated goods or services Subpart 1—Preliminary provisions 52 52A 52B 52C 52D 52E 52F Overview of Part Purpose of Part Outline of Part Interpretation Subpart 2—Regulating particular goods or services Overview of process if regulation imposed on goods or services Effect of goods or services being subject to regulation Preliminary test for regulation of goods or services Commission inquiry 201—1 Page 8 8 9 9 9 9 10 10 12 13 13 1 Commerce Amendment Bill 52G 52H 52I 52J How inquiry triggered Commission inquiry into particular goods or services Process of inquiry Commission’s recommendation following inquiry Order in Council imposing regulation 52K Minister’s consideration 52L Minister’s decision and recommendation 52M Order in Council imposing regulation 52N Revocation or amendment of Order in Council Commission determination about how regulation applies 52O 52P Determination by Commission under this section Amendment of section 52O determination Subpart 3—Input methodologies Purpose of input methodologies How published input methodologies apply 52Q 52R 52S Matters covered by input methodologies 52T When input methodologies must be determined 52U Commission process for determining input methodologies 52V Publication of input methodologies 52W Amendment of input methodologies 52X Review of input
 methodologies Appeals of input methodology determinations Appeals of input methodology determinations Process for appeals in respect of input methodology Input methodology applies pending outcome of appeal Subpart 4—Information disclosure regulation Purpose of information disclosure regulation Effect of being subject to information disclosure regulation Section 52O determination to set out information disclosure requirements Consolidated information may also be required Charge for providing copies to public 52Y
 52Z 53 53A 53B 53C 53D 53E 2 13 14 15 15 16 17 17 18 18 19 20 20 21 21 22 22 23 23 23 24 25 25 25 26 27 28 Commerce Amendment Bill 53F Input methodologies on cost of capital and pricing principles 53G 53H 53I 53J 53K 53L Subpart 5—Negotiate/arbitrate regulation Purpose of negotiate/arbitrate regulation Overview of negotiate/arbitrate regulation Section 52O determination to set out requirements for application of negotiate/arbitrate regulation Compulsory arbitration Subpart 6—Default/customised price­quality regulation Purpose of default/customised price­quality regulation Overview of default/customised price­quality regulation 53M Content of price­quality paths 53N Monitoring compliance with price­quality paths 53O 53P 53Q 53R 53S 53T 53U 53V Default price­quality path Section 52O determination to set out requirements of default price­quality paths Resetting default prices, rates, and quality standards Customised price­quality paths Supplier may propose customised price­quality path Effect of making proposal for customised price­quality path Preliminary assessment of proposal Process and timing for assessing proposal Extension of time frames Determination setting customised price­quality path 53W Terms of customised price­quality paths 53X Commission’s costs in setting customised price­quality path Prioritisation by Commission 53Y 53Z What happens if Commission does not make decision within time frame What happens to price­quality paths if input methodologies change 28
 28 28 29 30 30 31 31 31 32 33 34 35 35 35 36 36 37 37 37 38 3 Commerce Amendment Bill 53ZA What happens to price­quality paths if input methodologies change Subpart 7—Individual price­quality regulation 53ZB Price­quality path for individual businesses Subpart 8—Miscellaneous provisions 53ZC Powers of Commission under this Part 53ZD Levies 53ZE Material may be incorporated by reference 53ZF Power to exempt disclosure of commercially sensitive information Subpart 9—Electricity lines services Application,
 overview, and interpretation Overview of how this subpart applies Overview of when this subpart applies 54 54A 54B Meaning of electricity lines services 54C 54D Deﬁnition of consumer­owned Further interpretation for this subpart Imposition of regulation under this Part Electricity lines services declared to be regulated All electricity lines services are subject to information disclosure regulation Certain electricity lines services are also subject to default/customised price­quality path regulation How exempt status can be lost and default/customised price­quality regulation can be applied to consumer­owned suppliers Commission must make section 52O determination specifying how this subpart applies When and how price­quality regulation applies Initial default price­quality paths How regulation applies to suppliers with administrative settlements under Part 4A (other than Transpower) How regulation applies to Transpower 54E 54F 54G 54H 54I 54J 54K 54L Other transitional provisions 54M Certain breaches of thresholds before 1 April 2008 expire if no intention to declare control is published before cut­off date 4 38 39 39 41 42 42 43 43 43 44 46 46 47 47 47 48 49 49 49 50 Commerce Amendment Bill 54N 54O 54P Old law applies to breaches of thresholds before 1 April 2008 if intention to declare control is published before cut­off date Transitional penalties for breaches after 1 April 2008 Transitional provision for proposals for customised price­quality paths 54Q
 Energy efﬁciency Energy efﬁciency Jurisdiction issues and interface with Electricity Commission and Electricity Act 1992 Transfer of jurisdiction relating to suppliers of electricity lines services Effect of transfer of jurisdiction Procedure before jurisdiction order can be made Levies during transition in jurisdiction Impact of certain decisions made under Electricity Act 1992 54R 54S 54T 54U 54V Savings provisions 54W Savings provision relating to existing information 54X disclosure requirements Savings
 provision for existing levy regulations for electricity lines businesses Subpart 10—Gas pipeline services Overview and interpretation Overview of this subpart 55 55A Meaning of gas pipeline services Imposition of regulation under this Part 55B 55C 55D 55E Gas pipeline services declared to be regulated All gas pipeline services are subject to information disclosure regulation All gas pipeline services are subject to price­quality regulation Commission must make section 52O determination specifying how this subpart applies When and how price­quality regulation applies generally 55F How initial price­path set 51 52 52 52 53 53 54 54 54 55 56 56 56 57 58 58 58 58 5 Commerce Amendment Bill When and how price­quality regulation applies to services controlled by virtue of the Commerce (Control of Natural Gas Services) Order 2005 55G 55H Existing Order, authorisations, and undertakings continue to apply until 2 September 2016 (or earlier expiry) How price­quality regulation under this Part applies after 2 September 2016 (or earlier expiry) Interface with Gas Act 1992 55I Impact of certain decisions made under Gas Act 1992 Savings provisions 55J 55K Savings provision until Commission publishes information disclosure requirements Savings provision for existing levy regulations for services controlled under Commerce (Control of Natural Gas Services) Order 2005 Subpart 11—Airport services Overview and interpretation Overview 56 56A Meaning of speciﬁed airport services
 Imposition of regulation under this Part 56B 56C 56D 56E Speciﬁed airports services declared to be regulated Speciﬁed airport services are subject to information disclosure regulation Duty to also disclose to Secretary of Transport Commission must make determination specifying how this subpart applies How information disclosure regulation applies 56F Transitional provision until Commission publishes information disclosure requirements Transitional provision requiring review after new prices set Part 4A repealed
 56G 59 60 60 61 61 62 62 63 63 63 63 64 64 64 5 6 Commerce Amendment Bill Amendments to Part 5 Commission to prepare draft determination in relation to restrictive trade practices New sections 69AB and 69AC inserted 69AB Authorisation or clearance void if undertaking contravened 69AC Variation of undertaking Heading and sections 70 to 74 repealed Amendments to Part 6 Jurisdiction of High Court Jurisdiction of District Courts Evidence not otherwise admissible New heading and section 79A Proceedings for pecuniary penalties Proceedings for pecuniary penalties 79A Injunctions may be granted by Court for contravention of Part 3 New sections 85A to 85C inserted 85A Pecuniary penalties for contravention of undertaking Court may order divestiture of assets or shares in respect of contravention of undertaking 85C Matters Court must not take into account under 85B sections 85A and 85B 15 New heading and sections 86 to 87C substituted Regulated goods or services 86 86A 86B 86C 87 87A 87B Pecuniary penalty for contravening information disclosure requirement Order requiring information disclosure requirement to be complied with Offences relating to information disclosure regulation Orders where negotiate/arbitrate regulation applies Pecuniary penalty for contravening price­quality requirements Compensation for contravention of price­quality requirement Offence relating to price­quality regulation 64 65 65 65 67 67 67 67 67 67 68 69 69 70 70 71 71 72 72 73
 74 75 75 7 cl 1 Commerce Amendment Bill 87C Injunction and other orders relating to price­quality regulation Other orders Appeals in relation to determinations by Commission Persons entitled to appeal Determination of appeals Amendments to Part 7 Power to search Offences Restriction on delegation Proceedings privileged Regulations Sections 116 to 118 repealed New Schedules 5 and 6 added 26 New Schedules 5 and 6 added Part 2 Amendments to other Acts 27 28 29 30 Amendments to
 Electricity Act 1992 Amendment to Electricity Industry Reform Act 1998 Amendments to Gas Act 1992 Amendments to Airport Authorities Act 1966 Schedule New Schedules The Parliament of New Zealand enacts as follows: Title This Act is the Commerce Amendment Act 2008.
Commencement 2009: The following come into force on 111 AAAprilprilpril 20092009 (a) sections 555 andandand 282828 (which repeal Part 4A of the prin­ sections sections cipal Act relating to electricity lines businesses); and subparttt 999 ofofof PPParararttt 444 of the principal Act (which relates subpar subpar to electricity lines businesses, as substituted by section section section (b) 1 2 (1) 8 76 76 76 77 77 77 77 77 78 78 78 78 78 79 79 79 80 5 Commerce Amendment Bill Part 1 cl 4 444 ofofof thisthisthis ActActAct), except sections 54C(3) andandand 54M54M54M tototo sections 54C(3) 54C(3) sections 54P54P54P.
(2) The rest of this Act comes into force on the day after the date on which it receives the Royal assent.

3 4 Part 1 Amendments to Commerce Act 1986 Principal Act amended This Part amends the Commerce Act 1986.
Replacement of Parts 4 and 4A New Part 4 substituted Part 4 is repealed and the following Part substituted: “Part 4 “Regulated goods or services “Subpart 1—Preliminary provisions “52 Overview of Part This Part provides for the regulation of the price and quality of goods or services in markets where there is little or no competi­ tion and no likelihood of a substantial increase in competition.
5 10 15 “52A Purpose of Part “(1) The purpose of this Part is to promote the long­term beneﬁt 20 section 525252 by pro­ of consumers in markets referred to in section section moting outcomes that are consistent with outcomes produced in competitive markets so that suppliers of regulated goods or services— “(a) have incentives to innovate and to invest, including in 25 replacement, upgraded, and new assets; and “(c) “(b) have incentives to improve efﬁciency and provide ser­ vices at a quality that reﬂects consumer demands; and share with consumers the beneﬁts of efﬁciency gains in the supply of all or any regulated goods or services, 30 including through lower prices; and are limited in their ability to extract excessive proﬁts.
“(d) In this Part, the purpose set out in subsection subsection (1)(1)(1) applies in subsection section 1A1A1A.
place of the purpose set out in section section “(2) 9 Part 1 cl 4 Commerce Amendment Bill “52B Outline of Part “(1) This Part provides— “(a) “(b) generic provisions for imposing any 1 or more of 3 types of regulation on goods or services (see subpar subparttt 222); and subpar for the Commission to determine input methodologies 5 applying to the supply of goods or services regulated subparttt 333).
under this Part (see subpar subpar “(a) “(2) The different types of regulation under this Part are as follows: information disclosure regulation, under which regu­ lated suppliers are required to disclose information in 10 accordance with requirements determined by the Com­ subparttt 444): mission (see subpar subpar “(c) “(b) negotiate/arbitrate regulation, under which regulated suppliers are required to negotiate with other parties on prices and quality, and, if negotiation is unsuccessful, 15 subparttt 555): to enter into binding arbitration (see subpar subpar price­quality regulation, of which there are 2 types: “(i) default/customised regulation, under which default price­quality paths are set for regulated suppliers, but individual suppliers 20 may seek a customised price­quality path instead (see subpar subparttt 666); and subpar individual price­quality regulation, under which the Commission sets a price­quality path for an subparttt 777).
individual regulated supplier (see subpar subpar “(3) Regulation of the following services is dealt with by subpar subpartststs subpar price­quality “(ii) 25 999 tototo 111111: “(a) subparttt 999): electricity lines services (subpar subpar subparttt 101010): “(b) gas pipeline services (subpar subpar subparttt 111111).

services at certain airports (subpar “(c) subpar 30 “(4) This section is only a guide.
“52C Interpretation In this Part, unless the context otherwise requires,— “consumer (other than in sections sections 54B54B54B,,, 54C54C54C,,, andandand 55A55A55A) sections means a person that consumes or acquires regulated goods or 35 services 10 Commerce Amendment Bill Part 1 cl 4 “information disclosure requirement means a requirement that applies to a supplier of goods or services that are subject to information disclosure regulation, and is speciﬁed in a secsecsec­­­ tiontiontion 52O52O52O determination “input methodology means a description of any methodology, 5 process, rule, or matter that includes any of the matters listed in section 52S52S52S and that is published by the Commission under section section section 52V52V52V; and, in relation to particular goods or services, section section means any input methodology, or all input methodologies, that relate to the supply, or to suppliers, of those goods or services 10 “inquiry means an inquiry by the Commission carried out in accordance with sections sections 52G52G52G tototo 52I52I52I sections “price— “(a) means any 1 or more of individual prices, aggregate prices, or revenues (whether in the form of speciﬁc 15 numbers, or in the form of formulas by which speciﬁc numbers are derived); and includes any related terms of payment “(b) “publicly available in relation to making a document or infor­ mation available, means that— “(a) 20 the document or information is available for inspection, free of charge, on an Internet site that is publicly acces­ sible at
 all reasonable times; and a copy of the document or information is available for inspection at all reasonable times, free of charge, at the 25 head ofﬁce of the person that is required to make it pub­ licly available; and copies of the document may be purchased by any person at a reasonable price “(b) “(c) “publicly disclose, in relation to information required to be 30 disclosed under information disclosure regulation, means to disclose information to the public in the manner required by a section
 52O52O52O determination section section “regulated means regulated under this Part “regulated goods or services means goods or services that are 35 declared to be regulated— “(a) section 52M52M52M; or by Order in Council made under section section “(b) by any of subpar subpartststs 999 tototo 111111 subpar 11 Part 1 cl 4 Commerce Amendment Bill “regulated supplier means a person to whom a section section 52O52O52O section determination applies in relation to particular goods or ser­ vices “section 52O determination means a determination by the Commission under section section 52O52O52O that sets out how each type 5 section of regulation that applies to particular regulated goods or ser­ vices applies to a supplier of those goods or services; and, in relation to particular goods or services, means every section section section 52O52O52O determination relevant to the regulation of those goods or services.
10 “Subpart 2—Regulating particular goods or services “52D Overview of process if regulation imposed on goods or services “(1) The process for imposing regulation under this subpart on par­ 15 ticular goods or services involves the following steps: “(a) 20 the Commission holds an inquiry into whether and, if so, how, to regulate the goods or services, and then makes a recommendation to the Minister under section section section 52J52J52J: the Minister considers the Commission’s recommenda­ tion and decides whether or not to recommend to the Governor­General that regulation be imposed and, if so, which type or types of regulation: if the Minister decides to recommend regulation, an 25 Order in Council may be made under section section 52M52M52M that section makes the goods or services subject to regulation and identiﬁes the type or types of regulation that apply: for each type of regulated goods or services, the Com­ mission makes a section section 52O52O52O determination specifying 30 section how the applicable type or types of regulation apply to a supplier of the regulated goods or services.
“(b) “(c) “(d) “(2) This section is only a guide.

12 Commerce Amendment Bill Part 1 cl 4 “52E Effect of goods or services being subject to regulation “(1) If goods or services are subject to regulation of a particular type, every regulated supplier of those goods or service must comply with— “(a) the requirements of this Part relating to that type of 5 regulation; and every section section 52O52O52O determination applying to the sup­ section plier.
“(b) Sections 868686 tototo 87C87C87C (which relate to offences and civil pro­ “(2) Sections Sections ceedings relating to contraventions of this Part) apply to a 10 regulated supplier on and from the date on which the supplier section 52O52O52O determin­ is obliged to comply with a relevant section section ation.

“(3) The Commission is entitled to exercise any of its powers under this Act for the purpose of monitoring compliance by regulated 15 suppliers with regulation under this Part.
“(a) “52F Preliminary test for regulation of goods or services “(1) Goods or services may be regulated under this Part only if— the goods or services are supplied in a market where there is both— “(i) “(ii) no likelihood of a substantial increase in compe­ little or no competition; and 20 tition; and “(b) “(c) there is substantial scope for the exercise of market power in relation to the goods or services, taking into 25 account the effectiveness of existing regulation or ar­ rangements (including ownership arrangements); and the beneﬁts of regulating the goods or services in meet­ section 52A52A52A) ing the purpose of this Part (as set out in section section clearly exceed the costs of regulation.
30 “(2) In any consideration of this test, the part of the test in subsec subsec­­­ subsec (1)(c) need not be considered unless the parts of the test tiontiontion (1)(c) (1)(c) (1)(a) andandand (b)(b)(b) are satisﬁed.

in subsection subsection (1)(a) (1)(a) subsection “Commission inquiry “52G How inquiry triggered “(1) The Commission— 35 13 Part 1 cl 4 Commerce Amendment Bill “(a) must hold an inquiry if required to do so by the Minister; and “(b) may hold an inquiry on its own initiative.
“(2) Any requirement by the Minister must— “(a) “(b) be in writing; and specify the date by which the Commission must make section 52J52J52J to the Minister.
a recommendation under section section 5 “52H Commission inquiry into particular goods or services “(1) In conducting an inquiry into particular goods or services, the Commission must consider— section 52F52F52F is satisﬁed in relation “(a) whether the test in section section to the goods or services; and “(b) whether the goods or services should be regulated; and if so, how the goods or services should be regulated, “(c) including— “(i) how the goods or services should be deﬁned; and “(ii) which type or types of regulation (as set out in 52B(2)) the goods or services should be section 52B(2) 52B(2) section section subject to; and 10 15 “(iii) how that type or those types of regulation should 20 apply to suppliers of the goods or services.
“(2) As part of an inquiry into particular goods or services, the Commission— “(a) must determine (and then apply) input methodologies for the supply of the goods or services, in accordance 25 subparttt 333; and with subpar subpar “(b) must, when carrying out the analysis required by secsecsec­­­ 52F(1)(c), undertake a qualitative analysis of all tiontiontion 52F(1)(c) 52F(1)(c) material long­term efﬁciency and distributional consid­ erations.
30 “(3) As part of that qualitative analysis, the Commission must, as far as practicable,— “(a) quantify material effects on allocative, productive, and dynamic efﬁciency; and “(b) quantify material distributional and welfare conse­ 35 “(c) quences on suppliers and consumers; and assess the direct and indirect costs and risks of any type of regulation considered, including administrative and 14 Commerce Amendment Bill Part 1 cl 4 compliance costs, transaction costs, and spill­over ef­ fects.
“(4) As part of an inquiry, the Commission must, when considering which type of regulation might be imposed,— “(a) assess the beneﬁts of imposing different types of regu­ 5 lation in meeting the purpose of this Part (as set out in section 52A52A52A) against the costs of imposing those types section section of regulation; and consider what would be the most cost­effective type or types of regulation in the circumstances.
“(5) During an inquiry, the Commission may have regard to any other matters it considers necessary or desirable for the pur­ pose of the inquiry.

“(b) 10 “52I Process of inquiry “(1) At the start of an inquiry, the Commission must publish in the 15 Gazette a notice setting out,— “(a) in the case of an inquiry required by the Minister, the Minister’s requirements; and in the case of an inquiry on the initiative of the Com­ mission, the terms of reference for the inquiry.
20 “(b) “(2) The notice must set out indicative time frames and key steps.

“(3) During the course of an inquiry, the Commission— “(a) may publish, in whatever way it considers appropriate, further notices, consultation documents, or papers; and “(b) must give interested persons a reasonable opportunity 25 to give their views; and “(c) may hold 1 or more conferences; and “(d) must have regard to any views received from interested persons within any time frames set.
“(4) Before the end of an inquiry, the Commission must publish a 30 proposed recommendation for consultation.

“52J Commission’s recommendation following inquiry “(1) At the end of an inquiry, the Commission must make a recom­ mendation to the Minister on whether, in its opinion, the goods or services should be regulated.
35 15 Part 1 cl 4 Commerce Amendment Bill “(2) If the recommendation is that particular goods or services should be regulated, the recommendation must state the following: “(a) how the goods or services should be speciﬁed; and “(b) which type or types of regulation should apply to the 5 goods or services: “(c) what input methodologies apply: “(d) if information disclosure regulation is recommended, the material provisions of the information disclosure re­ quirements: if negotiate/arbitrate regulation is recommended, the material provisions of the negotiation process and ar­ bitration process: if default/customised price­quality regulation is recom­ mended, the default price path and quality standards: if individual price­quality regulation is recommended, the material provisions to apply.
“(e) “(f) “(g) “(3) The Minister must publish the Commission’s recommenda­ tion, and may do so in whatever way he or she considers ap­ propriate.

“Order in Council imposing regulation “52K Minister’s consideration “(1) The Minister must consider any recommendation of the Com­ section 52J52J52J.
mission made under section section “(2) As part of that consideration, the Minister— “(a) must consult with the relevant sector Minister (such as the Minister of Energy or the Minister of Transport); and “(b) may request further information or advice from the Commission.
10 15 20 25 30 If the Minister proposes, contrary to the recommendation of the Commission, that the goods or services should be regu­ lated, or that they should be subject to a type of regulation not recommended by the Commission, the Minister must ask the Commission what the material provisions of the relevant secsecsec­­­ 35 tiontiontion 52O52O52O determination would be likely to be if the goods or “(3) 16 Commerce Amendment Bill Part 1 cl 4 “(4) services were subject to the type or types of regulation pro­ posed by the Minister.
If the Commission receives a request under subsection subsection (3)(3)(3), subsection it may, at its discretion,— “(a) “(b) consult with interested parties; or reopen its inquiry, in which case section section 52I52I52I applies section with all necessary modiﬁcations.
“52L Minister’s decision and recommendation “(1) Having considered the Commission’s recommendation in ac­ cordance with section section 52K52K52K, the Minister must— section “(a) decide whether, in the opinion of the Minister, the goods or services should be regulated; and if the goods or services are to be regulated, decide which type or types of regulation are to apply; and “(b) 5 10 “(c) make a recommendation to that effect, if the goods or 15 services are to be regulated.
“(2) The decision on either matter may be the same as, or different from, the Commission’s recommendation under section section 52J52J52J section 52K(3).

or any advice given to the Minister under section section 52K(3) 52K(3) section “52M Order in Council imposing regulation “(1) The Governor­General may, on the recommendation of the Minister made under section section 52L52L52L, make an Order in Council section imposing regulation on particular goods or services.
“(2) The order must— “(a) “(b) declare that the goods or services are regulated; and state which type or types of regulation the goods or ser­ vices are subject to.
“(3) The order may identify the goods or services it relates to by reference to goods or (with all necessary modiﬁcations) ser­ vices— “(a) 20 25 30 supplied in or for delivery within speciﬁed regions, areas, or localities in New Zealand; or supplied in different quantities, qualities, grades, or classes; or supplied by or to or for the use of different persons or 35 classes of persons; or “(b) “(c) 17 Part 1 cl 4 Commerce Amendment Bill any or all of parparparaaagggrrraaaphsphsphs (a)(a)(a) tototo (c)(c)(c).
“(d) Subsection (3)(3)(3) applies so that any part or element of goods “(4) Subsection Subsection or services can be dealt with separately.

“(5) The order must include an expiry date, which must be a date not later than 20 years after its date of commencement.

“(6) The order is a regulation within the meaning of the Regula­ tions (Disallowance) Act 1989 and the Acts and Regulations Publication Act 1989.
5 “52N Revocation or amendment of Order in Council section 52M52M52M in respect of 10 “(1) An Order in Council made under section section “(2) particular goods or services may not be revoked or signiﬁ­ cantly amended unless the Commission has held an inquiry into the goods or services.
subsection (1)(1)(1), signiﬁcantly amended means amended in In subsection subsection a way that— “(a) alters the type or types of regulation applying to the goods or services; or “(b) materially alters the goods or services to which the regu­ 15 lation applies, so that either— “(i) the goods or services, or any of them, are no 20 longer regulated; or “(ii) goods or services that were not identiﬁed in the original order are now subject to regulation.
section 52M52M52M may be “(3) An Order in Council made under section section amended in any other material way only after the Commission 25 has consulted with interested parties, but may be amended in a non­material way without prior consultation.
“Commission determination about how regulation applies “52O Determination by Commission under this section “(1) The Commission must make determinations under this section in relation to suppliers of regulated goods or services,— “(a) in the case of goods or services declared to be regulated by an Order in Council under section section 52M52M52M, as soon as section practicable after the Order in Council is made; and 30 35 18 Commerce Amendment Bill Part 1 cl 4 “(b) in the case of goods or services declared to be regulated under any of subpar subpartststs 999 tototo 111111, in accordance with subpar 55E, andandand 56E56E56E.
sections 54I,54I,54I, 55E, 55E, sections sections “(2) Determinations must— “(a) “(b) set out, for each type of regulation to which the goods 5 or services are subject, the requirements that apply to each regulated supplier; and set out any time frames (including the regulatory periods) that must be met or that apply; and refer to the input methodologies that apply; and 10 “(c) “(d) be consistent with this Part.
It is not necessary for a single determination to address all matters relating to particular regulated goods or services, or to a supplier of regulated goods or services, and different parts of any determination may come into effect at different times.
If a determination under this section is made following an in­ section 52J52J52J, the require­ quiry and a recommendation under section section ments referred to in subsection (2)(a) must not differ in any subsection (2)(a) (2)(a) subsection material respect from the recommendation, or from any advice 52K(3).
given to the Minister under section section 52K(3) 52K(3) section 15 20 “(3) “(4) “(5) A determination under this section may require a supplier to comply with the requirements set out in any other determin­ ation that has been made under this section in respect of regu­ lated goods or services of the same type.
“(6) The Commission must, as soon as practicable after making a 25 determination under this section,— “(a) give a copy of the determination to each supplier to whom the determination relates; and “(b) publish a summary of it in the Gazette; and “(c) make the whole determination publicly available.

“(7) Each supplier to whom the determination relates must comply with the requirements imposed by the determination.
30 “52P Amendment of section 52O determination section 52O52O52O determination may be amended in a material “(1) A section section way only after the Commission has consulted with interested 35 parties, but may be amended in a non­material way without prior consultation.

19 Part 1 cl 4 Commerce Amendment Bill “(2) However, the Commission is not required to conduct an in­ quiry before amending a determination.

“(3) An amendment forms part of the determination it amends.
“(4) An amendment comes into force on the date speciﬁed in the amendment, which must be a date on or after the date on which 5 it, or a summary of it, is published in the Gazette.
“(5) The Commission must, as soon as practicable after making an amendment,— “(a) give a copy of the amendment to each supplier to whom the determination relates; and “(b) publish the amendment, or a summary of the amend­ ment, in the Gazette; and “(c) make a copy of the determination, as amended by the amendment, publicly available.
“Subpart 3—Input methodologies “52Q Purpose of input methodologies The purpose of input methodologies is to promote certainty for suppliers and consumers in relation to the rules, requirements, and processes applying to the regulation, or proposed regula­ tion, of goods or services under this Part.
“52R How published input methodologies apply 10 15 20 Every relevant input methodology relating to the supply of particular goods or services that is published under section section section 52V52V52V must be applied,— “(a) if the goods or services are regulated, by every regulated 25 supplier of the goods or services in accordance with the section 52O52O52O determination; and relevant section section in all cases, by every person entitled or required under this Act to recommend on, decide, or determine— “(i) whether or how regulation under this Part should 30 “(ii) apply to the goods or services; or the prices or quality standards applying to the goods or services.
“(b) 20 Commerce Amendment Bill Part 1 cl 4 “52S Matters covered by input methodologies “(1) The input methodologies relating to particular goods or ser­ vices must include, to the extent applicable to the type of regu­ lation under consideration,— “(a) methodologies for evaluating or determining the fol­ 5 lowing matters in respect of the supply of the goods or services: “(i) “(ii) valuation of assets, including depreciation, and cost of capital: treatment of revaluations: “(iii) allocation of common costs, including between activities, businesses, consumer classes, and geo­ graphic areas: “(iv) treatment of taxation: “(v) pricing principles; and regulatory processes and rules, such as— “(i) the speciﬁcation and deﬁnition of prices, in­ cluding identifying any costs that can be passed through to prices; and identifying circumstances in which price­quality 20 paths may be reconsidered within a regulatory period; and “(ii) 10 15 “(b) “(c) matters relating to proposals by a regulated supplier for a customised price­quality path, including— “(i) requirements that must be met by the regulated 25 supplier, including the scope and speciﬁcity of information required, the extent of independent veriﬁcation and audit, and the extent of consult­ ation and agreement with consumers; and the criteria that the Commission will use to eval­ 30 uate any proposal.
“(ii) (1)(a)(iii) must not un­ “(2) Any methodologies under subsection subsection (1)(a)(iii) (1)(a)(iii) subsection duly deter investment by a supplier of regulated goods or ser­ vices in the provision of other goods or services.
“52T When input methodologies must be determined “(1) The Commission must determine input methodologies for the subpartststs 999 tototo 111111 no later goods or services regulated under subpar subpar 2010. than 303030 JJJuneuneune 20102010 35 21 Part 1 cl 4 Commerce Amendment Bill “(2) The Minister may, on the written request of the Commission, extend the deadline referred to in subsection subsection (1)(1)(1) once, by a subsection period of up to 6 months.
“(3) The Commission must determine input methodologies for any goods or services that are the subject of an inquiry as soon 5 as practicable after the Commission is satisﬁed that the parts of the test for the regulation of goods or services set out in 52F(1) are satisﬁed.
section 52F(1) parparparaaagggrrraaaphsphsphs (a)(a)(a) andandand (b)(b)(b) ofofof section 52F(1) section “52U Commission process for determining input methodologies “(1) When the Commission begins work on an input methodology, 10 it must publish a notice of intention to do so that— “(a) “(b) outlines the process that will be followed; and sets out the proposed time frames.
“(2) During the course of its work on an input methodology, the Commission— “(a) must publish a draft methodology; and “(b) must give interested persons a reasonable opportunity to give their views on that draft methodology; and 15 “(c) may hold 1 or more conferences; and “(d) must have regard to any views received from interested 20 persons within any time frames set.
subsections (1)(1)(1) andandand (2)(2)(2), any work done or action “(3) Despite subsections subsections taken (including any consultation) by the Commission on in­ put methodologies before the commencement of this section may be treated by the Commission and any person consulted 25 as work done or action taken under this section.
“52V Publication of input methodologies “(1) The Commission must publish every input methodology, and every amendment to an input methodology,— “(a) within 10 working days after the Commission deter­ 30 “(b) mines the input methodology or amendment; or if the input methodology or an amendment is deter­ mined by the High Court on appeal, within 10 working days after the Commission receives a copy of the deci­ sion of the High Court.
35 22 Commerce Amendment Bill Part 1 cl 4 “(2) The publication must be by way of a notice in the Gazette setting out— “(a) a brief description of the nature of the methodology, and the goods or services to which it applies; and the reasons for determining that methodology; and how it is publicly available.

“(b) “(c) “(3) The Commission must make every input methodology, and every amended input methodology, publicly available as soon as the input methodology or amendment is published.
“52W Amendment of input methodologies If the Commission proposes to amend an input methodology by making a material change, section section 52U52U52U applies as if the section amendment were a new input methodology.

5 10 “52X Review of input methodologies “(1) The Commission must review each input methodology no later 15 than 7 years after the date on which it is ﬁrst published and, after that, at intervals of no more than 7 years.
Section 52U52U52U applies, with all necessary modiﬁcations, as if “(2) Section Section the review were a new input methodology.

Section 52V52V52V applies if, following a review, an input method­ 20 “(3) Section Section ology is replaced or amended.
“Appeals of input methodology determinations “52Y Appeals of input methodology determinations “(1) Any person who gave views on an input methodology deter­ “(2) mination to the Commission as part of the process under secsecsec­­­ 25 tiontiontion 52U52U52U, and who has a signiﬁcant interest in the matter, may appeal to the High Court against the determination.
In this section and section section 52Z52Z52Z, input methodology deter­ section mination means any of the following: “(a) “(b) the initial determination of an input methodology: any determination by the Commission that amends the input methodology: any determination by the Commission of an input meth­ odology following a review of the input methodology.
“(c) 30 23 Part 1 cl 4 Commerce Amendment Bill “(3) In determining an appeal against an input methodology deter­ mination, the High Court may do any of the following: “(a) decline the appeal and conﬁrm the input methodology set out in the determination: allow the appeal by— “(i) “(ii) amending the input methodology; or revoking the input methodology and substituting a new one; or “(b) 5 “(iii) referring the input methodology determination back to the Commission with directions as to the 10 particular matters that require amendment.
“(4) If the Court allows an appeal, the Commission may seek clari­ ﬁcation from the Court on any matter for the purpose of im­ plementing the Court’s decision.

“(5) Any appeal under section 97 to the Court of Appeal from any 15 decision or order of the High Court under this section may be on a point of law only.
“52Z Process for appeals in respect of input methodology section 52Y52Y52Y must be brought within 20 “(1) Any appeal under section section working days after the date on which the input methodology 20 determination is published.

“(2) The appeal must be by way of rehearing and must be con­ ducted solely on the basis of the documentary information and views that were before the Commission when it made its deter­ mination, and no party may introduce any new material during 25 the appeal.
“(3) The High Court must sit with 2 lay members (unless the Court considers that only 1 is required).

“(4) Each of the lay members must have relevant experience and be appointed from the pool of people appointed under section 30 77 to be members of the Court for the purpose of hearing the appeal.

“(5) Section 77 applies, and section 77(14) is not limited by subsubsub­­­ section (3)(3)(3) of this section.
section section 24 Commerce Amendment Bill Part 1 cl 4 Input methodology applies pending outcome of appeal “53 “(1) The High Court may not stay the application of section section 52R52R52R section with respect to any input methodology published under secsecsec­­­ tiontiontion 52V52V52V until any appeal against it is ﬁnally determined.
Section 52R52R52R continues to apply with respect to every input 5 “(2) Section Section methodology published under section section 52V52V52V until any appeal section against it is ﬁnally determined.
“Subpart 4—Information disclosure regulation “53A Purpose of information disclosure regulation The purpose of information disclosure regulation is to ensure that every supplier of goods or services that are subject to this type of regulation publicly discloses reliable and timely infor­ mation, so that interested persons are informed about matters relating to the supply of the regulated goods or services.
10 15 “53B Effect of being subject to information disclosure regulation “(1) Every supplier of goods or services that are subject to infor­ mation disclosure regulation must— “(a) “(b) “(c) publicly disclose information in accordance with the in­ 20 formation disclosure requirements set out in the rele­ vant section section 52O52O52O determination; and section supply to the Commission a copy of all information dis­ section 52O52O52O determin­ closed in accordance with the section section ation, within 5 working days after the information is ﬁrst 25 made publicly available; and supply to the Commission, in accordance with a written notice by the Commission, any further statements, re­ ports, agreements, particulars, or other information re­ quired for the purpose of monitoring the supplier’s com­ 30 section 52O52O52O determination.
pliance with the section section “(2) If a supplier of goods or services is subject to information dis­ closure regulation, the Commission— “(a) may monitor and analyse all information disclosed in accordance with the information disclosure require­ 35 ments; and 25 Part 1 cl 4 Commerce Amendment Bill “(b) must, as soon as practicable after any information is publicly disclosed, publish a summary and analysis of that information for the purpose of promoting greater understanding of the relative performance of individual regulated suppliers, and the changes in performance 5 over time.
“53C Section 52O determination to set out information disclosure requirements section 52O52O52O determination relating to goods or services “(1) A section section that are subject to information disclosure regulation must— 10 specify the goods or services to which it applies; and “(a) specify the suppliers to which it applies; and “(b) specify the information to be disclosed; and “(c) specify the manner in which the information is to be “(d) disclosed; and specify the form of disclosure; and specify when, and for how long, information must be disclosed; and refer to the input methodologies that apply; and specify any other methodologies that are required in the 20 preparation or compilation of the information.
Information required to be disclosed may include (without limitation) any or all of the following: “(a) ﬁnancial statements (including projected ﬁnancial state­ “(g) “(h) “(e) “(f) “(2) 15 ments): asset values and valuation reports: “(b) prices and pricing methodologies: “(c) contracts: “(d) transactions with related parties: “(e) “(f) ﬁnancial and non­ﬁnancial performance measures: “(g) plans and forecasts, including (without limitation) plans and forecasts about investments, prices, and revenues, and quality and service levels: asset management plans: policies and methodologies in these or other areas: consolidated information that includes information about unregulated goods or services, in which case section 53D53D53D applies.
section section “(h) “(i) “(j) 25 30 35 26 Commerce Amendment Bill Part 1 cl 4 section 52O52O52O determination may do all or any of the fol­ “(3) The section section lowing: “(a) require disclosed information, or information from which disclosed information is derived (in whole or in part), to be veriﬁed by statutory declaration: exempt any person or class of persons, or provide for ex­ emptions, from any requirements of the determination, and provide for the revocation of exemptions: provide for transitional provisions: impose any other requirements that the Commission 10 considers necessary or desirable to promote the purpose of information disclosure regulation.
5 “(b) “(c) “(d) section 52O52O52O determination may not require a supplier “(4) The section section to publicly disclose any provision of an existing contract that, immediately before the goods or services became subject to in­ 15 formation disclosure regulation, was not required by or under Part 4A or any other enactment to be publicly disclosed.
“53D Consolidated information may also be required “(1) The purpose of this section is to enable the Commission to monitor compliance with information disclosure regulation 20 applying to regulated goods or services.

section 52O52O52O determination may require information re­ “(2) A section section ferred to in subsection subsection (3)(3)(3) to be disclosed only to the extent subsection required to enable the purpose in subsection subsection (1)(1)(1) to be met.
subsection If a regulated supplier provides goods or services that are not 25 subject to regulation under this Part (unregulated goods or services), the supplier may be required to disclose— “(a) “(3) consolidated ﬁnancial statements, and any other infor­ section 53C53C53C, for all businesses mation referred to in section section (including those related to the supply of unregulated 30 goods or services) undertaken by that supplier; and consolidated ﬁnancial statements, and any other infor­ section 53C53C53C, for the supply of all mation referred to in section section unregulated goods or services in aggregate; and reconciliation between information provided under 35 parparparaaagggrrraaaphsphsphs (a)(a)(a) andandand (b)(b)(b) with information disclosed in accordance with information disclosure requirements applying to the regulated goods or services.
“(b) “(c) 27 Part 1 cl 4 Commerce Amendment Bill “53E Charge for providing copies to public section 52O52O52O determination, “(1) A person who is required, by a section section to provide copies of statements and information to the public on request may charge for providing those copies.

“(2) The charge must be no more than is reasonably required to 5 recover the costs of providing those copies.
“53F Input methodologies on cost of capital and pricing principles “(1) This section applies to input methodologies for— evaluating or determining the cost of capital; and “(a) “(b) pricing principles.
“(2) Those input methodologies are applicable in respect of infor­ “(b) mation disclosure regulation as follows: “(a) the Commission may apply them for the purposes of monitoring and analysis; but if information disclosure regulation is the only type of regulation to which the goods or services are subject, the supplier is not required to apply them for any purpose related to that regulation.

section 52R52R52R.
section 52R52R52R.

(2)(b) overrides section “(3) Subsection Subsection (2)(b) section (2)(b) Subsection 10 15 20 “Subpart 5—Negotiate/arbitrate regulation “53G Purpose of negotiate/arbitrate regulation The purpose of negotiate/arbitrate regulation is to encourage a supplier and its customers to reach agreement, through nego­ tiation, on the supplier’s prices and quality standards during a 25 speciﬁed regulatory period, and to provide for binding arbitra­ tion if negotiation is unsuccessful.
“53H Overview of negotiate/arbitrate regulation “(1) If a regulated supplier is subject to negotiate/arbitrate regula­ tion,— “(a) the supplier must enter into negotiations with parties identiﬁed by the Commission in order to reach agree­ ment on the matters identiﬁed by the Commission (being the prices and quality standards associated with 30 28 Commerce Amendment Bill Part 1 cl 4 “(b) “(c) regulated goods or services) that will apply for the regulatory period speciﬁed by the Commission; and if the negotiations fail to reach a settlement of all the matters within the time frames set by the Commission, the parties must enter into arbitration to resolve the out­ 5 standing matters; and the terms of the arbitration are set by the Commission, and the arbitral award is binding on the parties unless or until they agree to vary it.
“(2) This section is only a guide.
“53I Section 52O determination to set out requirements for “(1) application of negotiate/arbitrate regulation If negotiate/arbitrate regulation applies to regulated goods or section 52O52O52O determination must set out the fol­ services, the section section lowing: “(a) “(b) 10 15 20 the parties to the negotiation or arbitration: the matters (including the prices and quality standards associated with the regulated goods or services) that the parties must agree to by negotiation, or are bound to by arbitral award: the period or periods for which any negotiated settle­ ment or arbitral award applies: a reference to the input methodologies that apply: the information that the parties must provide to the other parties and, if necessary, the arbitrator, and the time 25 frames for that provision: the processes for negotiations, including the form of involvement by the parties, and the form, scope, and coverage of any negotiated settlement: the time frames for the negotiations (including stages in 30 negotiations) and, in particular, the date by which, if ne­ gotiations are not complete, the parties must enter into arbitration to settle any remaining unresolved matters: the terms of any arbitration that takes place, including its form, procedures, the allocation of costs, and powers 35 of the arbitrator: the date by which the arbitral award must be made: “(c) “(d) “(e) “(f) “(g) “(h) “(i) 29 Part 1 cl 4 Commerce Amendment Bill “(j) the manner in which the parties must make publicly available any negotiated settlement, arbitral award, or both.
“(2) The Commission may include in the determination any other matters it considers necessary or desirable to promote the pur­ 5 pose of negotiate/arbitrate regulation.
“(3) The terms of arbitration set by the Commission must— “(a) “(b) “(c) allow the parties a reasonable period within which to agree on an arbitrator but, if agreement is not reached within that period, the terms must provide that the Com­ 10 mission must appoint the arbitrator (and may not ap­ point itself as the arbitrator); and require the arbitral award to include provisions requir­ ing and enabling the parties to enforce it; and include a right or rights of recourse to the High Court, 15 exercisable by any party to the arbitration.
“53J Compulsory arbitration “(1) If a negotiated settlement is not reached within the time frame set by the Commission, the parties must enter into arbitration section 52O52O52O determination.

on the terms set out in the section section 20 “(2) Nothing in the Arbitration Act 1996 applies to the arbitration, except to the extent that the Commission applies particular provisions of that Act to the arbitration.
“(3) The arbitrator’s role is to determine a commercially fair and workable outcome in light of the fact that the parties cannot 25 agree.

“(4) The arbitral award is binding on the parties to the arbitration unless or until the parties agree to vary it.
“Subpart 6—Default/customised price­quality regulation 30 “53K Purpose of default/customised price­quality regulation The purpose of default/customised price­quality regulation is to provide a relatively low­cost way of setting price­quality paths for suppliers of regulated goods or services, while allow­ ing the opportunity for individual regulated suppliers to have 35 30 Commerce Amendment Bill Part 1 cl 4 alternative price­quality paths that better meet their particular circumstances.
“53L Overview of default/customised price­quality regulation “(1) If goods or services are subject to default/customised price­ quality regulation,— “(a) the Commission sets default price­quality paths that ap­ ply for a regulatory period, and all regulated suppliers must apply those default price­quality paths; but individual suppliers may make a proposal to the Com­ mission for a customised price­quality path; and the Commission may set a customised price­quality path for the supplier, and that then applies for a set period instead of a speciﬁed default price­quality path.
“(b) “(c) “(2) This section is only a guide.
“53M Content of price­quality paths “(1) Every price­quality path (whether a default price­quality path or a customised price­quality path under this subpart, or an in­ dividual price­quality path under subpar subparttt 777 ) must specify,— subpar in relation to prices, either or both of the following with “(a) respect to a speciﬁed regulatory period: “(i) the maximum price or prices that may be charged by a regulated supplier: the maximum revenues that may be recovered by a regulated supplier; and “(ii) 5 10 15 20 “(b) “(c) the quality standards that must be met by the regulated 25 supplier; and the regulatory period.
“(2) A regulatory period must be 5 years.

“(3) However, the Commission may set a shorter period than 5 years if it considers that it would better meet the purposes of 30 this Part, but in any event may not set a term less than 4 years.

section 53W53W53W.
Subsections (2)(2)(2) andandand (3)(3)(3) are subject to section “(4) Subsections section Subsections “53N Monitoring compliance with price­quality paths For the purpose of monitoring compliance with a price­qual­ ity path (whether a default price­quality path or a customised 35 31 Part 1 cl 4 Commerce Amendment Bill price­quality path under this subpart, or an individual price­ quality path under subpar subparttt 777), the Commission may, in add­ subpar ition to exercising its powers under section 98, issue a written notice to a regulated supplier requiring it to provide any or all of the following: “(a) 5 a written statement that states whether or not the sup­ plier has complied with the price­quality path applying to that supplier: a report on the written statement referred to in parparparaaa­­­ gggrrraaaphphph (a)(a)(a) that is signed by an auditor in accordance 10 with any form speciﬁed by the Commission: sufﬁcient information to enable the Commission to properly determine whether all applicable price­quality paths have been complied with: a certiﬁcate, in the form speciﬁed by the Commission 15 and signed by at least one director of the supplier, con­ ﬁrming the truth and accuracy of any information pro­ vided under this section.
“(b) “(c) “(d) “Default price­quality path “53O Section 52O determination to set out requirements of 20 default price­quality paths If default price­quality regulation applies to regulated goods or services, the section section 52O52O52O determination must set out a default section price­quality path that includes— “(a) the starting prices that apply to the supply of the goods 25 or services during the ﬁrst regulatory period; and the rate or rates of change in prices, relative to the con­ sumer price index, required during the ﬁrst regulatory period; and the quality standards that apply during the ﬁrst regula­ 30 tory period; and the date or dates on which the default price­quality path (or any part of it) takes effect; and the annual date by which any proposal for a customised price­quality path must be received; and the annual date by which compliance must be demon­ section 53N53N53N.
strated in accordance with section section 35 “(b) “(c) “(d) “(e) “(f) 32 Commerce Amendment Bill Part 1 cl 4 “53P Resetting default prices, rates, and quality standards “(1) Before the end of the ﬁrst and every subsequent regulatory period, the Commission must amend the section section 52O52O52O deter­ section mination by setting out the reset default prices, rate or rates of changes in prices, and quality standards that apply for the 5 following regulatory period.
In resetting default prices, rates, and quality standards, the Commission— “(a) must consult with interested parties; and “(b) may consider all or any of the following: “(2) 10 “(i) “(ii) information disclosed in accordance with infor­ mation disclosure regulation: information obtained from the consultation with interested parties: “(iii) information obtained by the Commission under 15 section 53N53N53N: section section “(iv) other information in the public domain, including the annual reports of suppliers, submissions, and Internet sites; but sections 53ZC53ZC53ZC or 98 to 20 “(c) may not use its powers under sections sections obtain information except to verify information relating to the current or previous years.
“(3) The reset default prices must be either— “(a) the prices that applied at the end of the preceding regu­ latory period; or 25 “(b) prices determined by the Commission after considering (2)(b) .
information referred to in subsection subsection (2)(b) (2)(b) subsection subsections (6)(6)(6) andandand (7)(7)(7), the Commission must “(4) Subject to subsections subsections set only one reset default rate per type of regulated goods or services (for example, if the default rate is 1% in a CPI − × 30 path, 1% must be the rate for all goods or services of that type).
“(5) The reset default rate must be based on the long­run average productivity improvement rate achieved by either or both of suppliers in New Zealand, and suppliers in other comparable countries, of the relevant goods or service, using whatever 35 measures of productivity the Commission considers appropri­ ate.
In order to provide incentives for suppliers to improve quality, the Commission may provide for a differing rate or rates in “(6) 33 Part 1 cl 4 Commerce Amendment Bill the reset default rate to apply to all suppliers within a class to which any quality standards apply (for example, there may be other rates, for example, 0.75%, that apply to all suppliers who meet speciﬁed quality improvement targets).
“(7) The Commission may set alternative reset default rates for a 5 “(8) particular supplier as an alternative, in whole or in part, to the reset default prices set under subsection (3)(b) if, in the subsection (3)(b) (3)(b) subsection Commission’s opinion, this is necessary or desirable to min­ imise any undue ﬁnancial hardship to the supplier or to min­ imise price shocks to consumers.
If reset default prices, rates, and quality standards have not been set by way of an amendment to the relevant section section 52O52O52O section determination by the end of the regulatory period to which it applies, the default prices, rates, and quality standards apply­ ing to that regulatory period continue to apply until the reset 15 default prices, rates, and quality standards are set.
10 “Customised price­quality paths “53Q Supplier may propose customised price­quality path “(1) At any time after a default price­quality path is set by the Com­ mission, a supplier that is (or is likely to be) subject to the 20 default price­quality path may make a proposal to the Com­ mission for a customised price­quality path to apply to that supplier.
“(2) Every proposal must— “(a) comply with the input methodologies relating to the 25 process for, and content of, customised price­quality path proposals; and “(b) be made within the period, or by the annual date, speci­ section 52O52O52O determination; ﬁed for the purpose in the section section and include the standard application fee for customised price­quality path proposals; and apply or adopt all relevant input methodologies.
“(d) “(c) 30 “(3) A supplier may make only 1 proposal during a regulatory period, and may not make a proposal within the 12 months 35 before a default price­quality path is due to be reset.

34 Commerce Amendment Bill Part 1 cl 4 “(4) A supplier that makes a proposal must make it publicly avail­ able as soon as practicable after it has been made to the Com­ mission.
“53R Effect of making proposal for customised price­quality path A supplier that makes a proposal to the Commission— “(a) “(b) cannot withdraw the proposal; and is bound, for the regulatory period to which it applies, by any customised price­quality path that the Commis­ sion subsequently sets for the supplier.
5 10 “53S Preliminary assessment of proposal “(1) Within 40 working days after receiving a proposal, the Com­ mission must determine whether the proposal complies with the input methodologies under section 52S(1)(c) relating to section 52S(1)(c) 52S(1)(c) section the process for, and content of, customised price­quality path 15 proposals.
If the proposal does not comply with those requirements, the Commission may, at its discretion,— “(a) “(b) discontinue any consideration of the proposal; or request the supplier to remedy the deﬁciencies in the 20 proposal by providing additional information within 40 working days.
“(2) “(3) “(4) If the supplier fails to provide any additional information (2)(b), requested by the Commission under subsection subsection (2)(b) (2)(b) subsection the Commission may discontinue any consideration of the 25 proposal.
If a proposal is discontinued under subsection subsection (2)(2)(2) ororor (3)(3)(3), subsection 53Q(3) does not apply and the supplier may make section 53Q(3) 53Q(3) section section another proposal within the regulatory period (except in the 12 months before the default price­quality path is due to be 30 reset).
“53T Process and timing for assessing proposal “(1) Once the Commission decides that a proposal complies with the input methodologies relating to the process for, and content of, customised price­quality path proposals, it must— 35 35 Part 1 cl 4 Commerce Amendment Bill “(a) “(b) “(c) give notice that the proposal is under consideration, and how copies of the proposal may be obtained; and set a date for interested persons to make submissions on the proposal; and have regard to any submissions made by that date.
“(2) The Commission must make a determination on a proposal for a customised price­quality path within 150 working days of receiving a complete proposal, subject to sections sections 53U53U53U andandand sections 53Y53Y53Y.

“53U Extension of time frames sections 53S53S53S andandand 53T53T53T may, The time frames speciﬁed in sections sections with the agreement of the supplier and the Commission, be extended by a total of up to 30 working days.
5 10 “53V Determination setting customised price­quality path “(1) The Commission may determine any customised price­quality 15 path that the Commission considers appropriate for a supplier that has made a proposal.
“(2) To avoid doubt, and without limitation, the determination may do any of the following: “(a) set a price­quality path that is lower, or otherwise less 20 favourable to the regulated supplier, than the default price­quality path that would otherwise apply: if the Commission sets a lower price than applied under the default price­quality path, the Commission may re­ quire the supplier to lower its prices below the cus­ 25 tomised price on a temporary basis in order to refund consumers for some or all of any over­recovery of rev­ enues that occurred while the default price­path applied; but, in this case, any lowering of price must be spread over time to minimise undue ﬁnancial hardship to the 30 supplier: if the Commission sets a higher price than applied under the default price­quality path, the Commission may al­ low the supplier to recover some or all of any shortfall in its revenues while the default price­path applied; but, 35 in this case, the recovery must be spread over time to minimise price shocks to consumers.
“(b) “(c) 36 Commerce Amendment Bill Part 1 cl 4 “(3) A customised price­quality path for a supplier is imposed by way of an amendment to the section section 52O52O52O determination relat­ section ing to the default/customised price­quality regulation applying section 52P52P52P applies accordingly.

to the supplier, and section section 5 “53W Terms of customised price­quality paths “(1) A customised price­quality path applies for 5 years.
“(2) However, the Commission may set a shorter period than 5 years if it considers this would better meet the purpose of this Part, but in any event may not set a term less than 3 years.

“(3) At the end of the period, the supplier is subject to a default 10 price­quality path that must be determined by the Commission, section 52O52O52O determination for that supplier, using the in a section section process used under section section 53P53P53P for resetting default price­ section quality paths.
“53X Commission’s costs in setting customised price­quality 15 path “(1) The Commission’s costs in setting a customised price­quality path must be met by the person who makes the proposal for a customised price­quality path.

“(2) The costs may be recovered in whatever manner the Commis­ 20 sion determines.
“53Y Prioritisation by Commission “(1) The Commission is not required to consider any more than 4 proposals for a customised price­quality path relating to the same type of regulated goods or services in any one year.
If the Commission receives more than 4 proposals for a cus­ tomised price­quality path relating to the same type of regu­ lated goods or services in any one year, the Commission— “(a) may defer the additional proposals to a subsequent year; “(2) but “(b) must prioritise its consideration of the proposals in ac­ subsection (3)(3)(3).
cordance with the criteria in subsection subsection “(3) The criteria for Commission decisions on priorities are— “(a) quality and completeness of the initial proposal; and 25 30 37 Part 1 cl 4 Commerce Amendment Bill “(b) urgency of any proposed additional investment (com­ pared to historic rates of investment) required to meet consumer requirements on quality; and “(c) materiality of the proposal relative to size and revenues of the supplier.
5 “53Z What happens if Commission does not make decision within time frame “(2) “(1) This section applies if the Commission does not make a de­ termination within 150 working days of receiving a complete proposal (or within any extended time agreed under section section 10 section 53U53U53U).
If the regulated supplier has not complied, in the Commis­ sion’s opinion, with any reasonable exercise by the Commis­ sion of its information­gathering powers under section section 53ZC53ZC53ZC section or 98, the default price­quality path continues in effect at the 15 close of that period.

If the regulated supplier has so complied, the customised pro­ section 53Q53Q53Q takes effect at the close of that posal made under section section period.
If a customised price­quality path proposal takes effect under 20 subsection (3)(3)(3), the Commission must immediately prepare subsection subsection section 52O52O52O determination, an amendment to the relevant section section setting out the customised price­quality path applying to the supplier.
“(3) “(4) “What happens to price­quality paths if input methodologies change 25 “53ZA What happens to price­quality paths if input methodologies change “(1) Default or customised price­quality paths may not be reopened within a regulatory period on the grounds of a change in an 30 subsection (2)(2)(2).
input methodology, except as provided in subsection subsection “(2) Every default and customised price­quality path must be re­ considered by the Commission if— “(a) an input methodology changes as a result of an appeal section 52Y52Y52Y; and under section section 35 38 Commerce Amendment Bill Part 1 cl 4 “(b) had the changed methodology applied at the time the price­quality path was set, it would have resulted in a materially different path being set.
“(3) In considering a proposal by a supplier, and making a deter­ mination, the Commission may vary an input methodology ap­ 5 plying to that supplier with the agreement of the supplier.
“Subpart 7—Individual price­quality regulation “53ZB Price­quality path for individual businesses “(1) If individual price­quality regulation applies to goods or 10 services supplied by a supplier, the Commission may set the price­quality path for that supplier using any process, and in any way, it thinks ﬁt, but must use the input methodologies that apply to the supply of those goods or services.
subparttt 666 apply (with all neces­ 15 “(2) The following provisions of subpar subpar sary modiﬁcations) where individual price­quality regulation is imposed: “(a) sections 53M53M53M andandand 53N53N53N: sections sections section 53ZA53ZA53ZA.
“(b) section section “Subpart 8—Miscellaneous provisions “53ZC Powers of Commission under this Part “(1) For the purpose of carrying out its functions and exercising its powers under this Part, the Commission may, in addition to exercising its powers under section 98, do any of the follow­ ing: “(a) 20 25 “(b) consult with any person the Commission considers may assist it: investigate any of the following: “(i) how effectively and efﬁciently any supplier of the goods or services is supplying the goods or 30 services: “(ii) how any formula, methodology, or price­quality path being considered by the Commission may be applied, or how any formula, methodology, or price­quality provision determined or authorised 35 39 Part 1 cl 4 Commerce Amendment Bill by the Commission has been applied, in consid­ ering proposed prices or quality standards: “(iii) how any conditions relating to the quality of the goods or services may be, or are being, fulﬁlled: examine, consider, or investigate any activity, cost, rev­ 5 enue, transfer, asset valuation, circumstance, or event that is occurring or that has occurred during the previ­ ous 7 years: “(c) “(d) by notice in writing, require any supplier of the goods “(e) or services— “(i) “(ii) to prepare and produce forecasts, forward plans, or other information; and to apply any methodology speciﬁed by the Com­ mission in the preparation of forecasts, forward plans, or other information: by notice in writing, require any supplier of the goods or services, or any previous supplier of
 them that the Commission has reason to believe may have informa­ tion or documents relevant to the investigation, audit, or inquiry, at the time and place speciﬁed in the notice, 20 to do either or both of the following: “(i) produce or supply to the Commission documents and information in relation to the goods or ser­ vices, or the prices or operations of the person in respect of the goods or services: to answer any questions about any matter that the Commission has reason to believe may be relevant to the investigation, audit, or inquiry: “(ii) 10 15 25 “(f) by notice in writing, require any supplier of the goods or services, at the time and place speciﬁed in the no­ 30 tice, to produce or supply to the Commission an expert opinion from an appropriately qualiﬁed person, or from a member of a class of appropriately qualiﬁed persons, as determined by the Commission in relation to the mat­ (e)(i).
ters in parparparaaagggrrraaaphphph (b), (d), ororor (e)(i) (c), (d), (b), (c), (d), (e)(i) (c), (b), 53P(2)(c).

“(2) This section is subject to section section 53P(2)(c) 53P(2)(c) section 35 “Compare: 1986 No 5 s 70E 40 Commerce Amendment Bill Part 1 cl 4 “53ZD Levies “(1) Every supplier of regulated goods or services (or prescribed class of suppliers of regulated goods or services) must pay to the Minister the levy determined in accordance with regula­ subsection (2)(2)(2).
tions made under subsection subsection “(2) The Governor­General may, by Order in Council made on the recommendation of the Minister, make regulations— “(a) 5 specifying the amount of levies, or method of calculat­ ing or ascertaining the amount of levies, on the basis that the estimated costs of performing the Commission’s 10 functions, powers, and duties under this Part, and of collecting the levy money, should be met fully out of levies: including in levies, or providing for inclusion in levies of, any shortfall in recovering those actual costs: refunding, or providing for refunds of, any over­recov­ ery of those actual costs: 15 “(b) “(c) “(d) providing different levies for different classes of suppli­ “(e) “(f) “(g) ers or goods or services: specifying the ﬁnancial year or part ﬁnancial year to 20 which those levies apply, and applying to that ﬁnancial year or part ﬁnancial year and each subsequent ﬁnancial year until revoked or replaced: providing for the payment and collection of those levies: for the ﬁrst ﬁnancial year to which the levy applies to a supplier or class of suppliers, including in the levy amount or method costs incurred by the Commission in connection with preparing itself to perform, and per­ forming, its functions, powers, and duties under this 30 Part, irrespective of the fact— “(i) that the regulations are made and come into effect after that year; or that the goods or services become regulated af­ ter the costs were incurred (for example, costs 35 incurred by the Commission in
 preparing input methodologies): “(ii) 25 “(h) requiring payment of a levy for a ﬁnancial year or part ﬁnancial year, irrespective of the fact that the regula­ 41 Part 1 cl 4 Commerce Amendment Bill “(i) tions may be made after that ﬁnancial year has com­ menced: exempting or providing for exemptions from, and pro­ viding for waivers of, the whole or any part of the levy for any case or class of cases.
5 “(3) The amount of any unpaid levy is recoverable in any court of competent jurisdiction as a debt due to the Crown.

“(4) The Minister must consult with the suppliers of regulated goods or services, or representatives of those suppliers, before making a recommendation for the purposes of subsection subsection 10 subsection (2)(2)(2).
“53ZE Material may be incorporated by reference hedule 555 applies if the Commission wishes to incorporate ScScSchedule hedule material by reference in any of the following documents: “(a) “(b) a section section 52O52O52O determination: section an input methodology.
15 “53ZF Power to exempt disclosure of commercially sensitive information “(1) The Commission may, on application, exempt any person or class of persons, in respect of any information or class of infor­ 20 mation that the Commission considers to be commercially sen­ sitive, from any obligation to make that information publicly available as part of the requirements of information disclos­ ure regulation, negotiate/arbitrate regulation, or customised price­quality regulation.
25 “(2) The Commission may grant the exemption on any terms and conditions that it thinks ﬁt.

“(3) The exemption must be granted by notice in the Gazette, and takes effect from the date speciﬁed in the exemption (which must not be earlier than the date of the Gazette notice).

“(4) The Commission may, in like manner, vary or revoke any ex­ 30 emption.
“(5) The Commission must keep a list of all current exemptions made by it under this section available for public inspection free of charge during normal ofﬁce hours of the Commission 35 at the ofﬁces of the Commission.

42 Commerce Amendment Bill Part 1 cl 4 “(6) An exemption under this section is not a regulation within the meaning of the Regulations (Disallowance) Act 1989 or the Acts and Regulations Publication Act 1989.
“Subpart 9—Electricity lines services “Application, overview, and interpretation 5 “54 Overview of how this subpart applies “(1) This subpart provides— “(a) “(b) “(c) that all suppliers of electricity lines services are subject to information disclosure regulation; and that suppliers of electricity lines services that are not 10 consumer­owned are also subject to price­quality regu­ lation; and for the transition to the new regime provided for in this Part.

“(2) This section is only a guide.


“54A Overview of when this subpart applies “(1) This subpart applies on and after 111 AAAprilprilpril 20092009 2009.

54C(3) andandand 54M54M54M tototo 54P54P54P apply as soon “(2) However, sections sections 54C(3) 54C(3) sections as the rest of this Part comes into force.

“(3) This section is only a guide.


“54B Meaning of electricity lines services “(1) In this subpart, unless the context otherwise requires, electri­ city lines services means the conveyance of electricity by line in New Zealand.
“(a) “(2) However, none of the following are electricity lines services: conveying electricity solely for the supplier’s own con­ sumption or for the consumption of the supplier’s asso­ ciates: conveying electricity only from a generator to the na­ tional grid or from the national grid to a generator: conveying electricity (other than via the national grid) only from a generator to a local distribution network or from a local distribution network to a generator: “(b) “(c) 15 20 25 30 43 Part 1 cl 4 Commerce Amendment Bill “(f) “(e) “(g) “(d) conveying electricity by lines that are not connected, directly or indirectly, to the national grid: conveying electricity only by a line or lines that are mostly in competition with a line or lines operated by another supplier of electricity lines services that is not 5 an associate of the person, provided that the competition is actual competition and not potential competition: conveying electricity if the total circuit length of the prescribed voltage electric lines provided by the sup­ plier (or over which electricity is conveyed by the sup­ 10 plier, as the case may be) is less than 25 kilometres: conveying electricity of less than 20 gigawatt hours per annum: “(h) conveying electricity to less than 500 consumers.
In this section, unless the context otherwise requires,— “associate has the same meaning as in section 12 of the Elec­ tricity Industry Reform Act 1998 “consumer has the same meaning as in section 2(1) of the Electricity Act 1992 “lines has the same meaning as in section 2(1) of the Electri­ 20 city Act 1992 “national grid has the same meaning as in section 2(1) of the Electricity Act 1992 “prescribed voltage electric line means a line that is capable of conveying electricity at a voltage equal to or greater than 25 3.3 kilovolts.
15 “(3) “54C Deﬁnition of consumer­owned “(1) In this subpart, unless the context otherwise requires, a sup­ plier is consumer­owned if it is a supplier that meets the fol­ lowing criteria: “(a) 100% of the control rights and 100% of the equity return rights (within the meaning of section 3 of the Electricity Industry Reform Act 1998) in the supplier are held by either— “(i) a customer trust or a community trust within the 35 subsection (2)(2)(2); or meaning of subsection subsection 30 44 Commerce Amendment Bill Part 1 cl 4 “(ii) a customer co­operative within the meaning of subsection (2)(2)(2); and subsection subsection “(c) “(b) the trustees of the customer trust or community trust, or the directors of the customer co­operative, as the case may be, that is referred to in parparparaaagggrrraaaphphph (a)(a)(a) are elected 5 or appointed solely by the persons who are consumers of the supplier, and at least 90% of the persons who are consumers of the supplier at the time of the election or appointments are eligible to vote in those elections or to participate in those appointments; and all of the persons who are consumers of the supplier as at an income distribution resolution date beneﬁt from that income distribution; and “(d) the supplier has fewer than 100,000 ICPs.
In this section, unless the context otherwise requires,— “community trust is a trust— “(a) whose income beneﬁciaries substantially comprise per­ sons who are a class or classes identiﬁed by reference to their domicile or location or operation within, or con­ nection to, a prescribed geographic area; and that has conﬁned distributions largely to those bene­ ﬁciaries or for purposes related to a prescribed geo­ graphic area “(b) 10 15 20 “(2) 25 “consumer has the same meaning as in section 2(1) of the Electricity Act 1992 “customer co­operative means a co­operative company (as deﬁned in section 2(1) of the Co­operative Companies Act 1996) that has the characteristics described in the deﬁnition of customer trust in this subsection, applied as if references to trusts were to co­operatives, references to beneﬁciaries were to 30 shareholders, and all other necessary modiﬁcations were made “customer trust is a trust— “(a) whose income beneﬁciaries substantially comprise per­ sons who are a class or classes identiﬁed by reference to any of— “(i) 35 the person’s connection to the lines of the sup­ plier: the person’s receipt of electricity from the sup­ plier: “(ii) 45 Part 1 cl 4 Commerce Amendment Bill “(iii) the person’s liability for payment for supply of “(iv) “(v) electricity from the supplier: the person’s liability for payment for the connec­ tion: the person’s liability for payment for line ser­ 5 vices; and “(b) that has conﬁned distributions largely to those beneﬁ­ ciaries “ICP means a point of connection on a local or an embedded network at which a retailer supplies electricity to a consumer “income distribution resolution date means the date that a supplier, or the trust or co­operative that owns a supplier, as the case may be, resolves to make an income distribution to beneﬁciaries.
10 “(3) As soon as practicable after this subsection comes into force, 15 the Minister must publish a notice in the Gazette stating the names of the suppliers that are consumer­owned as at that date.

subsection (3)(3)(3) is only for information purposes “(4) The notice in subsection subsection and has no legal effect.
“54D Further interpretation for this subpart 20 In this subpart, unless the context otherwise requires,— “existing administrative settlement means any deed agreed between the Commission and a supplier of electricity lines ser­ vices before 111 AAAprilprilpril 20092009 2009 in respect of a breach of a threshold “Part 4A means Part 4A of this Act as in force immediately 25 before its repeal by the Commer 2008 Amendment ActActAct 20082008 Commercecece Amendment Amendment Commer “threshold means a threshold set under Part 4A for the declar­ ation of control in relation to large electricity lines businesses “Transpower means Transpower New Zealand Limited or any subsidiary of, or successor to, that company.
30 “Imposition of regulation under this Part “54E Electricity lines services declared to be regulated Electricity lines services are regulated under this Part.

46 Commerce Amendment Bill Part 1 cl 4 “54F All electricity lines services are subject to information disclosure regulation All electricity lines services are subject to information disclos­ ure regulation under this Part.
“54G Certain electricity lines services are also subject to 5 default/customised price­quality path regulation “(1) All electricity lines services (other than those supplied by Transpower) are subject to default/customised price­quality regulation under this Part unless they are exempt.

“(2) All electricity lines services that are supplied by a supplier that 10 is consumer­owned are exempt (unless an Order in Council section 54H54H54H).
has been made in respect of the service under section section “54H How exempt status can be lost and default/customised price­quality regulation can be applied to consumer­owned suppliers “(1) Electricity lines services that are supplied by a supplier that is consumer­owned cease to be exempt for the purpose of secsecsec­­­ tiontiontion 54G54G54G (and therefore become subject to default/customised price­quality regulation under this Part) if the Governor­Gen­ eral, by Order in Council, declares that this section applies.
“(2) The Minister may make a recommendation only if the Minister is satisﬁed that either— “(a) “(b) the Commission has advised the Minister that a supplier has ceased to be consumer­owned within the meaning of section section 54C54C54C; or section the Commission has recommended to the Minister that the purpose of this Part would be better met if price­ quality regulation were imposed on the supplier under this Part.
15 20 25 “(3) The Commission may make a recommendation under subsec subsec­­­ 30 subsec (2)(b) only following consideration of a petition made by tiontiontion (2)(b) (2)(b) 1 or more of the following: “(a) 15% of the persons who are residential consumers of the supplier as at the date of the petition who are eligible to vote in elections for trustees of the customer trust or 35 community trust, or for directors of the customer co­op­ erative: 47 Part 1 cl 4 Commerce Amendment Bill “(c) “(b) 20% of the persons who are residential consumers of the supplier as at that date who are not eligible to vote in elections for trustees of the customer trust or commu­ nity trust, or for directors of the customer co­operative: 25% of the persons who are non­residential consumers 5 (either by number or by consumption of that class of consumer) of the supplier as at that date who are not eligible to vote in elections for trustees of the customer trust or community trust, or for directors of the customer co­operative.
10 “(4) Petition means a petition seeking the application of price­ quality regulation to all or any of the electricity lines services of the relevant supplier, and that records the signatures of the signatories.

“(5) The Governor­General may, on the recommendation of the 15 Minister, make an Order in Council in accordance with this section.
“54I Commission must make section 52O determination specifying how this subpart applies section 52O52O52O determinations that specify how informa­ 20 “(1) The section section tion disclosure regulation applies in respect of each supplier of electricity lines services must be made as soon as practic­ 2009. able after 111 AAAprilprilpril 20092009 section 52O52O52O determinations that specify how de­ “(2) The section section fault/customised price­quality regulation applies in respect of 25 each supplier of electricity lines services that are subject to that form of regulation as at 111 AAAprilprilpril 20092009 2009 must be made as soon as practicable after that date.
section 52O52O52O determinations that specify how de­ “(3) The section section fault/customised price­quality regulation applies in respect of 30 each supplier of electricity lines services that become subject to that form of regulation as a result of an Order in Council section 54H54H54H must be made as soon as practicable made under section section after the order comes into force.
48 Commerce Amendment Bill Part 1 cl 4 “When and how price­quality regulation applies “54J Initial default price­quality paths section 52O52O52O determinations required in respect of each “(1) The section section supplier of electricity lines services that are subject to de­ fault/customised price­quality regulation under section section 54G54G54G 5 section must set default price­quality paths as follows: “(a) the default price­quality path that applies for the period 2009 and ending with the close commencing on 111 AAAprilprilpril 20092009 of 313131 MarMarMarccchhh 20102010 2010 must be the thresholds for large elec­ tricity lines businesses that were set by the Commission 10 under Part 4A and that expire on 313131 MarMarMarccchhh 20092009 2009; and the default price­quality path that applies for the period 2010 must be set by the Com­ commencing on 111 AAAprilprilpril 20102010 mission using the process used under section section 53P53P53P for section resetting default price­quality paths.
15 “(b) section 54K54K54K.

“(2) This section is subject to section section “54K How regulation applies to suppliers with administrative settlements under Part 4A (other than Transpower) “(1) The enactment of the Commer 2008 Amendment ActActAct 20082008 Commercecece Amendment Amendment Commer does not limit or affect any existing administrative settlement 20 that applies for electricity lines services.
“(2) Price­quality regulation under this Part applies to the supplier until the expiry of the existing administrative settlement as if the settlement were a section section 52O52O52O determination setting out section the requirements of this Part.
“(3) As soon as practicable after the expiry of the existing admin­ istrative settlement, the supplier is subject to a default price­ quality path determined by the Commission, in a section section 52O52O52O section determination for that supplier, using the process used under section 53P53P53P for resetting default price­quality paths.

section section “(4) This section does not apply to services supplied by Trans­ 25 30 power.
“54L How regulation applies to Transpower “(1) The enactment of the Commer 2008 Amendment ActActAct 20082008 Commercecece Amendment Amendment Commer does not limit or affect any existing administrative settlement 35 that applies to Transpower.
49 Part 1 cl 4 Commerce Amendment Bill “(2) Any threshold for Transpower set as part of an administrative settlement before 111 AAAprilprilpril 20092009 2009 must be regarded after 111 AAAprilprilpril 2009 as if it were a customised price­quality path set under 20092009 section 53V53V53V.
section section “(3) Before the expiry of any authorisation or undertaking or any 5 existing administrative settlement that applies to Transpower under Part 4A or 5, the Commission must recommend to the Minister that an Order in Council be made under section section 52M52M52M section declaring that either— “(a) Transpower is subject to default/customised price­qual­ 10 subparttt 666; or ity regulation under subpar subpar “(b) Transpower is subject to individual price­quality path subparttt 777. regulation under subpar subpar “(5) Subparttt 222, except the provisions relating to inquiries, applies “(4) Subpar Subpar to the process for imposing that regulation and making the 15 section 52O52O52O determination.
section section If an Order in Council declares that Transpower is subject to default/customised price­quality regulation, the section section 52O52O52O section determination must set the price­quality path that applies for the regulatory period commencing with the date on which the 20 Order in Council comes into force, using the process under section 53P53P53P for resetting default price­quality paths.
section section “(6) The only requirements that may be included in a section section 52O52O52O section determination in respect of the quality standards of Trans­ power are requirements that give effect to quality standards 25 set by the Electricity Commission.
“Other transitional provisions “54M Certain breaches of thresholds before 1 April 2008 expire if no intention to declare control is published before cut­off date 30 “(1) The Commission may not commence or continue any action in respect of a breach of a threshold, and must treat it in all respects as if it had never occurred, if— “(a) the breach occurred before the close of 313131 MarMarMarccchhh 20072007 2007 and the Commission has not published a notice of inten­ 35 tion to declare control under Part 4A before the cut­off date of 111 October October 20082008 October 2008; or 50 Commerce Amendment Bill Part 1 cl 4 “(b) 2007 and the close of the breach occurs between 111 AAAprilprilpril 20072007 2008 and the Commission has not published 313131 MarMarMarccchhh 20082008 a notice of intention to declare control before the cut­off 2009. date of 111 AAAprilprilpril 20092009 “(2) This section applies regardless of when the breach is identiﬁed.
5 “54N Old law applies to breaches of thresholds before 1 April “(1) 2008 if intention to declare control is published before cut­off date If, before the applicable cut­off date referred to in section section section 54M(1) in respect of a breach, the Commission has published a 10 54M(1) 54M(1) notice of intention to declare control under Part 4A, the enact­ ment of the Commer 2008 does not— Amendment ActActAct 20082008 Commercecece Amendment Amendment Commer limit or affect any action that may be commenced or “(a) continued in respect of the breach under any existing administrative settlement; or limit or affect the power of the Commission, before 111 AAAprilprilpril 20102010 “(i) make a control declaration under Part 4A; or “(ii) grant an authorisation or accept an undertaking in respect of the breach under Part 5; or limit or affect the power of the Commission, before or 2010, to commence or continue any action after 111 AAAprilprilpril 20102010 under Part 5 in respect of a breach of any such author­ isation or undertaking.
subsection (1)(1)(1) applies as if Parts 4A to 6 25 “(2) To avoid doubt, subsection subsection 2010, to— “(b) “(c) 20 15 “(3) had not been amended or repealed by the Commer Amend­­­ Commercecece Amend Amend Commer 2008. mentmentment ActActAct 20082008 If the Commission imposes control under section 57F after 2009, then the Commission must determine require­ 111 AAAprilprilpril 20092009 ments for that electricity lines business under Part 5 as if sec­ 30 tions 70 to 74 had not been repealed.
“(4) However, the content of the requirements (but not the process) subsection (3)(3)(3) must be determined as if the electricity under subsection subsection lines business were subject to customised price­quality regu­ lation under this Part, and the customised price­quality path 35 section 53W53W53W applies.
applies as if section section 51 Part 1 cl 4 Commerce Amendment Bill Sections 878787 andandand 87A87A87A (pecuniary penalty and compensation) “(5) Sections Sections apply to the electricity lines business as if the breach of the requirement under Part 5 were a contravention of price­quality regulation under this Part.
5 “54O Transitional penalties for breaches after 1 April 2008 “(1) This section applies to a breach of a threshold that occurs on 2008 (whether or not the breach is identiﬁed or after 111 AAAprilprilpril 20082008 before or after that date).
Sections 878787 andandand 87A87A87A (pecuniary penalty and compensation) “(2) Sections Sections apply to the electricity lines business in respect of the breach 10 as if— “(a) the breach of the threshold were a contravention of price­quality regulation under this Part; and sections 878787 andandand 87A87A87A were in force from the date of “(b) sections sections the breach.
15 “54P Transitional provision for proposals for customised price­quality paths “(1) A supplier of electricity lines services may propose a cus­ tomised price­quality path at any time— “(a) after the Commission gives notice of the requirements 20 and criteria that will apply in relation to a proposal for a customised price­quality path for electricity lines ser­ 52S(1)(c); and vices, as required by section section 52S(1)(c) 52S(1)(c) section 53Q(3) for how 2013 (see section section 53Q(3) 53Q(3) section “(b) before 313131 MarMarMarccchhh 20132013 that date is calculated).
“(2) A customised price­quality path may apply at any time on or 2010, notwithstanding that the proposal may be after 111 AAAprilprilpril 20102010 made after that date.

“54Q Energy efﬁciency “Energy efﬁciency The Commission must provide incentives to improve energy efﬁciency and demand side management, and to reduce energy losses, when applying this Part in relation to electricity lines services.
52 25 30 Commerce Amendment Bill Part 1 cl 4 “Jurisdiction issues and interface with Electricity Commission and Electricity Act 1992 “54R Transfer of jurisdiction relating to suppliers of electricity lines services The Governor­General may, by Order in Council made on 5 the recommendation of the Minister of Energy, transfer to the Electricity Commission the jurisdiction under this Part in re­ spect of all or any electricity lines services.
“54S Effect of transfer of jurisdiction “(1) If an Order in Council is made under section section 54R54R54R,— section “(a) the Electricity Commission, and not the Commerce Commission, has all the powers, duties, and functions under this Part in respect of the electricity lines services in respect of which the jurisdiction has been transferred; and the Electricity Commission must exercise or perform those powers, duties, and functions, and be treated in that exercise or performance, as if it were an independ­ ent Crown entity.
“(b) 10 15 “(2) Without limiting subsection (1)(b), if an Order in Council is 20 subsection (1)(b) (1)(b) subsection section 54R54R54R, the Minister of Energy may not— made under section section set objectives and outcomes under section 172ZK of “(a) the Electricity Act 1992 on any matter relating to its jurisdiction under this Part; or “(c) “(b) direct the Electricity Commission to give effect to or 25 have regard to any government policy that relates to the jurisdiction under this Part; or direct the Electricity Commission to amend any provi­ sion that is included in its statement of intent that relates to the jurisdiction under this Part; or remove any member of the Electricity Commission for a reason related to the exercise of the jurisdiction under this Part.
“(d) 30 section 54R54R54R may contain any “(3) The Order in Council under section section other provisions that are necessary or desirable to ensure that 35 the Electricity Commission exercises or performs the powers, duties, and functions under this Part, and is treated in that exer­ cise or performance, as if it were an independent Crown entity.
53 Part 1 cl 4 Commerce Amendment Bill “54T Procedure before jurisdiction order can be made “(1) The Minister of Energy may make a recommendation for the purpose of section section 54R54R54R only if— section “(a) he or she has consulted with representatives of industry participants and representatives of consumers; and “(b) he or she has consulted with the Electricity Commission and the Commerce Commission and has sought a rec­ ommendation from them; and he or she is satisﬁed that the transfer of jurisdiction that would occur would result in— “(i) more efﬁcient and effective achievement of the “(c) 5 10 purpose of this Part; and “(ii) more efﬁcient and effective achievement of the purposes of the Electricity Act 1992 as it applies to some or all suppliers of electricity lines ser­ 15 vices; and “(iii) lower compliance costs for industry participants in the electricity distribution and transmission markets.
“(2) Industry participant has the same meaning as in section 2(1) 20 of the Electricity Act 1992.

“54U Levies during transition in jurisdiction “(1) The costs of the Commerce Commission during any period after any transfer of jurisdiction under this Part may continue section 53ZD53ZD53ZD.

to be met via levy regulations under section section “(2) The costs of the Electricity Commission in respect of jurisdic­ tion that is transferred to it must be met via levy regulations under the Electricity Act 1992.
“54V Impact of certain decisions made under Electricity Act 1992 25 30 “(1) The Electricity Commission must advise the Commerce Com­ mission as soon as practicable after making any recommen­ dation for an electricity governance regulation or rule under subpart 2 of Part 14 of the Electricity Act 1992, or after mak­ ing any decision under electricity governance regulations or 35 rules, or after issuing any guidelines, that is or are likely to be 54 Commerce Amendment Bill Part 1 cl 4 relevant to the powers, duties, or functions of the Commerce Commission under this Part.
“(2) The Commerce Commission must take into account, before exercising or performing any of its powers, duties, or functions under this Part,— “(a) 5 any electricity governance regulation or rule, or deci­ sion made under them, that relates to or affects the quality standards or pricing methodologies applicable to Transpower: any electricity governance regulation or rule, or deci­ 10 sion made under them, that relates to or affects the pric­ ing methodologies applicable to any other line owner: any guidelines of which it receives advice under subsubsub­­­ section (1)(1)(1) that are likely to be relevant to the exercise section section or performance of the powers, duties, or functions of the 15 Commerce Commission under this Part: the levy payable by Transpower or any other line owner under section 172ZC of the Electricity Act 1992.
“(b) “(c) “(d) “(3) The Commerce Commission must, if asked by the Electricity Commission to do so, reconsider a section section 52O52O52O determin­ 20 section ation and, to the extent that the Commerce Commission con­ siders it necessary or desirable to do so, amend the determin­ ation, to take account of any matter referred to in subsection subsection subsection (2)(2)(2).
“Savings provisions 25 “54W Savings provision relating to existing information disclosure requirements Any information disclosure requirements published by the Commission under subpart 3 of Part 4A before 111 AAAprilprilpril 20092009 2009 continue to apply to each supplier of electricity lines services 30 in respect of every ﬁnancial year that precedes the ﬁrst ﬁnan­ cial year to which a determination made by the Commission 54I(1) applies to that supplier.
under section section 54I(1) 54I(1) section 55 Part 1 cl 4 Commerce Amendment Bill “54X Savings provision for existing levy regulations for electricity lines businesses “(1) Any regulations made pursuant to section 57ZK before the repeal of Part 4A continue to apply to each person who is a large line owner in respect of every ﬁnancial year that precedes 5 the ﬁrst ﬁnancial year to which levy regulations made under section 53ZD53ZD53ZD apply to that supplier.
section section Subsection (1)(1)(1) applies as if— “(2) Subsection Subsection “(a) references in those regulations to the Commission’s costs included references to the costs of exercising 10 and performing the Commission’s powers, duties, and functions under this Part, and enforcing the obligations under this Part, in respect of those persons, and with all other necessary modiﬁcations; and terms used in subsection subsection (1)(1)(1) have the same meaning 15 subsection as they do in those regulations.
“(b) “Subpart 10—Gas pipeline services “Overview and interpretation “55 Overview of this subpart “(1) This subpart provides— “(a) “(b) that certain gas pipeline services are subject to informa­ tion disclosure regulation and price­quality regulation; and for the transition to the new regime provided for in this Part.

“(2) This section is only a guide.


20 25 “55A Meaning of gas pipeline services “(1) In this subpart, unless the context otherwise requires, gas pipeline services means the conveyance of natural gas by pipeline, including the assumption of responsibility for losses 30 of natural gas.
“(2) However, none of the following are gas pipeline services: conveying natural gas to a gas processing facility: conveying natural gas of less than 75 000 gigajoules per annum per pipeline: “(a) “(b) 35 56 Commerce Amendment Bill Part 1 cl 4 “(3) “(c) “(d) conveying natural gas for supply to industrial and com­ mercial consumers located within 1 kilometre of a gas station or existing gas pipeline: conveying natural gas by a pipeline that is listed in the hedule 666. column ofofof ScScSchedule second column hedule column second second In this section, unless the context otherwise requires,— “consumer has the same meaning as in section 2(1) of the Gas Act 1992 “container has the same meaning as in section 2(1) of the Gas Act 1992 “gas refueller has the same meaning as in section 2(1) of the Gas Act 1992 “pipeline— “(a) means everything used, or designed or intended for use, 5 10 (whether above or below ground) in or in connection 15 with the conveyance of natural gas between— “(i) the boundary of the gas ﬁeld or gas processing facility to the point of supply to a consumer or gas refueller; or the outlet of the container in which gas is stored 20 to the point of supply to a consumer or gas refu­ eller; but excludes meters.
“(ii) “(b) “(4) The Governor­General may, by Order in Council made on the recommendation of the Minister, amend ScScSchedule hedule 666 by— 25 hedule adding any pipeline: “(a) “(b) deleting any pipeline: “(c) changing the description of any pipeline or its owner.

“(5) The Minister may not make a recommendation for the purpose subsection (4)(4)(4) unless the Commission has made a recom­ 30 of subsection subsection mendation to the same effect.
“Imposition of regulation under this Part “55B Gas pipeline services declared to be regulated Gas pipeline services are regulated under this Part.

57 Part 1 cl 4 Commerce Amendment Bill “55C All gas pipeline services are subject to information disclosure regulation Gas pipeline services are subject to information disclosure regulation under this Part.
“55D All gas pipeline services are subject to price­quality 5 regulation Gas pipeline services are subject to default/customised price­ 2010. quality regulation under this Part on and after 111 JJJulululyyy 20102010 “55E Commission must make section 52O determination specifying how this subpart applies 10 section 52O52O52O determinations that specify how informa­ “(1) The section section tion disclosure regulation applies in respect of each supplier of gas pipeline services must be made soon as practicable af­ ter this subpart commences to apply.
section 52O52O52O determinations that specify how de­ 15 “(2) The section section fault/customised price­quality regulation applies in respect of each supplier of gas pipeline services must be made as soon 2010. as practicable after 111 JJJulululyyy 20102010 section 52O52O52O determinations that specify how de­ “(3) The section section fault/customised price­quality regulation applies in respect 20 of each supplier of gas pipeline services that become subject to that form of regulation as a result of an Order in Council made under section 55A(4)(a) must be made as soon as section 55A(4)(a) 55A(4)(a) section practicable after the order comes into force.
“When and how price­quality regulation applies generally “55F How initial price­path set The section section 52O52O52O determinations required in respect of each section supplier of gas pipeline services must set the default price­ quality path as follows: “(a) if the supplier has increased its prices by more than the movement, or forecast movement, in the all groups in­ dex number of the New Zealand Consumer Price Index 2008 and ending in the period beginning 111 JJJanuar anuaryyy 20082008 anuar with the date that the determination is made, the Com­ 35 25 30 58 Commerce Amendment Bill Part 1 cl 4 “(b) section 53ZC53ZC53ZC or 98 mission may use its powers under section section and may determine the initial default price­path in any way that it thinks ﬁt: in any other case, section section 53P53P53P applies, and the Com­ section mission must set the initial default price­path as if it 5 were resetting prices and rates and quality standards under that section.
“When and how price­quality regulation applies to services controlled by virtue of the Commerce (Control of Natural Gas Services) Order 2005 10 “55G Existing Order, authorisations, and undertakings continue to apply until 2 September 2016 (or earlier expiry) “(1) This section provides how price­quality regulation under this Part applies to services that are controlled by virtue of the 15 Commerce (Control of Natural Gas Services) Order 2005 (the Order) “(2) The Order continues in force, despite the repeal of Part 4, until the date on which the Order expires or is revoked (the expiry date).
20 “(3) The enactment of the Commer 2008 Amendment ActActAct 20082008 Commercecece Amendment Amendment Commer does not limit or affect, before the expiry date, any of the following in respect of the gas pipeline services that are con­ trolled by virtue of the Order: “(a) any existing authorisation made, or any undertaking ob­ 25 tained or accepted, under Part 5 before 111 AAAprilprilpril 20092009 2009; or the power of the Commission to obtain or accept any further undertakings under Part 5; or any action that may be commenced or continued in re­ 30 spect of a breach of any authorisation or undertaking.
“(b) “(c) subsection (3)(3)(3) applies as if the provisions “(4) To avoid doubt, subsection subsection of Parts 4 to 6 had not been amended or repealed by the ComComCom­­­ 2008.
Amendment ActActAct 20082008 mermermercecece Amendment Amendment “(5) Price­quality regulation under this Part applies until the expiry 35 date as if every authorisation or undertaking referred to in subsubsub­­­ 59 Part 1 cl 4 Commerce Amendment Bill section 52O52O52O determination setting out the section (3)(3)(3) were a section section section section requirements under this Part.
“55H How price­quality regulation under this Part applies after 2 September 2016 (or earlier expiry) “(1) This section provides how price­quality regulation under this 5 Part applies to a gas pipeline service after it ceases to be con­ trolled by virtue of the Commerce (Control of Natural Gas Ser­ vices) Order 2005 (the Order) 53W(3) applies (with all necessary modiﬁcations) to “(2) Section Section 53W(3) Section 53W(3) the setting of the default price­quality path in respect of the 10 gas pipeline service with effect on and after the expiry date.
In this section, expiry date means— “(a) “(b) the expiry date referred to in section section 55G55G55G; or section if an undertaking is obtained or accepted from a supplier in respect of a service that expires on an earlier date, that 15 earlier date, provided that the Order ceases to apply to that service on or before that date (by revocation of the Order or otherwise).
“(3) “Interface with Gas Act 1992 “55I Impact of certain decisions made under Gas Act 1992 “(1) The recommending body must advise the Commerce Commis­ sion as soon as practicable after making any recommendation for a gas governance regulation or rule under Part 4A of the Gas Act 1992, or after making any decision under gas govern­ ance regulations or rules, or after issuing any guidelines, that 25 is or are likely to be relevant to the powers of the Commerce Commission under this Part.
20 “(2) The Commission must take into account, before exercising any of its powers under this Part,— “(a) any gas governance regulation or rule under Part 4A of 30 the Gas Act 1992, or decision under those gas govern­ ance regulations or rules, that relates to or affects the quality standards or pricing methodologies applicable to a pipeline owner: any guidelines issued by the recommending body of 35 subsection (1)(1)(1) that is likely which it is advised under subsection subsection “(b) 60 Commerce Amendment Bill Part 1 cl 4 to be relevant to the powers of the Commerce Commis­ sion under this Part: the levy payable by any pipeline owner under the Gas Act 1992.
“(c) “(3) The Commission must, if asked by the recommending body 5 to do so, reconsider any determination made under this Part and, to the extent that the Commission considers it necessary or desirable to do so, amend the determination, to take account of any matter referred to in subsection subsection (2)(2)(2).

subsection In this section, recommending body has the same meaning as 10 in section 43D of the Gas Act 1992.
“(4) “Savings provisions “55J Savings provision until Commission publishes information disclosure requirements “(1) The Gas (Information Disclosure) Regulations 1997 continue 15 to apply to each supplier of gas pipeline services in respect of every ﬁnancial year that precedes the ﬁrst ﬁnancial year to which a determination made by the Commission referred to in 55E(1) applies to that supplier.
section 55E(1) 55E(1) section section “(2) After that, no regulations made under section 55 of the Gas 20 Act 1992 apply to the supplier of gas pipeline services.
“55K Savings provision for existing levy regulations for services controlled under Commerce (Control of Natural Gas Services) Order 2005 “(1) Any regulations made pursuant to section 74 before the repeal 25 of that section continue to apply to each person that is a sup­ plier of controlled services under the Commerce (Control of Natural Gas Services) Order 2005 in respect of every ﬁnancial year that precedes the ﬁrst ﬁnancial year to which levy regu­ lations made under section section 53ZD53ZD53ZD apply to that supplier.
section Subsection (1)(1)(1) applies as if— “(2) Subsection Subsection “(a) references in those regulations to the Commission’s costs include references to the costs of exercising the Commission’s powers and duties under this Part, and enforcing the obligations under this Part, in respect of 35 30 61 Part 1 cl 4 Commerce Amendment Bill those persons, and with all other necessary modiﬁca­ tions; and terms used in subsection subsection (1)(1)(1) have the same meaning subsection as they do in those regulations.
“(b) “Subpart 11—Airport services “Overview and interpretation 5 “56 Overview “(1) This subpart provides— “(a) “(b) “(c) that speciﬁed airport services (at Auckland, Welling­ ton, and Christchurch airports) are subject to informa­ 10 tion disclosure under this Part; and for the transition to the new regime provided for in this Part; and for a review of the new regime as soon as any new price is set in 2012 for speciﬁed airport services.

15 “(2) This section is only a guide.
“56A Meaning of speciﬁed airport services “(1) In this Part, unless the context otherwise requires, speciﬁed airport services means all of the services supplied by the com­ subsection (2)(2)(2) in markets directly re­ 20 panies referred to in subsection subsection lated to the following activities (whether for international and domestic ﬂights): “(a) “(b) “(c) “(d) aircraft and freight activities: airﬁeld activities: speciﬁed passenger terminal activities: any other services that are determined by the Governor­ General, by Order in Council made on the recommen­ dation of the Minister under subsection subsection (4)(4)(4), to be spe­ subsection ciﬁed airport services for the purposes of this Part.
25 “(2) The companies are— 30 “(a) “(b) the company (as deﬁned in section 2 of the Auckland Airport Act 1987) that operates Auckland International Airport or any subsidiary of, or successor to, that com­ pany: the company (as deﬁned in section 2 of the Welling­ 35 ton Airport Act 1990) that operates Wellington Inter­ 62 Commerce Amendment Bill Part 1 cl 4 “(c) national Airport or any subsidiary of, or successor to, that company: the airport company (as deﬁned in section 2 of the Air­ port Authorities Act 1966) that operates Christchurch International Airport or any subsidiary of, or successor 5 to, that company.
(1)(a) tototo (c)(c)(c) have the same mean­ “(3) Terms used in subsection subsection (1)(a) (1)(a) subsection ings as in section 2 of the Airport Authorities Act 1966.
“(4) The Minister may recommend that an Order in Council be made under subsection (1)(d) only if the Minister is satis­ 10 subsection (1)(d) (1)(d) subsection ﬁed that— “(a) the services are supplied in a market where any or all of the companies referred to in subsection subsection (2)(2)(2) have a subsection substantial degree of market power; and the Commission has consulted with interested parties 15 (however, the Commission is not required to conduct an inquiry).
“(b) “Imposition of regulation under this Part “56B Speciﬁed airports services declared to be regulated Speciﬁed airport services are regulated under this Part.

20 “56C Speciﬁed airport services are subject to information disclosure regulation Speciﬁed airport services are subject to information disclosure regulation under this Part.
“56D Duty to also disclose to Secretary of Transport 25 Each supplier of speciﬁed airport services must supply to the Secretary of Transport a copy of any information disclosed under this Part, as soon as practicable after so disclosing it.
“56E Commission must make determination specifying how this subpart applies The section section 52O52O52O determinations that specify how informa­ section tion disclosure regulation applies in respect of each supplier of speciﬁed airport services must be made no later than 111 JJJulululyyy 2010 (or, if the deadline for determining input methodologies 20102010 30 63 Part 1 cl 5 Commerce Amendment Bill 52T(2), no later than the date to is extended under section section 52T(2) 52T(2) section which that deadline is extended).
“How information disclosure regulation applies “56F Transitional provision until Commission publishes information disclosure requirements 5 “(1) The Airport Authorities (Airport Companies Information Dis­ closure) Regulations 1999 continue to apply to each supplier of speciﬁed airport services in respect of every ﬁnancial year that precedes the ﬁrst ﬁnancial year to which a determination section 56E56E56E applies to that 10 made by the Commission under section section supplier.
“(2) After that, no regulations made under section 9A of the Airport Authorities Act 1966 apply to that supplier.

“(3) Each supplier of speciﬁed airport services must supply to the Commission a copy of any information disclosed under those 15 regulations, as soon as practicable after so disclosing.
“56G Transitional provision requiring review after new prices set As soon as practicable after any new price for a speciﬁed air­ port service is set in or after 2012 by a supplier of the service, 20 the Commission must— “(a) review the information that has been disclosed by sup­ pliers of speciﬁed airport services under subpar subparttt 444; and subpar report to the Ministers of Commerce and Transport as to how effectively information disclosure regulation under 25 this Part is promoting the purpose in section section 525252 in re­ section spect of the speciﬁed airport services.” “(b) Part 4A repealed Part 4A is repealed.
Amendments to Part 5 30 Commission to prepare draft determination in relation to restrictive trade practices Section 62 is amended by repealing subsections (5) and (6) and substituting the following subsections: 5 6 (1) 64 Commerce Amendment Bill Part 1 cl 7 “(5) If any of the persons to whom a draft determination was sent under subsection (2) notiﬁes the Commission, in writing, within the period of 10 working days prescribed in subsection (3) that he or she wishes the Commission to hold a conference in relation to the draft determination, the Commission must 5 appoint a date, time, and place for the holding of the confer­ ence and give notice of the date, time, and place so appointed to each of the persons to whom a draft determination was sent under subsection (2).
“(6) The Commission may, of its own motion, determine to hold a 10 conference in relation to the draft determination and must ap­ point a date, time, and place for the holding of the conference and give notice of the date, time, and place so appointed to each of the persons to whom the draft determination was sent under subsection (2).” 62(5) andandand (6)(6)(6) of the principal Act (as amended by Section 62(5) Section 62(5) Section this section) apply in respect of every application for an au­ thorisation under section 58 of the principal Act that is made after the commencement of this section.
(2) 15 New sections 69AB and 69AC inserted 7 (1) The following sections are inserted after section 69A: “69AB Authorisation or clearance void if undertaking 20 “(1) contravened If a person contravenes an undertaking accepted under section 69A, the clearance given or the authorisation granted in rela­ 25 tion to the acquisition to which the undertaking relates is void and of no effect from the date it was given or granted.
Subsection (1)(1)(1) does not prevent the Court from making an “(2) Subsection Subsection sections 85A85A85A tototo 85C85C85C in relation to the undertak­ order under sections sections ing.
30 “69AC Variation of undertaking “(1) The Commission may, on an application made under subsec subsec­­­ subsec tiontiontion (2)(2)(2), accept a variation of an undertaking given under sec­ tion 69A if it considers that the variation would not have ma­ terially affected its decision to give the clearance or grant the 35 authorisation in relation to the acquisition to which the under­ 65 Part 1 cl 7 Commerce Amendment Bill taking relates if the variation had been proposed at the time of the decision.
subsection (1)(1)(1)— “(2) An application for a variation under subsection subsection “(a) may be made only by the person who gave the under­ taking or on whose behalf the undertaking was given; 5 and “(b) must be made no later than 20 working days before the date on which the relevant obligation under the under­ taking must be met.
“(3) The Commission must notify the person who made the appli­ 10 cation of its decision on the application no later than 3 working days before the relevant obligation under the undertaking must be met.
subsection (1)(1)(1)— “(4) A variation under subsection subsection “(a) “(b) comes into force on a date speciﬁed in the variation 15 (being a date that is on or after the date on which the variation is accepted); and is deemed to form part of the undertaking (and, accord­ ingly, is deemed under section 69A(3) to form part of the clearance given or the authorisation granted in re­ 20 lation to the acquisition to which the undertaking re­ lates).” Section 69AB69AB69AB of the principal Act (as inserted by this sec­ Section Section tion) applies only to undertakings under section 69A of the principal Act that are accepted in relation to clearances given 25 or authorisations granted on notices under section 66 or 67 of the principal Act that are registered after the commencement of this section.
Section 69A69A69ACCC of the principal Act (as inserted by this section) Section Section applies to— (a) every undertaking accepted under section 69A of the principal Act before the commencement of this section if the period for giving effect to the undertaking has not expired at the time of that commencement; and every undertaking accepted under section 69A of the 35 principal Act after the commencement of this section.
(b) 30 (2) (3) 66 8 9 (1) (2) 10 11 12 (1) Commerce Amendment Bill Part 1 cl 12 Heading and sections 70 to 74 repealed Sections 70 to 74 and the heading above section 70 are re­ pealed.
Amendments to Part 6 Jurisdiction of High Court Section 75(1) is amended by repealing paragraph (c) and sub­ stituting the following paragraph: “(c) in the case of contraventions relating to PPParararttt 444,— “(i) proceedings for the recovery of pecuniary penal­ section 868686 ororor 878787: ties under section section applications for orders under section 86A, 86C86C86C,,, section 86A, 86A, section ororor 87A87A87A: “(ii) 5 10 “(iii) applications 87C87C87C:”.
for injunctions under section section section Section 75(1) is amended by adding the following paragraph: 15 “(i) section 85A85A85A ororor 85B85B85B.” applications for orders under section section Jurisdiction of District Courts Section 76 is amended by omitting “86” and substituting “86B86B86B,,, 87B87B87B”.

Evidence not otherwise admissible Section 79 is amended by omitting “under section 80 or section 83” and substituting “for pecuniary penalties”.
20 New heading and section 79A The following heading and section are inserted after section 79: 25 “Proceedings for pecuniary penalties “79A Proceedings for pecuniary penalties “(b) In any proceedings under this Part for a pecuniary penalty— the standard of proof is the standard of proof applying “(a) in civil proceedings; and the Commission may, by the order of the Court, obtain discovery and administer interrogatories.” The following provisions are consequentially repealed: (a) section 74D(3) and (4): 30 (2) 67 Part 1 cl 13 Commerce Amendment Bill (b) (c) section 80(3) and (4): section 83(3) and (4).
Injunctions may be granted by Court for contravention of Part 3 The heading to section 84 is amended by adding “or under­ 5 taking”.
Section 84 is amended by adding the following subsection as subsection (2): If it appears to the Court, on the application of the Commis­ sion, that a person intends to engage, or is engaging, or has en­ 10 gaged, in conduct that constitutes or would constitute a contra­ vention of an undertaking accepted under section 69A, the Court, by order, may do all or any of the following things: “(a) grant an injunction restraining any person from engag­ ing in conduct that constitutes or would constitute— 15 a contravention of that undertaking: “(i) “(ii) any attempt to contravene that undertaking: “(iii) aiding, abetting, counselling, or procuring any other person to contravene that undertaking: inducing or attempting to induce any other per­ 20 son, whether by threats, promises, or otherwise, to contravene that undertaking: “(iv) “(b) “(c) “(v) being in any way directly or indirectly, know­ ingly concerned in, or party to, the contravention by any other person of that undertaking: “(vi) conspiring with any other person to contravene 25 that undertaking: impose on any person obligations to be observed in the carrying on of any business or the safeguarding of any business or any assets of any business: provide for the carrying on of any business or the safeguarding of any business or assets of any business, either by the appointment of a person to conduct or supervise the conduct of any business (on the terms and with the powers as may be speciﬁed or described in the 35 order), or in any other manner, as it thinks
 necessary in the circumstances of the case.” 30 13 (1) (2) “(2) 68 Commerce Amendment Bill Part 1 cl 14 (3) 84(2) of the principal Act (as inserted by this sec­ Section 84(2) 84(2) Section Section tion) applies only to undertakings under section 69A of the principal Act that are accepted in relation to clearances given or authorisations granted on notices under section 66 or 67 of the principal Act that are registered after the commencement 5 of this section.
New sections 85A to 85C inserted 14 (1) The following sections are inserted after section 85: “85A Pecuniary penalties for contravention of undertaking “(1) The Court may, on the application of the Commission, order a 10 person to pay a pecuniary penalty to the Crown if the Court is satisﬁed that the person— “(a) has contravened an undertaking accepted under section 69A; or “(b) has attempted to contravene an undertaking accepted 15 “(c) under section 69A; or has aided, abetted, counselled, or procured any other person to contravene an undertaking accepted under section 69A; or “(e) “(d) has induced, or attempted to induce, any other person, 20 whether by threats or promises or otherwise, to contra­ vene an undertaking accepted under section 69A; or has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by any other person of an undertaking accepted under section 69A; 25 or has conspired with any other person to contravene an undertaking accepted under section 69A.
“(2) However, the Court may only make an order under subsec subsec­­­ subsec “(f) tiontiontion (1)(1)(1) if the acquisition to which the undertaking relates has 30 proceeded.

“(3) The amount of pecuniary penalty must not, in respect of each “(4) act or omission, exceed $500,000.
In setting the amount of pecuniary penalty, the Court must take into account all of the following matters: “(a) “(b) the nature and extent of the contravention: the circumstances in which the contravention took place: 35 69 Part 1 cl 14 Commerce Amendment Bill “(c) whether the person has obstructed or hindered the Com­ mission in any attempt of the Commission to obtain compliance with the undertaking: “(d) whether the person has taken any steps with the inten­ tion of— “(i) “(ii) impeding the disposal of assets or shares in ac­ cordance with the undertaking; or limiting the effectiveness of the undertaking in preventing a substantial lessening of competition in a market: 5 10 “(e) whether the person or an interconnected body corporate has previously been found by the Court in proceedings under this Part to have engaged in similar conduct.
“(5) Subsection section 85C85C85C.

Subsection (4)(4)(4) is subject to section section Subsection “(6) A person may not be liable to more than 1 pecuniary penalty 15 in respect of the same conduct.

“(7) An application under this section may be made at any time within 12 months from the date on which the relevant obliga­ tion under the undertaking was required to be met.
“85B Court may order divestiture of assets or shares in respect 20 “(1) of contravention of undertaking If the Court, on the application of the Commission, is satis­ ﬁed that any person has contravened an undertaking accepted under section 69A and the acquisition to which the undertak­ ing relates has proceeded, the Court may, by order, give direc­ 25 tions for the disposal by that person of any assets or shares in accordance with the undertaking.
“(2) An application under this section may be made at any time within 12 months from the date on which the relevant obliga­ tion under the undertaking was required to be met.
30 “85C Matters Court must not take into account under sections 85A and 85B For the purposes of sections sections 85A85A85A andandand 85B85B85B, the Court must sections not take into account any of the following: “(a) whether it was appropriate for the Commission to ac­ 35 cept the undertaking under section 69A: 70 Commerce Amendment Bill Part 1 cl 15 “(b) whether the undertaking under section 69A is still ne­ cessary or desirable: “(c) whether any of the terms of the undertaking under sec­ “(d) tion 69A are still necessary or desirable: the extent to which the contravention of the undertaking 5 under section 69A may have lessened competition in a market.” Sections 85A85A85A tototo 85C85C85C of the principal Act (as inserted by this Sections Sections section) apply only to undertakings under section 69A of the principal Act that are accepted in relation to clearances given 10 or authorisations granted on notices under section 66 or 67 of the principal Act that are registered after the commencement of this section.
(2) 15 New heading and sections 86 to 87C substituted Sections 86 and 87 and the heading above section 86 are re­ 15 pealed and the following heading and sections substituted: “Regulated goods or services “86 Pecuniary penalty for contravening information disclosure requirement “(1) The Court may, on application by the Commission, order any 20 person to pay a pecuniary penalty to the Crown if the Court is satisﬁed that the person— “(a) has contravened any information disclosure require­ section 52C52C52C); or ment (as deﬁned in section section “(b) has attempted to contravene any such requirement; or “(c) has aided, abetted, counselled, or procured any other person to contravene any such requirement; or “(d) has induced, or attempted to induce, any other person, whether by threats or promises or otherwise, to contra­ vene any such requirement; or has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by any other person of any such requirement; or has conspired with any other person to contravene any such requirement.
“(e) “(f) 25 30 35 71 Part 1 cl 15 Commerce Amendment Bill “(2) section 86B86B86B, a reference to contra­ subsection (1)(1)(1) and section In subsection section subsection vening an information disclosure requirement includes all or any of the following: “(a) “(b) failing to disclose information required to be disclosed: failing to disclose information in the form or within the 5 time required: disclosing information under an information disclosure requirement that is false or misleading.
“(c) “(3) The amount of pecuniary penalty must not, in respect of each “(4) act or omission, exceed $500,000 in the case of an individual, 10 or $5,000,000 in the case of a body corporate.
In determining the amount of pecuniary penalty, the Court must have regard to all relevant matters, including— the nature and extent of the contravention; and “(a) the circumstances in which the contravention took 15 “(b) place; and “(c) whether the person has previously been found by the Court in proceedings under this Part to have engaged in similar conduct.

“(5) A supplier may not be liable to more than 1 pecuniary penalty 20 in respect of the same conduct.
“(6) Proceedings under this section may be commenced at any time within 3 years after the contravention occurred.

“86A Order requiring information disclosure requirement to be complied with 25 “(1) The Court may, on application by the Commission, order a supplier of regulated goods or services to comply with an in­ formation disclosure requirement that applies to the supplier.
“(2) An order under this section must specify the date by which, or period within which, the supplier must comply with the re­ 30 quirement.
“86B Offences relating to information disclosure regulation “(1) A person commits an offence if— “(a) the person, knowing that particular goods or services are subject to information disclosure regulation, in­ 35 72 Commerce Amendment Bill Part 1 cl 15 “(b) tentionally contravenes any information disclosure requirement relating to those goods or services; or the person is subject to an order under section section 86A86A86A and section fails to comply with the order by the date, or within the period, speciﬁed.
5 subsection (1)(1)(1) is “(2) A person who commits an offence under subsection subsection liable on summary conviction to a ﬁne not exceeding $200,000 in the case of an individual, or $1,000,000 in the case of a body corporate.

“(3) Despite section 14 of the Summary Proceedings Act 1957, pro­ 10 ceedings for an offence under subsection (1)(a) may be com­ subsection (1)(a) (1)(a) subsection menced at any time within 3 years after the contravention oc­ curred.
“(b) “86C Orders where negotiate/arbitrate regulation applies “(1) The Court may, on the application of a party (party A) to ne­ 15 gotiation or arbitration in respect of goods or services that are subject to negotiate/arbitrate regulation, make either or both of the following orders: “(a) an order requiring another party to the negotiation or arbitration (party B) to comply with the relevant secsecsec­­­ 20 tiontiontion 52O52O52O determination in the manner speciﬁed by the Court: an order requiring party B to pay party A an amount to compensate party A for loss or damage suffered as a result of party B failing to co­operate, or inadequately 25 co­operating with, the negotiation or arbitration.
(1)(b) must “(2) Any application for an order under subsection subsection (1)(b) (1)(b) subsection be made within 1 year after the date on which the failure to co­operate, or inadequate co­operation, occurred.
In setting an amount under subsection (1)(b), the Court must 30 subsection (1)(b) (1)(b) subsection have regard to all relevant factors, including— “(a) “(b) the nature and extent of the failure to co­operate; and the extent to which the failure was the result of factors outside the control of party B; and “(3) “(c) whether party B has previously been ordered to pay 35 compensation for a similar failure in proceedings under this section.
73 Part 1 cl 15 Commerce Amendment Bill “87 Pecuniary penalty for contravening price­quality requirements “(1) The Court may, on application by the Commission, order a person to pay a pecuniary penalty to the Crown if the Court is satisﬁed that the person— “(a) has contravened any price­quality requirement applying to the regulated goods or services; or 5 “(b) has attempted to contravene any such requirement; or “(c) has aided, abetted, counselled, or procured any other person to contravene any such requirement; or “(d) has induced, or attempted to induce, any other person, whether by threats or promises or otherwise, to contra­ vene any such requirement; or has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by any other 15 person of any such requirement; or has conspired with any other person to contravene any such requirement.
“(e) “(f) 10 “(2) sections 87A87A87A tototo 87C87C87C, a reference to subsection (1)(1)(1) and sections In subsection sections subsection contravening a price­quality requirement— “(a) refers to a requirement imposed in relation to goods or services that are subject to default­customised price­ quality regulation or to individual price­quality regula­ tion imposed under PPParararttt 444; and “(b) means either or both of the following: 20 25 “(i) “(ii) failing to comply with the requirements for prices, whether by charging a price for the goods or services that is higher than the maximum price permitted under the price­quality, or by receiving more revenue than is permitted, or in 30 any other way: refusing or failing to comply with any quality standards required under the price­quality regu­ lation.
“(3) The amount of pecuniary penalty must not, in respect of each 35 act or omission, exceed $500,000 in the case of an individual, or $5,000,000 in the case of a body corporate.
In setting the amount of pecuniary penalty, the Court must take into account all of the following matters: “(4) 74 Commerce Amendment Bill Part 1 cl 15 “(a) “(b) “(c) the nature and extent of the contravention: the nature and extent of any loss or damage suffered by any person as a result of the contravention: the circumstances in which the contravention took place: “(d) whether or not the person has previously been found by the Court in proceedings under this Part to have engaged in similar conduct.
“(5) A supplier may not be liable to more than 1 pecuniary penalty in respect of the same conduct.

“(6) Proceedings under this section may be commenced at any time within 3 years after the contravention occurred.
5 10 “87A Compensation for contravention of price­quality “(1) requirement If the Court orders a person to pay a pecuniary penalty under 15 section 878787 in respect of the contravention of a price­quality section section requirement, the Court may, in addition, order the person to pay compensation to any person who has suffered, or is likely to suffer, loss or damage as a result of the contravention (an aggrieved person).
20 “(2) An application for orders under this section may be made by the Commission or any aggrieved person.

“(3) The application must be made within 1 year of the date of the pecuniary penalty order.

“(4) The Court may make an order under this section whether or 25 “(5) not any aggrieved person is party to the proceedings.

In proceedings under this section, the Court may make such orders as to cost as it thinks ﬁt.
“87B Offence relating to price­quality regulation “(1) A person commits an offence if— 30 “(a) “(b) the person, knowing that particular goods or services are subject to price­quality regulation, intentionally contravenes a price­quality requirement in respect of the goods or services; or the person is subject 87C(1)(b) and fails to comply with the order.
87C(1)(b) 87C(1)(b) section 35 to an order under section section 75 Part 1 cl 16 Commerce Amendment Bill subsection (1)(1)(1) is “(2) A person who commits an offence under subsection subsection liable on summary conviction to a ﬁne not exceeding $200,000 in the case of an individual, or $1,000,000 in the case of a body corporate.
“(3) Despite section 14 of the Summary Proceedings Act 1957, pro­ 5 ceedings for an offence under subsection (1)(a) may be com­ subsection (1)(a) (1)(a) subsection menced at any time within 3 years after the contravention oc­ curred.
“87C Injunction and other orders relating to price­quality “(1) regulation If the Court is satisﬁed that goods or services that are subject to price­quality regulation are being supplied, or are likely to be supplied, in contravention of any price­quality requirement applying with respect to those goods or services, the Court may do either or both of the following: “(a) grant an injunction restraining any supplier of those goods or services from supplying them in contravention of the price­quality requirement: requiring the supplier to supply the goods or services in accordance with the price­quality requirement applying 20 to them.
10 15 “(b) “(2) An application for an order under this section may be made by any person.” 16 “(7) 17 Other orders Section 89 is amended by adding the following subsection: In this section, a reference to a contravention of this Act in­ cludes a reference to contravening the requirements of any type of regulation under PPParararttt 444.” 25 Appeals in relation to determinations by Commission Section 91 is amended by repealing subsection (1) and substi­ 30 tuting the following subsections: “(1) There is a right of appeal to the High Court under this subsec­ tion against any determination of the Commission under this Act, other than the following: “(a) a determination made under section section 35 section 52O52O52O (a section section section 52O52O52O determination): 76 Commerce Amendment Bill Part 1 cl 22 “(b) an input methodology determination (as deﬁned in secsecsec­­­ tiontiontion 52Y52Y52Y, and for which a separate appeal right is given under that section).
“(1A) There is a right of appeal to the High Court on a question of law against any determination of the Commission under 5 this Act (including a determination referred to in subsection subsection subsection (1)(1)(1)).” 18 19 Persons entitled to appeal Section 92 is amended by omitting paragraphs (d) and (e) and substituting the following paragraph: “(d) in the case of an appeal against a determination made section 52O52O52O, any supplier or consumer (as de­ under section section ﬁned in section section 52C52C52C) of goods or services to which the section determination relates:”.
Determination of appeals Section 93 is amended by omitting all the words above para­ graph (a) and substituting “In determining an appeal under sec­ tion 91(1), the Court may do any of the following:”.
Amendments to Part 7 20 “(4) Power to search Section 98A is amended by adding the following subsection: In this section, a reference to a contravention of this Act in­ cludes a reference to contravening the requirements of any type of regulation under PPParararttt 444.” 10 15 20 21 22 (1) (2) Offences Section 103(1)(a) is amended by omitting “70E” and substi­ 53N, 53ZC53ZC53ZC”.
tuting “53B(1)(c), 53B(1)(c), 53N, 53N, 53B(1)(c), 25 Restriction on delegation Section 105(1) is amended by omitting “, except in accordance with subsection (2)”.

Section 105 is amended by repealing subsections (2) and (3).

30 77 Part 1 cl 23 Commerce Amendment Bill 23 (1) (2) (3) (4) 24 Proceedings privileged Section 106(4) is amended by omitting “or that person’s spouse”.

Section 106(5) is amended by omitting “under section 80 or section 83” and substituting “for pecuniary penalties”.
Section 106(5) is amended by omitting “, or that person’s spouse”.

Section 106(6)(b) is amended by omitting “103(1)(b)” and substituting “103”.

Regulations Section 108 is amended by repealing paragraph (cb) and sub­ stituting the following paragraph: “(cb) authorising the Commission to refund a part of a prescribed fee paid by a person in any case where a written undertaking is obtained or accepted from that person:”.

5 10 15 25 26 27 (1) (2) Sections 116 to 118 repealed Sections 116 to 118 are repealed.
New Schedules 5 and 6 added New Schedules 5 and 6 added The Schedules 5 and 6 set out in the Schedule of this Act are 20 added.

Part 2 Amendments to other Acts Amendments to Electricity Act 1992 This section amends the Electricity Act 1992.
The deﬁnition of consumer in section 2(1) is amended by— omitting “the Corporation” in the ﬁrst place where it ap­ (a) pears and substituting “any electricity generator”; and omitting “the Corporation” in the second place where it appears and substituting “the electricity generator”.

(b) 25 30 (3) Section 172E(2)(d) section 54V54V54V”.
57MA(1)” and substituting “section section is amended by omitting “section 78 28 (1) (2) 29 (1) (2) Commerce Amendment Bill Part 2 cl 30 Amendment to Electricity Industry Reform Act 1998 This section amends the Electricity Industry Reform Act 1998.

Section 92 is amended by omitting “and Part 4A”.

Amendments to Gas Act 1992 This section amends the Gas Act 1992.
The deﬁnition of consumer in section 2(1) is amended by— omitting “the Corporation” in the ﬁrst place where it (a) appears and substituting “any gas producer”; and omitting “the Corporation” in the second place where it appears and substituting “the gas producer”.

(b) 5 10 Amendments to Airport Authorities Act 1966 This section amends the Airport Authorities Act 1966.
Section 4A is amended by adding the following subsection: 30 (1) (2) “(4) This section does not limit the application of regulation under (3) PPParararttt 444 of the Commerce Act 1986.” Section 9A is amended by inserting the following subsection before subsection (1): 15 “(1A) This section applies to each of the following airport compan­ ies until the end of the last day of the ﬁnancial year that is section 56F56F56F of the Commerce Act 1986 in re­ 20 referred to in section section lation to that company: “(a) the company (as deﬁned in section 2 of the Auckland Airport Act 1987) that operates Auckland International Airport: the company (as deﬁned in section 2 of the Welling­ 25 ton Airport Act 1990) that operates Wellington Inter­ national Airport: the airport company (as deﬁned in section 2 of the Air­ port Authorities Act 1966) that operates Christchurch International Airport.
30 “(b) “(c) “(1B) After the end of that day, this section does not apply to that company, and references in this section to ‘every airport com­ pany’ are references to every company other than that com­ pany.” 79 Schedule Commerce Amendment Bill Schedule New Schedules Schedule 5 Material incorporated by reference sss 262626 sss 53ZE53ZE53ZE Deﬁnitions In this schedule, unless the context otherwise requires,— material means written material that is set out in a document other than a Part 4 determination Part 4 determination means either of the following: (a) (b) a determination made under section section 52O52O52O: section section 52V52V52V.
an input methodology published under section section Material incorporated by reference into Part 4 determinations The Commission may incorporate by reference any material into a Part 4 determination if— (a) (b) the material deals with technical matters; and it is impractical to include it in, or publish it as part of, the determination.
1 2 (1) (2) Material may be incorporated by reference into a Part 4 deter­ mination— (a) (b) with any modiﬁcations, additions, or variations speci­ in whole or in part; and ﬁed in the Part 4 determination.
(3) Material incorporated by reference— (a) (b) is the material as it exists at the time the Part 4 deter­ mination is published; and has legal effect as part of the Part 4 determination for lauses 888 andandand 999. all purposes, except as provided in ccclauses lauses Proof of material incorporated by reference 3 (1) A copy of any material incorporated by reference in a Part 4 determination must be— (a) certiﬁed by the chairperson as a correct copy of the ma­ terial; and retained by the chairperson.
(b) 80 Commerce Amendment Bill Schedule Schedule 5—continued (2) 4 (1) (2) The production in proceedings of a certiﬁed copy of the ma­ terial is, in the absence of evidence to the contrary, sufﬁcient evidence of the incorporation of the material into the Part 4 determination.
Access to material incorporated by reference The Commission— (a) must make copies of all material incorporated by refer­ ence in a Part 4 determination available for inspection during normal working hours at the head ofﬁce of the Commission; and (b) must make copies of the material available for purchase at a reasonable price from the head ofﬁce of the Com­ mission; and (c) may make copies of the material available in any other 5 10 way that the chairperson considers appropriate in the 15 circumstances (such as on an Internet site); and (d) must give notice in the Gazette of how the material is available for inspection and purchase.
lause (1)(1)(1) applies to material when it is ﬁrst incorporated SubcSubcSubclause lause into a Part 4 determination, and to any subsequent amendment 20 or replacement of the material that is incorporated into the de­ termination.

(3) A failure to comply with this clause does not invalidate a Part 4 determination.
5 25 Effect of amendments to, or replacements of, material incorporated by reference An amendment to, or replacement of, material incorporated by reference in a Part 4 determination has legal effect as part of the determination only if— (a) the amendment or replacement material is made by the 30 person or organisation that made the original material; and the amendment or replacement material is of the same general character as the original material; and either— 35 (b) (c) 81 Schedule Commerce Amendment Bill Schedule 5—continued (i) (ii) a subsequent Part 4 determination states that the particular amendment or replacement material has legal effect as part of the determination; or the chairperson, by notice in the Gazette, adopts the amendment or replacement material as hav­ 5 ing legal effect as part of the determination.
Effect of expiry of material incorporated by reference Material incorporated by reference in a Part 4 determination that expires, is revoked, or ceases to have effect, ceases to have legal effect as part of the Part 4 determination only if— (a) a subsequent Part 4 determination states that the mater­ ial ceases to have that legal effect; or the chairperson, by notice in the Gazette, states that the material ceases to have that legal effect.
(b) Consultation before material incorporated by reference This clause applies if— (a) the Commission proposes to incorporate material by reference into any Part 4 determination; or the Commission proposes to make a Part 4 determin­ ation adopting amended or replacement material; or the chairperson proposes to publish a notice in the Gazette adopting amended or replacement material.
(b) (c) 10 15 20 lause (1)(1)(1) are proposed, subclause lause If any of the things referred to in subcsubc the Commission— (a) must make copies of the material (which in this sub­ 25 clause includes any amended or replacement material) proposed to be incorporated by reference available for inspection during normal working hours at the head of­ ﬁce of the Commission; and (b) must make copies of the material available for purchase 30 at a reasonable price from the head ofﬁce of the Com­ mission; and (c) may make copies of the material available in any other way that the chairperson considers appropriate in the circumstances (such as on an Internet site); and 35 6 7 (1) (2) 82 Commerce Amendment Bill Schedule Schedule 5—continued (d) must give notice in the Gazette of how copies of the ma­ terial may be inspected and purchased, and how people may make comments on the proposal; and (e) must allow a reasonable opportunity for people to com­ (f) ment on the proposal; and must consider any comments made within the time al­ lowed.
5 (3) A failure to comply with this clause does not invalidate a Part 4 determination.

8 9 Acts and Regulations Publication Act 1989 not applicable 10 to material incorporated by reference The Acts and Regulations Publication Act 1989 does not apply to material incorporated by reference in a Part 4 determination, or to any amendment to, or replacement of, the material.
Application of Regulations (Disallowance) Act 1989 to material incorporated by reference 15 (1) Nothing in section 4 of the Regulations (Disallowance) Act 1989 requires material incorporated by reference in a Part 4 determination to be laid before the House of Representatives.

(2) However, in all other respects the Regulations (Disallowance) 20 Act 1989 applies to material incorporated by reference in a Part 4 determination.
Schedule 6 Exemptions from Part 4 in respect of speciﬁc pipelines 55A(2)(d), (4)(4)(4) sss 55A(2)(d), 55A(2)(d), 25 Pipeline owner Todd Taranaki Limited Swift Energy New Zealand Limited Pipeline McKee Production Station—Tikorangi gas pipelines Waihapa—New Plymouth gas pipeline 83 Schedule Commerce Amendment Bill Schedule 6—continued Pipeline owner Methanex New Zealand Limited Pipeline • • • • Bertrand Road—Waitara Val­ ley Plant gas pipeline (via Faull Road Mix­ ing station) Tikorangi—Faull Road Mixing Station gas pipeline Faull Road Mix­ Station—Mo­ ing tunui Plant main process gas process gas pipeline Faull Road Mix­ ing Station—Waitara Valley Plant minor gas pipeline Vector Limited Nova Gas Limited 12 Kapuni—Faull Road Mixing Station low temperature separator gas pipeline All gas pipelines Wellington, New Zealand: Published under the authority of the New Zealand Government—2008 84