Nash Stuart: Commerce (Cartels and Other Matters) Amendment Bill — Second ReadingText is incorporated into the Bound VolumeNash Stuart: Commerce (Cartels and Other Matters) Amendment Bill — Second Reading[Sitting date: 26 November 2014. Volume:702;Page:894. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier):I must admit that I was a little bit concerned when I heard the new chair of the Commerce Committee Melissa Lee giving that very brief speech around what National is doing in terms of deepening and broadening capital markets. I might be wrong but I thought that member actually said that the Government is moving to put in place mechanisms that drive spending away from borrowing and into saving. The way I read things the reason we have got instruments like loan-to-value ratios in place is that New Zealanders have such a love affair with investing in the non-productive sector like housing in Auckland that we are in big trouble. In fact our capital markets are so narrow that our own superannuation fund feels the need to invest offshore because if it invested all of its money in New Zealand it would create such a distortionary effect as to completely stuff up our capital markets.I would say that there is one thing that the Government could do—and I think I have heard Mr English say this; I could be wrong—that would actually have a massive impact on broadening and deepening our capital markets and that is tax reform in a whole range of areas. But that is a conversation for another day.At this point we are talking about the Commerce (Cartels and Other Matters) Amendment Bill. It is a very important piece of legislation. As you know yourself Mr Deputy Speaker being a former chair of the Commerce Committee all parties in this Parliament have worked together to really tighten up the legislation around capital markets and business practice in this country. A lot of that was actually started by Lianne Dalziel when she was the Minister of Commerce and she put a lot of legislation through. To be fair to the Hon Simon Power when he was the Minister of Commerce he picked up a lot of this legislation and was I would suggest probably the hardest-working Minister in that Government when he was here. I think I remember at one stage looking at the Order Paper when he was the Minister of Commerce and a third of all bills on the Order Paper were sponsored by Mr Simon Power.I suppose this is why it is a little bit disappointing that I am speaking on this bill. By that I mean that this bill was introduced in 2010. I took a little bit of a break—had a bit of a sabbatical for 3 years and then came back—and of course this bill should have been well passed before I got here.Hon Member: Sent on holiday.STUART NASH: Sent on hiatus. I went and had a bit of good time and spent some time with my kids and my family had some more kids another wife and then I came back. I would have thought that when this bill was introduced in 2010—in fact it was introduced when I was here the first time. I probably spoke on it. This bill should have gone through. It really should have. It sat on the Order Paper. It had its first reading in 2012 was reported back in May 2013 and here we are doing its second reading now. It has taken too long and I think there is probably acknowledgment from that side of the House as well that it has taken too long but it is here now thank goodness—better late than never.There is one thing that we really need to do in this country if we are to attract the sort of investment that we need and that is to really tighten up the rules and the regulations around doing business in New Zealand and that is to do with our capital markets as well. I remember when I was working at Fletcher Challenge and I was speaking to the chief financial officer. He was an American chap who had worked a lot in the big American companies and he said that when he first came over to Fletcher’s and went around the world seeking capital investment into Fletcher’s he was told by a number of overseas institutional investors: “Why would we invest in New Zealand? It’s like the Wild West.” That is the sort of overseas reputation that New Zealand had at that point in time. This was the mid to early 1990s.I am very pleased to say that we have moved a long way since then but I think what we saw with the global financial crisis and the collapse of the vast majority of mezzanine finance companies was that we still had a long way to go—we had a long way to go. But this is one of the bills that is just getting us there.There is nothing more insidious than cartels. If I may say I suspect one of the reasons that this bill has taken so long to get here is that I often say that one of the big differences between the National Party and the Labour Party is that the National Party believes that the market has the outcome—leave it to the market and it will deliver optimal results for New Zealand. But what the Labour Party believes is that when there is monopolistic behaviour going on or cartel behaviour or behaviour that is occurring to the detriment of New Zealanders the Government has a very important role to play in that. This bill in a way addresses that to a certain extent. But my personal view is that the Government should be playing a much stronger role in in fact knocking monopolistic behaviour on the head well and truly. What that would do is really serve the interests of a whole lot of New Zealanders who are struggling out there at the moment.We have just had a report back from the Commerce Commission around supermarket behaviour. It did not find any sort of price fixing or any coercive behaviour going on but the fact that so many people reported or submitted to the Commerce Commission on this said that it does not smell quite right. I suppose again this bill sends a signal to any organisation that may be tempted to engage in cartel behaviour that we are watching you—we are watching you. And if an organisation engages in cartel behaviour and it is proven—and look let us be honest about this: the test is actually not that high—then it will be absolutely nailed.The thing I also like about this bill is that it holds people personally liable. So directors or chief operational members cannot escape prosecution if they have knowingly behaved in this sort of way. You know I suspect we can all think of industries that we have long suspected of operating cartel behaviour but proving it is a little bit different. I mean as we all know when we drive down the street we often wonder why the petrol is the same price at Caltex Shell BP and Gull and all those petrol stations. Some of us scratch our heads and go: “Well goodness me I wonder whether these guys catch up behind closed doors.” I suppose it is a little bit different because the Shell guys can drive down the road and they can see exactly the same thing so it is difficult to get a truly competitive pricing model in the petrol market because it is such a commodity and they do advertise their prices in the most public manner.But there have been a number of cases and I recall one having worked in the forestry industry where the Commerce Commission has taken a good hard look at some behaviour and in one instance—and I will not mention it in the House even though I am allowed to—it went very very hard against a major New Zealand company that was operating what the commission believed was a cartel.Anyway the purpose of this bill is to amend the Commerce Act 1986 to introduce criminal sanctions for hard-core cartel behaviour. It does make a number of other amendments including the provisions to govern jurisdiction and other penalties. We do operate in a globalised economy at this point in time and that just makes it easier for cartel behaviour to take place. It does not have to take place in New Zealand—it can take place overseas—but if it impacts upon the New Zealand company in any way shape or form believe me our regulatory bodies will find them and we will take the steps.What is a cartel? We often think of a cartel as five or six or seven companies operating together but actually the description of a cartel is that it can be between two or more businesses that regulate output fix prices and in general make the market less competitive. And in this day and age where that gap is growing at a huge rate between the few at the top who are doing incredibly well and a growing number down the bottom who are not anti-competitive behaviour just makes it that much more difficult for people to actually survive let alone get ahead.The banned cartel conducts include price fixing. What price fixing is—I think we probably all know what it is—is when companies agree to set a set price or a discount. Again that can happen behind closed doors it can happen offshore but if it affects the competitiveness of the New Zealand market then we will crack down on it. They include restricting output. This is a common practice where they say: “Well OK there is too much supply. Let’s restrict output and force the price up.” But it is an agreement between two companies to do this. It is not an agreement that is made in isolation given the market variables; it is done in collusion. Market allocating—that is an agreement to pursue other customers. Again I have been involved in industries where I am sure this goes on and it has got to stop. I am not saying it still happens because I was involved in those industries a little while ago. And bid rigging which is agreeing on prices to submit for tenders.The reason this bill is so important is that as we rebuild New Zealand’s second-largest city we need to have absolute confidence that it is being done at the best possible price in a manner that is completely legitimate. By that I mean that I think we would be absolutely horrified to find that there had been cartel behaviour going on in such a massive project. There has not been a project as big as the rebuild of Christchurch and I can imagine it would be tempting for some industries to sit down and engage in the sort of behaviour that New Zealanders find reprehensible. So this is a very very clear reminder and a very clear signal to those organisations that this sort of anti-competitive behaviour will absolutely not be tolerated.The great thing about this bill is that every single party and member in this House agrees with it. That is why I commend this bill to the House. Thank you very much.