Parker David: Commerce (Cartels and Other Matters) Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Parker David: Commerce (Cartels and Other Matters) Amendment Bill — First Reading 
[Sitting date: 24 July 2012. Volume:682;Page:3873. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 Ever since we had the United States some years ago embarking upon Operation Enduring Freedom or the coalition of the willing I have been suspicious of loaded names when they come before Parliament. So I have been somewhat intrigued to hear all of the speeches so far in this debate that talked about “hard-core cartel behaviour”. Immediately I had something springing to mind that was in the publishing industry that was not really at the Mills and Boon end of romance. But then I looked further at this Commerce (Cartels and Other Matters) Amendment Bill and I saw that other than in the explanatory statement where there is this loaded reference to “hard-core cartel behaviour”— 
Dr Russel Norman 
: Domicility are you talking about? 
Hon DAVID PARKER 
: Domicility? No I am not talking about domicility or other hard-core cartel behaviour in the vernacular! I was surprised when I read the bill having picked up the copy that was on the Table in the House in front of me to see that other than in the general policy statement there is no reference to “hard-core cartel behaviour” because it actually is not a term of art or a term of science or indeed a reference to hard-core publications. I think it is intended to be a reference to bad or serious cartel behaviour rather than some sort of cartel behaviour that might not be quite so serious. 
After that little diversion I think it is appropriate to record that there are repeated incidents around the world including in New Zealand of inappropriate cartel behaviour by certain large industries that have dominance. There are a small number of players who can influence price inappropriately to their commercial advantage and to the disadvantage of consumers who have to pay more for their products or cannot get them when they should be able to. We have seen instances of that some of which have been referred to by the Minister already and by my colleague the Hon Clayton Cosgrove who made reference to some of the wood chemical price fixing that was going on which cost New Zealand industry a considerable amount. 
Perhaps the largest of these events to have happened in New Zealand recently which is referred to in the regulatory impact statement that is on the Table of the House dealt with air freight which was at a cost of some $200 million over a period of 7 years. It shows that the additional money that can effectively be stripped out of the New Zealand economy and out of the pockets of consumers to the benefit of corporates that embark upon illegal anti-competitive practices can be quite significant. This legislation attempts to control that. 
If we want another example of where the ethics in business are sometimes less than they ought to be of recent note has been the controversy in respect of the bank liability rates in the United Kingdom and the United States where there was effectively cartel-like behaviour over there that led to interest rates being set to the benefit of banks to the tune of probably billions of dollars over the period and that would effectively have been at the cost of other participants in the economy. 
Cartel behaviour can exhibit itself in a number of ways. You can have an agreement to charge prices that are less than competitive. You can have agreements to carve up market share in a way that results in less competition which results in higher prices. You can have agreements to limit the supply of a good or service in an artificial way where because there is an inadequate supply of that good or service the price is driven up because there are more people who want to acquire that good or service than there is available to be purchased because of this constraint on supply that is artificially orchestrated by those within the cartel. So all of these things have to be covered. 
As prior speakers have said you also have to be careful that you are not stopping things that are not inappropriate—inappropriate levels of collaboration or in some cases vertical integration of some aspects of industry can be in the interests of consumers and can be an outcome of competitive behaviour which is to the advantage of society because prices are not higher than they need to be. And we all know that if prices are higher in one area then something else suffers in another. For example if someone has to pay too much for their electricity then they might not be able to buy some clothes that they need for their kids etc. 
So although this bill is good in so far as it goes it is interesting to me that the Government is lauding the fact that it is introducing competition in this area where in another area of the economy it is probably causing a cost to the average residential consumer of about $200 per annum as a consequence of what will be the effect of the State-owned enterprise sale. We know that the average amount that is currently charged by a State-owned enterprise to a residential consumer is about $200 per annum less than the private sector competitors. We know that the electricity market is limited in its competition. That is why it has got so many rules. Rules for the conduct of the electricity market are thicker than the Bible in an effort to make that market more competitive than it would otherwise be. It is still not a perfectly competitive market. We know that from the analysis that has been done by Molly Melhuish and others and it remains uncontroverted despite the fact of some of the National Party—I have heard Tony Ryall taking issue with a very small part of her analysis—trying to discredit the whole thing. We know that in reality the absence of true competition in that market followed by strengthening this private sector effort to try to maximise profits through increasing prices in the electricity sector will have far more effect on consumers than this Commerce (Cartels and Other Matters) Amendment Bill which although a worthy thing for consideration by this Parliament will not be as influential on the interests of New Zealanders as will the effect of the sale of interests in those State-owned enterprise companies where the prices will move towards the private sector competitors following privatisation of those public company shares. So although the Labour Party supports this bill I note that the bill will not have as much effect as that other measure that I have talked about which goes in the other direction. 
One of the reasons why it is necessary to update this is that we know that the pernicious effects of cartel behaviour can be wide-reaching and we know that currently the penalties are inadequate. If you are a cartel and you get away with it for a period of years the civil penalties are at the moment so low that you could be quids ahead despite the fact that you eventually get caught and are brought to justice through the New Zealand courts. The civil penalties will be less than the amount that the cartel has taken out of the New Zealand economy. So for that reason it is necessary to change the penalty provisions to make it clear that the payment that can be sought from the cartel more accurately reflects the loss that has been caused. 
The regulatory impact statement makes the point that even after this legislation is passed not all cartel behaviour will be caught. It is very hard to pinpoint this cartel behaviour on occasions where some of the conduct is commenced outside the shores of New Zealand and these arrangements are very opaque. The regulatory impact statement if I read it correctly estimates that even after this bill has passed only about one-third of the cartel behaviours on best estimates is likely to be uncovered which means that two-thirds of the cartel behaviour will go undiscovered and unpunished. So this will not be a universal panacea to the problem but it is an appropriate step. It will align us more closely with the steps that have been taken in other Western jurisdictions that have identified that this problem does need to be addressed and have introduced penalties similar to those being proposed here. The closest comparison is probably in Australia. They have had this for a couple of years which does point to the fact that this amendment in New Zealand is probably overdue rather than ahead of its time.