Swain Paul: Commerce Amendment Bill — First Reading 
Swain Paul: Commerce Amendment Bill — First Reading 
[Volume:646;Page:15161] 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 Firstly I agree with the member that this kind of legislation is incredibly complicated. It is difficult and I say that with some experience as a former Minister of Commerce who left the hard decisions particularly on airport matters to the present Minister Lianne Dalziel—probably because it was a bit beyond me to be fair although other people say that I just ran out of time. The truth is that the Commerce Amendment Bill is enormously difficult and complicated and it will take the time of the Commerce Committee to look into it in great detail. 
Before the select committee at the moment is the Electricity Industry Reform Amendment Bill which looks at issues to do with lines companies and whether they should be allowed to extend their involvement in energy generation and at the relationship between retail and lines businesses and another issue that was raised at the select committee this morning is what the relationship is if any between the legislation we are looking at there and this bill in relation to lines companies. That is something that both the chair and I are keen to investigate to see whether in fact there is a relationship and if there is to make sure that the two are somehow in sync. So it is enormously complicated and we will obviously have to spend a lot of time on it. 
I want to get to some of the important bits and as the Minister has said the bill is about providing efficient and cost-effective regulation of the price and quality of key goods and services that are not subject to competition. In fact as she said there are not many such services. The bill is primarily aimed at electricity lines gas pipe lines and airports. When it comes to airports the problem we had when we were looking at the issue particularly with Auckland airport was the complaints from the airline industry that an airport like Auckland obviously had airlines over a barrel. It could charge whatever it liked and it was charging on its landing charges in order to boost up its facilities within the airport. There was a lot of cross-subsidising going on or so airlines said. It was always difficult to know because the airline industry was not exactly an enormously poor cousin in this issue. When we look at the situation across the world the only thing we can say with any certainty is that airlines accuse airports of ripping them off and airports accuse airlines of not being sympathetic to their development needs. Airports also argue that they are not a monopoly because airlines can fly somewhere else. So this was part of the issue when we came to look at whether airports should be regulated and it was enormously difficult. 
One of the issues that I think is being fixed in this legislation is the issue of how to value the asset. We got into great discussions for example about what the value is of a sea wall around an airport. It is a necessary piece of work but is it part of the airfield or part of some other form of infrastructure? Asset valuation is an enormously difficult thing. Of course at the time a lot of these things were under the Airport Authorities Act. Although the Minister of Commerce and the Commerce Commission could have conducted inquiries into these matters the next point was that there was available the use of only a very blunt instrument—one either regulated or one did not. That was enormously difficult and trying to get to the bottom of it all—trying to get decent information trying to have a methodology on what to do with that information and then coming up with a formula to regulate in an area as complex as the airline industry—was really really difficult. 
Hon Lianne Dalziel 
: It was two separate processes. 
Hon PAUL SWAIN 
: Well it actually was two separate processes; the member is right. Of course the whole issue really concerned what the relationship was between airport activities on the one hand—air field activities which was really the very narrow view that one could take when looking at these inquiries—versus other things like specified passenger terminal activities which was always the issue in what was a cross-subsidy issue. At that time it was clear that there was an interest in the whole thing but the legislative response was inadequate. I think that that was ultimately the point we all came to. Now the Minister is bringing forward this legislation which looks at things like the specified airports services—which is always the issue of dispute—and at what the nature is of the market one is actually talking about and are listed in the bill under new section 56A(1) substituted in clause 4 as including “(a) aircraft and freight activities: (b) airfield activities: (c) specified passengers terminal activities: (d) any other services that are determined by the Governor-General by Order in Council made on the recommendation of the Minister … to be specified airport services for the purposes of this Part.” Basically those four bits and anything else that she likes to consider should be included. I think that will help. I am not sure whether it will make the ultimate decision any easier but I think it will certainly help in the ability to try to deal with the really complex issues and the dispute between those two groups. That is a really important issue. 
Having looked through the bill—and I must say I have had a brief look at it but have not studied it at any great length—I think that one of the other things the Minister mentions is the ability to introduce some new fit for purpose regulatory powers. As I said before we had a kind of on-off switch under the previous regime. She went on to say in her speech that the current Act provides for price control as the sole response to the exercise of market power by suppliers with natural monopoly characteristics. I suppose that the person out in the street interested in this kind of thing is very keen on regulating monopolies. In fact regulatory economics is something that has only come into play again given that it was out of the lexicon for about 2 decades under previous Governments—and I say “Governments” advisedly—and everybody wants to drop straight in and regulate. The difficulty with regulation is that it does have perverse effects and we can send strange signals. For example if we regulate lines companies too hard the potential is they do not reinvest and then the lights go out. Of course lines companies then usually blame the Government because it is the regulator. On the other hand if we do not regulate hard enough then lines companies take monopoly rents and they achieve that by ripping off the poor consumer. So it is actually an enormously difficult thing to do and in a country the size of New Zealand it is enormously complex. 
The Minister is adding in some other powers that might be useful. One is information disclosure. That is a non-intrusive form of regulation because it means that people have to be a bit more upfront about their activities so that everyone can have a look. The general idea is to shine light in the dark corners although my experience in information disclosure is that it depends on who has the best accountants: usually an information disclosure documentation is about 894 pages the appendices 1 2 and 3 are usually about 300 pages each and the real answer is on about page 43 of appendix 2—if one can fight one’s way through it. The matter ends up in enormous debate and argument about whether in fact something applies to this or to that. However information disclosure is obviously really important. 
The negotiate/arbitrate form of regulation is a really critical thing and in the end it is quite a difficult thing. We are actually after commercial outcomes and if we can get some sort of negotiation/arbitration that is much better in my view than a Second World view which is that of Governments coming in and trying to determine the price of something that is enormously difficult to determine. Then there is the default/customised regulation which I am not 100 percent certain of I must say. I hope to be more the wiser on that during the select committee process. 
I thank the Minister for doing this work; perhaps if the previous Minister had actually got on and done the job a little harder we would not be in this position but I do thank her. I am going to enjoy spending some time looking at this legislation in the select committee.