Clark DavidCOMMERCE AMENDMENT BILLSecond ReadingHon Dr DAVID CLARK (Minister of Commerce and Consumer Affairs): Mr Speaker I present a legislative statement on the Commerce Amendment Bill.SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon Dr DAVID CLARK: I move That the Commerce Amendment Bill be now read a second time.The Commerce Act is to promote competition in the market for the long-term benefit of New Zealand consumers. Ultimately competition generates price benefits. It generates quality benefits. It generates opportunities for new innovation in the market and consumers see a wider range of products available in the market when there is healthy competition. I've spoken previously about the benefits of competition as they apply to performance productivity innovation and the like but healthy competition in the market demands carefully thought-through competition law. And that is what we are seeking to accomplish with this bill.The most notable change in this bill is the change to section 36 of the Commerce Act and up until this point in time section 36 has used a hypothetical test for assessing whether dominant firms in the market were abusing market power to retain or strengthen their position in the market. What we are proposing here in this bill—what this bill will do—is set a different test to ensure that different rivals in the market including new players who might arrive in any given market can compete on their merits. And that new test would prohibit any unilateral conduct by a firm with substantial market power that has the purpose effect or likely effect of substantially lessening competition in a relevant market. So what we will see hopefully as a result of this change that we're making to section 36 is a more competitive market and with that will accrue benefits to consumers and benefits to other smaller businesses.Now I understand that the select committee heard two concerns with respect to this change and considered two concerns. The first was really a range of scenarios where submitters argued that the new prohibition would be overly inclusive. And the second range of concerns that the select committee considered was a risk around overly conservative decision-making by dominant firms because they would find it too difficult to know when the test was likely to apply to them and that they thought that that would modify the way that they acted in the market. Well what I note from the select committee's report is that ultimately the majority of members on that committee were satisfied once those scenarios were worked through once they received the advice that those criticisms or concerns did not justify a change in approach to what was being suggested here in terms of section 36.Those concerns didn't suggest that we should retain the status quo which effectively is a situation where nobody has been able to be successfully challenged on behaviours as a dominant player in the market. And I think members opposite who raised some of those concerns ongoing know very well that the current dominant status of some really big players in the market has not been able to be challenged under the current provisions of the Act. So I'd be very interested to hear what they might have to say about what alternative provisions they would put forward and own—or put forward should they even get to be in Government in the future—because I think they just really want the status quo where those big firms with market power can indiscriminately apply that in the market to the detriment of small and innovative new businesses coming into market places. So we've got this new provision we've got the new scenarios that have been looked at and officials have also worked through and convinced themselves as they've worked through the detail that the reformed prohibition won't penalise unnecessarily dominant firms unless they are causing substantial harm in the market and that competitive process that we all I think in this House would want to see.There are of course then some complexities as those dominant firms have to work through what the new changes might mean for them and there has been attention given to how section 36 would apply in particular situations. So the bill alleviates some of the concerns that might be raised in a couple of ways. Firstly it adopts a test that already operates elsewhere in the Commerce Act. So it is a familiar test. And I'd also note that the test is what is used in Australian law. So we have law there we have records of proceedings we have some case law to assist in the interpretation of the prohibition already. The second thing that will alleviate some of those concerns is the delaying of the commencement of the new section 36 by 12 months which will allow time for the Commerce Commission to develop guidelines and for those firms which feel they may be affected by the change in the law to be able to assess whether and how they will meet the new guidelines that the Commerce Commission will propagate. And I believe that those changes are important and the select committee is right to emphasise the importance of that Commerce Commission guidance as to how section 36 will apply for those dominant firms.Now the second main policy area covered in this bill involves practices around intellectual property (IP). The current Act contains three provisions that require us to assume certain practices are never anti-competitive just because they involve intellectual property. That is outdated thinking. That is in the Act because that was the dominant thinking of the day when the Act was put together but in fact now that thinking has been discredited. And we should have in the law in my view provisions that ensure that we can have scrutiny as to whether IP practices are coming in to challenge the way competition law should rightly function. I understand that most submitters supported the repeal of these provisions. Others argued the provisions are necessary to prevent beneficial uses of IP innovation from being unlawful but again these submissions were carefully analysed worked through. The challenges that might sit in there were outweighed by the benefits of making the change. So ultimately the Government's view remains that intellectual property rights should be treated no differently under competition law to any other form of property right that might exist. And as I explained when I appeared before the Economic Development Science and Innovation Committee ultimately we want the benefits to accrue to consumers and to other small businesses that we see will accrue with this change. So again the Commerce Commission guidelines will be instrumental in enabling affected IP owners to realistically assess their obligations.There are a range of other suggestions that the committee itself has made which I think will improve the functioning of the bill overall and I do want to thank the committee for its work on this particularly important piece of law. Some of the changes it will create: I'd like to briefly mention three. It will create equivalent reforms as those we are proposing to section 36 but in trans-Tasman markets. The Australian Treasurer has given an undertaking that they—or agreed to the prohibition of the misuse of market power in those markets. I think that's a very good thing for trans-Tasman trade and dominant firms no matter which side of the Tasman they're on should have a clear understanding of how they are to behave. The committee has also recommended a range of reforms to the authorisation scheme and that again gives the Commerce Commission greater scope in terms of how it applies authorisations in the public interest. And I think that's appropriate and should again allay some of the fears that have been raised by some submitters with genuine concerns.And lastly the committee has recommended a short transition period for intellectual property arrangements affected by the repeal of section 45 and covenants brought within the Act's cartel regime. So the provisions as they were originally proposed at three years I think were too long. I agree with the committee that three years is unhelpfully long and so the 12-month period suggested on top of the 12-month delayed commencement period I think strikes the right balance. So I think those things are excellent. We have a number of other small tidy-ups that are going to be put through to make sure that we have strong competition law in this country because ultimately we want the consumer surplus that strong competition law generates. I would welcome support around the House for stronger competition in the markets but I fear we may hear from some members that they would rather protect the interests of large dominant firms in the market perhaps with whom they are close at the expense of new and innovative firms that come into challenge the status quo that come in to generate new products and better prices for consumers. Let's see who supports the status quo and who indeed wants to see consumers better off and see innovation in our markets. I commend—SPEAKER: Order! The member's time has expired.