Finlayson Christopher: State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill — In Committee 
Finlayson Christopher: State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill — In Committee 
[Volume:640;Page:10065] 
CHRISTOPHER FINLAYSON (National) 
: 
 I thought we were here to discuss competition law because this is a very interesting bill and I am addressing Part 2. It seems and I think I am right this is the only time post-Fonterra that there has been as it were a bypass of the Commerce Act and perhaps the Minister will correct me if I am wrong. 
When briefly dealing with Part 1 earlier this evening I began by referring to section 4(1) of the State-Owned Enterprises Act which sets out a fundamental purpose of the State-owned enterprise concept and that is this: “The principal objective of every State enterprise shall be to operate as a successful business and to this end”—and this is the first one—to be “(a) As profitable and efficient as comparable businesses that are not owned by the Crown;” So that is a fundamental principle and it is one that is borne out when one reads for example the second reading debate on the State-Owned Enterprises Bill on 11 December 1986. I refer members to  
Hansard 
 Volume 476 at page 6117 when the then Minister of Justice said: “The Bill provides for a clear separation of commercial and non-commercial objectives. The State-owned enterprises will be able to be held accountable for performance and return on taxpayers’ investments against clear commercial objectives.” 
What we have in Part 2 of this bill however is the removal of competition and the bastardisation or subversion of the State-owned enterprise concept. This really is an extraordinary part. Indeed I had to read clause 5(1) a couple of times before I actually believed it was there. It was a direction given to the board of a State-owned enterprise that the State-owned enterprise not engage in what as I have said is its core business. It must not engage in any activity that amounts to competition in the market place. Having created State-owned enterprises this Government the heir to the Lange Government does not want competition between those State-owned enterprises. 
As I said this is a naked bypass of Part 2 of the Commerce Act. It is a step on from the Fonterra exemption in that it precludes competition even if there is no merger and that is a very important point. It is worth pointing out that ordinary mortals who breach Part 2 of that Act can expect to be very harshly treated indeed and I refer the Committee to sections 80 to 82A. Even in certain circumstances exemplary damages may have to be paid. It really is a most unsatisfactory situation. 
Subpart 3 of the bill is also quite an extraordinary subpart. Although no merger has actually taken place it is something the Government is considering. Just in case it decides it will merge the two State-owned enterprises it is taking steps to ensure that Part 3 of the Commerce Act will not apply. Again compare this situation where the State-owned enterprises are being placed above the law with the position of mere mortals and I refer the Committee to sections 83 and 85 of the Commerce Act. 
As Mr Carter has said on a number of occasions—and it is what inspires his Supplementary Order Paper—clause 10 is a real shocker particularly subclause (1)(a) because it compels the Animal Health Board to continue its contracts with the State-owned enterprises notwithstanding what it may have negotiated earlier on an arm’s length basis. So much for sanctity of contract! The board contracts in good faith and at arm’s length with a State-owned enterprise and then legislation is introduced that if it comes into effect will override sanctity of contract. 
In my submission if State-owned enterprises can compete then State-owned enterprises should compete and be subject to the rigours not only of the State-Owned Enterprises Act but also of the Commerce Act. If the Commerce Commission had to consider any authorisation by these two State-owned enterprises under Part 2 then I am sure no clearance would be given because as is well known there are two fundamental questions. Has there been a loss of competition? The answer is yes. The next issue is “Where is the countervailing public benefit?” and there is none. That would be so too with any application under Part 3. These matters should go to the Commerce Commission but what the Minister is saying is that the State-owned enterprises can be above the law. 
I want to conclude by saying something briefly about the Minister’s Supplementary Order Paper which again I think is hopeless. A monopoly is created but it is a regulated monopoly. This is just another name for Labour Party regulation. The Minister has killed off competition yet has created by this Supplementary Order Paper a new layer of bureaucracy. It is notorious that these Part 4 inquiries can be horrendously expensive and lengthy. I wonder whether the costs saved by the Government by this legislation may well be illusory and may be outweighed by the costs that will be incurred by these lengthy Part 4 inquiries. 
In my submission from a competition law point of view ignoring the New Zealand Public Service Association and all the other dramatics that were mentioned just after the dinner adjournment this is bad legislation. It confuses the concept of what a State-owned enterprise is supposed to be about it denies to those State-owned enterprises the full rigours of the Commerce Act and it introduces a new subpart to the Commerce Act that can result only in increased costs and regulation; and that is unsatisfactory.