Power Simon: Commerce Amendment Bill — First Reading 
Power Simon: Commerce Amendment Bill — First Reading 
[Volume:646;Page:15159] 
SIMON POWER (National—Rangitikei) 
: 
 The National Party will support the passage of the Commerce Amendment Bill at its first reading and its going to the Commerce Committee in order for the committee to undertake some further work in some of the key areas the Minister has outlined today. The Minister is right when she says we are dealing with a complex area of law and what is proposed is quite a major change. It is quite a major change from the regime that we have had up until now; in fact it significantly alters existing Parts 4 4A and 5 of the Commerce Act. 
The bill introduces a new purpose statement for Part 4 in new section 52A(1) inserted by clause 4: “to promote the long-term benefit of consumers in markets … by promoting outcomes …” that ensure “suppliers of regulated goods or services—(a) have incentives to innovate and to invest”. That in itself is a worthy statement and in National’s view it would be very difficult to disagree with it because it includes the replacement and upgrading of new assets. It also makes sense that those suppliers have incentives to improve efficiency and to provide those services at a quality that reflects consumer demands. 
Equally important to the new test is that the supplier shares with consumers the benefits of efficiency gains including through lower prices. Indeed we add to that particular purpose statement a limitation on those suppliers’ abilities to extract excessive profits. The reason for introducing this statement is that the general purpose statement for the existing Commerce Act of promoting competition is considered to be unhelpful for sectors where competition is not viable. So a new test relating to the long-term benefit of consumers requires inclusion and clarification but equally important in many respects is the incentive for these organisations to invest in the long-term infrastructure of New Zealand. 
A new test for imposing regulation is also contained in the legislation. The test for imposing regulation has been changed from whether competition is limited and control is necessary or desirable in the interests of acquirers to a new test where goods or services may be regulated only if they are supplied in a market “where there is little or no competition and no likelihood of a substantial increase in competition.” We know that that test also needs to include the substantial scope for the exercise of market power and whether the benefits—and this is actually extremely important—of regulating the goods or services and meeting the purposes of the Act exceed the costs of regulation. 
The two separate review processes for deciding whether to regulate and how to regulate will be rolled into one process. As I read it the Minister’s existing right to impose regulation without the commission undertaking an inquiry will be repealed. 
The new tools for regulation are an important step. Before I start to go through that particular work I take this opportunity—and I should have done this in my opening remarks—to thank the Minister of Commerce and her officials for taking the time to keep the National Party informed throughout the select committee process and for making the officials available on more than one occasion for briefings and the like. This has not been an easy path to tread for the officials or for those engaged in the political arena. It is a pretty delicate area of the law. I want to put on record my thanks to the Minister for making sure that we were fully involved in that process. 
I return to the new tools for regulation. The alternatives to imposing price control that the commission is to be provided with include as the Minister said stricter information disclosure and that includes asset management plans investment proposals prices projected regulatory accounts and projected quality out-turns; a second negotiate/arbitrate regime; a default customised price quality path—and I will come back to that because there may be some further discussion in the select committee about some of the dates around the click-in period for that new path—and the customised price quality control for individual businesses. It is fair to say that the new regulatory regime proposed by the Minister is more light-handed than full price control. We want to be sure that the availability of more light-handed measures does not result in more regulation overall. That will be a test to be looked at a discussion that we will need to have just to ensure that we are not replacing a rarely used heavy-handed lot of regulation with a more readily used but light-handed series of regulations. We will be looking at that issue pretty carefully on the select committee. 
The bill requires the commission to set the input methodologies. They include things like weighted average cost—valuing assets and allocating common costs. According to the bill the commission is going to develop generic and sector-specific input methodologies. It is those input methodologies that will initially be subject to merits review. This is a difficult and tricky part of the proposal. A merits review will generally take the form of an appeal to a High Court judge assisted by two expert lay members. But as the Minister knows I have had some concerns that an appeal is available only for challenging decisions on the input methodologies. That may seem to be a bit of an abstract concept to the people who are listening to this debate but it means that if those regulations or input methodologies are determined the only opportunity to challenge them by way of merits review relates specifically to the way the input methodologies came about and the way they were determined. In other words there is no ability to seek a merits review for implementation issues or the practicalities around seeing through the decisions that have been made post the input methodology decision-making. 
I understand why the Minister wants there to be only one level of merits review—I think I do anyway. I think it is because the Government and the Minister want to avoid a whole lot of gaming between the commission and the people who are making applications or who are subject to the arrangements by the commission. But I have signalled to the Minister on more than one occasion that I think that when the merits review kicks in and whether one or two merits reviews are appropriate will be matters that the select committee members should spend some time on forming a view on to convince themselves that they are not going to limit the ability to protect the consumer and the issues around investment in infrastructure by having only one merits review at first instance—to use a clumsy phrase—following the determination of input methodology. 
I will quickly mention the airports issue. My view is that transferring the regulatory regime from the Airport Authorities Act to the Commerce Act is of merit. We should have a good look at that during the select committee process. 
This legislation is technical and difficult and the industries affected by it will be extremely interested in its passage. I signal to the Minister now that I am interested in some of the dates around the continuation under price control until the default customised regimes are negotiated and come into place. I will be very interested in testing some of those dates and finding out why they were chosen and in having a discussion about what is significant about 2016 and 1 April 2010. I will be interested in having those discussions at the select committee. 
It is actually misleading in some respects to call this bill simply the Commerce Amendment Bill. It does indeed amend the Commerce Act—or purport to—but it has far-reaching consequences around competition price control consumer protection and new disclosure regimes and it needs to be treated with the seriousness at the select committee that it deserves.