Nash StuartSTUART NASH (Labour—Napier): I have a couple of questions about this and a couple of concerns and I will raise those. First and foremost clause 8 inserting new section 30 Cartel provisions" actually says that no person may enter in unless exempt. I know a company is a legal person etc. but there are other legal entities that actually are not defined in law as a person—for example a partnership is not a person. Why not just say "person or other legal entity"? That may be a way to get around that if someone seeks to; I am not too sure.I think it is important just for what I am going to frame—the question that I am going to ask is what a cartel provision is as defined by the law. So a cartel provision—it talks about price fixing restricting output and market allocation. It used to talk about bid rigging but that has been taken out. I am not too sure why that has been taken out; no doubt there is a good reason. So price fixing restricting output and market allocation—let us keep that in mind OK? I mainly want to talk about price fixing. I think we all know what price fixing is or we have a general idea—a sort of an "ordinary usage" idea of what price fixing is. What it means is parties to a contract or arrangement or understanding look to fix control or maintain the price of goods where any two or more parties to a contract or a supply are in competition with each other but are fixing prices—pretty obvious.The reason I say that is that I want to talk about the exemptions for collaborative activity. So we have talked about what a cartel is—it is a nasty thing and we do not want it. However there are exemptions. I am not too sure why there are exemptions because what they talk about here—and this is in new section 31(1)(b)—is that "the cartel provision is reasonably necessary for the purpose of the collaborative activity." What is the definition of "reasonably necessary for the purpose of the collaborative activity."? Why do we have to have a carve-out there for cartel provisions? Cartels are not good things. We have established that; it is why this legislation is here and yet what we are saying is that they could be reasonably necessary.There is another thing also in section 31(2)—that collaborative activity means an enterprise or venture that is not carried on for the dominant purpose of lessening competition between two or more players. So according to the legislation here if the dominant purpose is not to price fix then that is OK as long as it is done in a collaborative way. Maybe I am not reading this legislation correctly but I would have thought that a couple of players—and I will give an example soon—would say: "It is not our dominant purpose to fix prices. We had a dominant purpose to act in a collaborative way. The fact that prices were fixed in the market place was not our intention. However that just happened and we're sorry about that but it's not what we intended."Also there is an exemption for vertical supply contracts. For example—this is new section 32(1)(a)—"the contract is entered into between a supplier or likely supplier of goods or services and a customer or likely customer of that supplier;". This is an exemption. It does not have the dominant purpose of lessening competition. So the price is fixed but it was not a dominant purpose. That was just an unintended outcome or an unfortunate outcome. I would argue that it will be interesting to see whether this is tested in court. In a way it has been tested but not in court.Where it was tested recently was when the Minister of Energy and Resources—in an interesting collaboration with me—tested this by asking the Ministry of Business Innovation and Employment (MBIE) whether in fact there was any anti-competitive behaviour in petrol pricing in this country. The reason we asked this is that what tended to happen is about 3 years ago for about 10 years the margin that petrol guys were making at the pump and at the supply end was about 10c a litre. Then what happened was it jumped up at one point to around 40c a litre. It tended to happen over the holiday period or when people were using vehicles etc. etc. but it was a trend.At the moment what we have got is one supplier in this market that has over 50 percent market share in the retail sector. I know the Commerce Commission did have a good close look at this when this came in to play because one big player bought another big player and it gave them over 50 percent. [Bell rung] Mr Chair?The CHAIRPERSON (Hon Trevor Mallard): Aw Stuart Nash.STUART NASH: Goodness me. I am sorry—I hope I am not keeping you up.The CHAIRPERSON (Hon Trevor Mallard): I will be enthusiastic if the member can be.STUART NASH: Well I am trying to. What I am doing here Mr Chair is saying that what has happened is that according to an MBIE report commissioned by the Minister of Energy and Resources with support from the Labour Party it could not dismiss the fact that there was anti-competitive behaviour going on. But of course a report is not strong enough to actually take legal action on. In fact what we were asking the Minister to do was refer this to the Commerce Commission because what happened is this report put together by a whole lot of knowledgable consultants said first of all that some of the players in this dominant market would not even give us any information.This is after the Minister herself had said: "I want to know what's going on in this market." What a couple of the players said was: "Well I'm sorry Minister. We don't really care what you want. We're not going to give you the information." So a full report could not be written but what the report did say is: "Well we have a suspicion here. We think that there might be uncompetitive behaviour going on. I am wondering whether in fact what they would do is say "Well look I know that one supplier is supplying to different places in the market" and these retailers and the supplier who is controlled by one of the major retailers in competition with another retailer—they know the price because they disclose the price at the wholesale point. What they might say is "Well it's not our dominant purpose to fix prices." or "It's not our dominant purpose to lessen competition." We pay more than any other country in the OECD for petrol before taxes—more than anyone else. That in itself should ring alarm bells but "it is not the dominant purpose to fix prices; it is just what happens and we are really sorry about that and we are really sorry New Zealanders that this happens".The other thing in here that I would be interested in knowing a little bit more about is that in new section 30C(3) it says that despite this in the first 9 months after the date on which this comes into being there are to be no proceedings under the section that controls cartel behaviour. However during those 9 months you are allowed to prosecute under the old legislation. I am wondering why that is. I am wondering whether it is because in fact there is cartel behaviour going on under the definition of the new legislation in our petrol sector. What this legislation is doing is saying to these guys: "You've got 9 months to sort it out and we're not going to prosecute you. We probably can't get you under the old legislation but we might be able to get you under the new legislation. You've got 9 months to sort it out."I do not know whether that is true or not but when I read this I go: why would you give them a 9-month grace period? Why would you do that? I mean this legislation as the Hon Clayton Cosgrove has talked about has been around for a long time.Hon Clayton Cosgrove: Four years.STUART NASH: Four years.Hon Clayton Cosgrove: Plus.STUART NASH: Plus—4 years plus. And so there is plenty of time for companies to understand what is going on. I must admit when I now know what is going on in the petrol sector after reading the report commissioned by the Minister about what is going on in the petrol sector and when I now read that consultants had concerns about the anti-competitive nature and I know that this legislation has taken 4 years to come through—you sort of join the dots.Maybe the picture I am creating by joining the dots is completely false. But you cannot help but wonder can you? You cannot help but wonder whether in fact you have known about this for 4 years but we are not going to prosecute you under the new legislation for at least 9 months after this comes into force. Why? Why is that the case? Why not say to people: "As soon as this comes into force we are going to prosecute you if we find cartel behaviour going on straight away."? Why give that 9 months' grace if the old legislation is bad and we actually need new legislation which obviously we do because this is why we are here and speaking on this bill?I just have concerns that first of all cartel behaviour is bad but we have given exemptions if it is reasonably necessary for collaborative behaviour. For me that just does not pass the sniff test and I think it does not pass the sniff test either if a supplier is supplying a customer but the dominant purpose is in fact price fixing."