Parker DavidHon DAVID PARKER (Labour): I rise to take a call on two points. The first is that I want to explain some of the reasons that lie behind the amendment proposed by the Hon Clayton Cosgrove on Supplementary Order Paper 408 which is to add a new definition of anti-competitive conduct in section 36 of the Commerce Act. The explanatory note attached to this proposed amendment describes the two significant gaps that currently lie in the section 36 test. At present to succeed in alleging anti-competitive conduct—or the use of market power interfering with competition—the person who is making the claim has to prove that the firm with the market power took advantage of that market power for one of the three prescribed anti-competitive processes that are listed in the Act. There are two significant gaps in this in practice. The first is the exclusive focus on purpose rather than effect and the Hon Clayton Cosgrove has already addressed how this compares adversely with the tests in some competition statutes overseas where effect in some situations can also be considered rather than having to rely upon purpose. One of the reasons why purpose alone makes it hard to police anti-competitive conduct is that sometimes the legitimate business rationales can obscure an anti-competitive purpose making it very difficult to prove the anti-competitive purpose even when it is so patently having the effect of using market power in a way that interferes with workable effective competition. Because of this a manifestly uncompetitive impact can remain unaddressed because the purpose element is not satisfied. I do not have the time to go through all of the detail of this but one of the reasons why section 36 has failed to achieve the intended purpose of this Parliament is that its effect was read down by the court. The court has further limited the ambit of the market power test under section 36 by applying what is called the counterfactual test. What this does is offer a degree of certainty to a monopolist and there has been a need to link the anti-competitive purpose or effect to the conduct of the monopolist. Because of this counterfactual test being applied in a conservative manner by the courts the already quite narrow ambit of section 36 has in practice been further narrowed by that test applied by the New Zealand courts. This is to be contrasted with the approach taken in Australia where rather than taking advantage of market power the legal test over there is a lower test where the conduct must have materially facilitated the anti-competitive conduct.So for those reasons the Labour Party believes that the interests of consumers in New Zealand and other competitive businesses can be undermined by anti-competitive conduct by dominant participants in a way that is not fair. It undermines fair competition and that is to the detriment of less dominant participants in those market arrangements.There has been I think a very pure approach taken to competition by the New Zealand Treasury since the 1980s really. You see it going back to what used to be allowed in respect of Telecom and it is still allowed by our pretty lax form of anti-competitive conduct regulated by section 36. It has been allowed because there has been a view within Treasury in New Zealand that there are price benefits often to New Zealanders where very very efficient monopolists taking advantage of the natural advantage that accrues from their monopoly advantage is more efficient than having competition in a smaller market.I have never bought that argument. I do not agree with that argument and I think that if we want to have an economy that allows smaller participants to rise up and compete against bigger companies and bigger entities many of which in New Zealand—disproportionately compared with other economies—are multinationals from overseas jurisdictions with it being a proven fact that the level of penetration of multinationals into the New Zealand economy particularly in respect of some of the larger service industries is higher than is normal for Western economies that makes it all the more important that we enable these smaller competitors or we certainly do not frustrate the efforts of those smaller competitors to nip at the heels of the big monopolists by having a decent section 36 of the Commerce Act.That is the reason that Clayton Cosgrove has brought forward this amendment to clause 36. It is so that more regard can be given to the effect of conduct rather than just the purpose.The other point that I would raise is the one as to whether we should have a criminal penalty. Can I say that I agree that if you are not going to have a criminal penalty then you should restore exemplary damages and if you do have a criminal penalty you ought not to have exemplary damages because they are both in the nature of a penalty. Having both exemplary damages and a criminal penalty is almost a bit like double jeopardy so I agree that you should not have both. So we are left with the argument as to whether you should have either exemplary damages—which are not compensatory. They are to make an example of the person who has erred or the company that has erred so they are more than compensatory. They are in the nature of a penalty. You ought not to have a criminal penalty in addition to exemplary damages. The question is: which is best? That is what the Hon Clayton Cosgrove has been saying—that the international best practice in his view is that we should have criminal penalties rather than just exemplary damages. That is the reason why the Hon Clayton Cosgrove has brought forward his Supplementary Order Paper 408 to that effect. In respect of those two issues which is the most important? Actually I think section 36 of the Commerce Act is the more important of those two issues and accordingly I would await with interest the Minister's response on that issue.