Tabuteau Fletcher: Commerce (Cartels and Other Matters) Amendment Bill — Second ReadingText is incorporated into the Bound VolumeTabuteau Fletcher: Commerce (Cartels and Other Matters) Amendment Bill — Second Reading[Sitting date: 26 November 2014. Volume:702;Page:891. Text is incorporated into the Bound Volume.]FLETCHER TABUTEAU (NZ First):I stand in support of the Commerce (Cartels and Other Matters) Amendment Bill on behalf of New Zealand First. The amendments arise from meaningful discussion with specialist interest groups and the ministry and I too note the work of the Commerce Committee and acknowledge Melissa Lee. These amendments look to clarify the scope of prohibited behaviour introduce new exemptions and introduce criminal sanctions for hard-core cartel behaviour. Anti-competitive behaviour is usually undertaken by the big players and it usually leads to large inefficiencies in the New Zealand market and that undermines the average Kiwi household. Mums and dads suffer as the giant corporates are able to take advantage of powers that New Zealand First would argue are currently more pervasive in New Zealand than many might think. Cartels in particular are the coming together of mutually dishonest minds to literally rob New Zealanders.This amendment bill has been a long time coming. Discussions around these changes have been circulating for years—years before the amendment bill was originally introduced in the House. The backbone of this country’s economy needs to be and must be healthy competition. When organisations from different countries from different borders collude—and also as New Zealand businesses collude with one another—to increase prices or fix output they are stealing from New Zealanders. This kind of theft must be stopped. We must do all we can to look after our New Zealanders. Further to this when cartels are allowed to operate they literally steal from families’ time. They not only steal income but they steal the efforts of hard-working New Zealanders who must either work longer hours or work more jobs in order to provide the basics for their children for example.The bill’s definition of a “cartel provision” found in section 30A inserted by clause 7 is “a provision contained in a contract arrangement or understanding that has the purpose effect or likely effect of 1 or more of the following in relation to the supply or acquisition of goods or services in New Zealand: (a) price fixing: (b) restricting output: (c) market allocating.” The bill proposes sensible and meaningful amendments but we must ask ourselves whether the amended law will be enough to empower the Commerce Commission. Is the Commerce Commission adequately armed and adequately resourced to be the watchdog that this country needs to ensure we quash anti-competitive behaviour?Just a week ago the Commerce Commission made public its findings with regard to the complaints received from dozens of individual complainants directly to the Commerce Commission itself and dozens more through the Food and Grocery Council. Normally when this many individuals come together that would be an indication of a serious problem but instead the Commerce Commission found no wrongdoing. It certainly raises questions in my mind. In New Zealand we are a country that seems to encourage large players in a diverse variety of markets but importantly we can sustain only a small group of them which is what the previous speaker James Shaw was alluding to with his examples from England. The nature of our geography and the size of our country—these two factors in particular—seem to combine to create natural breeding grounds for these oligopoly or duopoly entities.So I stand here as the voice of New Zealand First in this area and say that we cannot allow any firms—or especially any group of firms—to abuse their market powers. We must empower our commission with the tools and the teeth it needs to ensure that large firms behave in the best interests of their customers. I question the availability of flights within our country especially in our regions. I question the cost of milk within our country. I question the cost of many household items. I question the cost of our electricity. We cannot afford to stand by and let large players in essential markets especially take advantage of their power to the detriment of New Zealand households—to the detriment of our Kiwi mums and dads and their children. I personally get angered when two or more large corporates can presume to join together illegally to undermine markets and the New Zealand economy.However on the other side of the same coin New Zealand First always looks to support good legislation that will encourage businesses to work together for the betterment of New Zealand households. I note that one of the previous speakers said it was a balancing act. It is not actually a balancing act; it is about having clear and decisive legislation. It is about laying down the law and establishing what those boundaries are because if you do that correctly it does not have to be a compromise; it is one or the other.There has been a history of good New Zealand businesses wanting to work together in New Zealand. When businesses want to work together for the benefit of New Zealand households our legislation needs to encourage and support this. It has been long discussed that the original bill in its current state uses ambiguous language that actually deters cooperative behaviour on the part of good New Zealand businesses. The bill would allow for the lessening of competition in the New Zealand market as long as the bill gave rise to efficiencies that benefited the end consumer—for example a lower purchase price.New Zealand First is all for good business practice. If businesses knew that by joining together for a bid on a large contract for example they might create synergies and thereby lower their costs as well as benefit the end consumer then this does need to be encouraged. But when companies work secretly together to collude and fix prices artificially to restrict supply which essentially has the same effect of increased prices then we must ensure our agencies are adequately equipped to stop this.What New Zealand First asked for and now sees in the amendments is the provision for criminal sanctions for hard-core criminal cartel behaviour in particular. There must be a large burden of proof in order to proceed with criminal sanctions—we acknowledge this—but individuals who intend to engage in conduct that seeks to undermine markets and essentially rob from New Zealanders must be pursued and must be held to account. I note that many of our trading partners have already moved down this path and in discussions it was noted quite cynically that should organisations wish to collude with one another across borders it would seem at this stage at least that New Zealand is still an economy where a cartel arrangement can be entered into without much repercussion.These organisations were clear in their analysis. When weighing the risks it was worth attempting to contravene New Zealand law by entering into these cartel arrangements. The disincentive is currently not there. It is currently not enough to dissuade this behaviour. The OECD noted the detrimental effect of cartels on society throughout the world. The effects of cartels on economies are wide reaching and have a negative effect on economic efficiency. The OECD acknowledges that cartels by raising prices above the competitive level and decreasing output have the effect of making consumers either pay a higher price for a product or actually forego the product entirely. We all know that we as consumers miss out and we are being literally robbed when we allow cartels to operate on our shores.There are also good business arguments actually as to why we should fight this anti-competitive behaviour so strongly. When a cartel is able to raise its prices it is actually undermining the efficiency of the markets in which it operates so our very limited resources are not being best directed to their most optimal allocation. A cartel will protect its members from real competition from those honest practitioners not in this cartel behaviour. This allows inefficiency in a market and allows for slow or no improvement in productivity. Investors are sent signals by those cartels that are inherently incorrect and so investment flows in directions that it otherwise might not. If you own the market you are literally less inclined to be innovative to look for increased efficiencies to reduce costs or to increase quality.I note in finishing that the counterfactual test in section 36 of the Commerce Act is logical. When good minds apply their thought it looks on the surface like a fair test. However it is insufficient in and of itself. There is much international precedent for it to be discontinued. In fact Australia the only other major trading partner of ours that still uses it acknowledges that it is not the only tool it uses to take measures against anti-competitive behaviour. As we move into a framework for criminal sanctions especially I suggest we must employ a tool that our trading partners consider to be equally robust.Additionally the new measure whereby the legislation is currently asked to focus solely on the outcomes—and the Labour member spoke well to this—has the effect of essentially missing the point. The amended bill can now focus on the form of the conduct that is illegal in and of itself. This provides a simpler test with which to establish intent to collude. I commend this bill to the House.