Source: http://www.comcom.govt.nz/regulated-industries/part-4-inquiries/information-on-part-4-inquiries/
Timestamp: 2017-11-18 11:53:03
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Information on Part 4 inquiries | Commerce Commission
Information on Part 4 inquiries
Previous inquiries and preliminary assessments
This page contains general information on why certain goods and services are regulated under the Commerce Act and the process the Commission can undertake that could lead to the regulation of goods and services not currently regulated under Part 4.
In most markets, competition delivers benefits to consumers. Benefits include lower prices, better quality, and greater innovation. However, in limited cases, there may be little or no competition and little prospect of future competition. In these markets, the Commission may need to regulate the price and quality of goods and services for the long-term benefit of consumers.
Regulation is designed to ensure that suppliers of regulated goods and services have similar incentives and pressures to suppliers operating in competitive markets. Suppliers of regulated goods and services should not be able to earn excessive profits.
The Commission receives many complaints about high prices. High prices alone do not necessarily suggest that there is a problem with a market. For example, high prices in a market may simply be a result of high input costs and may not necessarily indicate a lack of competition.
Which goods and services are regulated?
Electricity lines services Part 4, Commerce Act
Gas pipeline services Part 4, Commerce Act
Airport Services Part 4, Commerce Act
Telecommunications Telecommunications Act
Dairy Dairy Industry Restructuring Act
An inquiry can be triggered in two ways:
the Minister of Commerce may require the Commission to conduct an inquiry
When deciding whether to hold an inquiry on our own initiative, we will conduct a preliminary assessment of a number of factors, including the levels of competition in a market (both current and future), the scope for suppliers to exercise market power, and the effectiveness of any existing regulation of that market.
whether there is little or no competition in the market
whether there is any prospect of a substantial increase in competition
whether the suppliers in the market are able to exercise "substantial market power".
there is a single supplier for most or all of a particular market (such as gas pipelines and electricity transmission)
there are very high barriers to entry.
Suppliers are considered to have substantial market power when they are able to raise prices (or reduce quality) and increase profit. To decide if suppliers have substantial market power, we are likely to consider:
how much existing competition there is to the business (ie from existing rivals)
how much potential competition there is to the business (ie whether new suppliers might enter the market if existing suppliers increase prices or lower quality)
how much power customers are able to exert on the business (ie whether customers would be in a position to refuse to buy the goods or services if an existing supplier increased prices or lowered quality)
whether any existing regulation or ownership arrangements are effective in limiting suppliers' ability to exercise market power.
If we consider there is little or no prospect of competition, no likely increase in competition in the future, and that suppliers are able to exercise substantial market power, we will then consider whether the benefits of regulation are greater than the costs.
It is possible that regulation might cause a loss of efficiency and innovation for regulated businesses, such as:
increased uncertainty for regulated businesses, their own suppliers and downstream customers, which may discourage investment
regulation of the prices, revenues and/or quality of the relevant goods or services
negotiation between the supplier and its customers on the prices and quality of the relevant goods or services
← Back to Part 4 inquiries
The Commerce Act – Regulation of goods and services fact sheet – June 2011 PDF (277 KB) Published on 01 March 2012