Minister of Commerce and Consumer Affairs Scott Simpson.
Photo: VNP / Phil Smith
A number of concerns have been raised about proposed changes to the Commerce Act which could disadvantage consumers, deter investors and increase the cost of doing business.
Law firm Chapman Tripp said some of the changes to the Commerce (Promoting Competition and Other Matters) Amendment Bill were positive, but others were problematic.
“Setting aside the several changes that we think have the potential to be really positive, for the ones we have concerns about, there are probably two categories,” Chapman Tripp competition and antitrust partner Lucy Cooper said.
“One is that they will add unnecessary uncertainty, time and cost to the Commerce Commission processes.
“And the other one … is the Commerce Commission will get a lot more discretion or power without solid process protections, or the ability to really scrutinise its work.
“I don’t intend that to be a criticism of the current commission at all. It’s more that in general, as you know, proper process is absolutely critical to making sure we can see that the service we are getting from the Commerce Commission is robust and fair.”
Mergers and acquisitions
She said a specific concern dealt with the commission’s ability to retroactively take action against a series of acquisitions that would, in hindsight, be found to have a cumulative effect of lessening competition.
“The focus should remain on the lawfulness of the marginal transaction, rather than allowing the commission to retrospectively impugn earlier transactions that would otherwise be lawful if considered in isolation.
“Allowing the commission to treat a sequence of separate transactions as a single transaction and find them all unlawful on the basis of their combined effect could also undermine investor confidence.”
Cooper said the commission had an existing power to block a transaction, when it had potential to put a company or organisation in the position of becoming a dominant player in a particular market.
“The commission already enforces against serial acquisitions, as demonstrated by successful action against Wilson Parking in local parking markets. We see no evidence that the commission is unable to intervene in serial acquisitions.”
Predatory pricing
Another proposed change would automatically see any below-cost pricing, that lasted for a period beyond three months, in a year, as predatory pricing.
“This is a change to the current position,” it said.
“The current regulation kicked in when a dominant player offered low prices as a means to price rivals out of the market or to deter a new entry.
“We consider that this test should remain.”
The proposed change could also act as a deterrent to pro-competitive low pricing and disadvantage consumers.
“We urge a rethink.”
The closing date for submissions on the bill is Wednesday 4 February.
