New Zealand was one of the few countries to rely on generic competition law, in the absence of any sector specific regulation, to moderate the behaviour of privately owned network infrastructure providers. That approach proved inadequate, and consequently, some sector specific regulation has been introduced. That regulatory response has been targeted at limited areas of behaviour that generic competition law was shown to not adequately address.
This paper will provide a short history of that transition from competition law to sector specific regulation and identify some of the areas that the sector specific regulation in telecommunications and electricity distribution and transmission is intended to address. The paper also provides comment on the Commission's experience as a regulator in those sectors and some observations on where sector regulation might go in New Zealand and the Commission's approach to those regulatory regimes.
Introduction
The Commission's purpose is to promote dynamic and responsive markets so that New Zealanders benefit from competitive prices, better quality and greater choice.
The Commission strives to achieve that purpose through enforcement, adjudication, regulatory control and the provision of information. The Commission is not subject to direction in its enforcement and regulatory control activities.
The period 1984-89 was one in which there were serious legislative and administrative attempts to promote competition in commerce and to prevent businesses placing restrictions upon competition.
There had been similar legislative attempts previously, but they had failed for a variety of reasons. Two attempts were made to redress this. The first step was the Commerce Amendment Act 1983 (an amendment to the Commerce Act 1975) and the second step was the introduction of the Commerce Act 1986.
A significant characteristic of the 1986 Act was that, for the first time, it attempted a comprehensive approach to competition law in New Zealand - with general principles applying to all sectors of the economy.
It abolished many of the earlier regimes involving sector-specific legislation and regulation.
The Commerce Act promotes competition by prohibiting certain forms of behaviour, or certain changes to market structure, that would significantly harm competition in a market.
The Commerce Act specifically:
- prohibits the forming of contracts, arrangements, understandings or mergers that could lead to a substantial lessening of competition (price fixing by competitors is deemed to substantially lessen competition, and is therefore illegal per se);
- prohibits a business with substantial market power from taking advantage of that market power to deter or exclude competitors from the market; and
- provides for the regulatory control of goods or services in markets where competition is insufficient to protect the interests of participants. This implicit threat of control has often been seen as an integral part of the approach to regulation in New Zealand, to encourage competitive standards of behaviour in markets that are not competitively structured.
The Act recognises that some instances of prohibited arrangements or mergers can increase the welfare of consumers. Consequently, the Act does allow for the authorisation of such anti-competitive business arrangements and acquisitions. For an authorisation to be granted, the Commission must be satisfied that the public benefit flowing from the arrangement or acquisition will be greater than the detriment attributable to the lessening of competition.
Problems from generic competition law
Owners of utility infrastructure are likely, because of the nature of network economies, to be monopolies. Utility markets share particular characteristics and bring about more complex competition issues. They are subject to the behavioural and structural anti-competitive provisions of the Commerce Act like any other industry or business in New Zealand.
Until the mid 1980s, utilities in New Zealand were generally statutory monopolies under state ownership. As part of wider economic liberalisation policies, these industries were progressively reformed in the years following 1985. This reform comprised the removal of statutory monopoly rights, the corporatisation (and in some cases, privatisation) of state trading departments, and restructuring to isolate the natural monopoly elements from the more contestable elements of the industries.
New Zealand's approach to the regulation of utilities started with the acknowledgement that not all parts of an incumbent's business are natural monopolies. This is a commonly held view of many other comparable agencies. The primary aim of this approach is to encourage competition in those related markets where entry is possible, and to ensure that entrants into those markets are not deterred by the market power of the integrated incumbent utility.
Reliance on generic competition law has had important successes for the New Zealand economy. It has also encountered some difficulties.
Issues relating to the New Zealand experience include:
- reliance on courts, arbitration or self-regulation leading to significant delays and costs;
- access pricing not required to be cost-based;
- vertically integrated companies cross-subsidising between monopoly services and contestable services;
- no clear access framework;
- the courts unable to set interconnection prices; and
- the element of the Universal Service Obligation (TSO) that was included in telecommunications network interconnection prices was not clear.
To address some of these problems, New Zealand has introduced sector specific regulations in the telecommunication and electricity markets in the last three years.
This paper will review the electricity and telecommunication sectors, and highlight the impact of the new legislation. It will also provide an update on the Commission's current work in the gas sector under the regulatory control provisions of the Commerce Act.
Electricity
Prior to 1993, neither electricity generation nor electricity transmission and distribution were controlled by a regulator. Wholesale electricity and transmission prices were determined by the corporatised, but Government owned, Electricity Corporation. Retail electricity and distribution prices were determined by publicly owned holders of exclusive territorial franchises (either elected specialist boards or councils).
The Electricity Act 1992 removed statutory exclusive retailing franchise areas and the obligation to supply. The Act also provided information disclosure regulations, established the regime for electricity safety and land access, and contained certain provisions for consumer protection (a five year price control provision for domestic consumers and an obligation to maintain line services for 20 years).
Further and more comprehensive information disclosure regulations were introduced in 1994. The Electricity (Information Disclosure) Regulations 1994 required public disclosure of information and focussed particularly on the natural monopolies in the industry (distribution and transmission). The regulations featured "financial separation" of natural monopoly (distribution lines) and competitive activities (retailing and generation) within common ownership.
Information relating to line charges became available to all consumers, plus further information on prices and other key conditions of contract. Separate audited financial statements, and separate pricing, were also required for local distribution activities to ensure that distribution was operating transparently.
Yardstick comparisons of the performance of distribution, including profitability measures based on common valuation arrangements and other specified account requirements, were designed to reveal instances of rent-seeking behaviour (excessive costs and/or excessive profits). Separate pricing was intended to facilitate negotiations by competing retailers for access to local distribution lines and to promote retail competition.
However, it soon became clear that greater transparency in pricing and profitability measures was not necessarily a sufficient check on monopoly power.
Southpower
During 1996-97 the Commission investigated complaints, made under the restrictive trade practices provisions (section 36) of the Commerce Act, that Southpower, an incumbent electricity distributor/retailer was preventing access by competitor retailers to its electricity distribution network.
The complainants alleged that Southpower had imposed anti-competitive access charges and cross-subsidised its electricity retailing business from its electricity distribution business for anti-competitive purposes.
The Commission's investigation found that Southpower overstated the scope and costs of its monopoly network business, correspondingly understated the scope and costs of its contestable retailing business, and imposed excessive network access charges on competitors which its own retailing business did not have to pay.
The Commission filed proceedings alleging misuse of market power against Southpower, however the proceedings were settled in 1998.
The terms of the settlement included Southpower creating three separate businesses - a network business, an electricity retailing business and a business providing billing and metering services. The three businesses would operate as separate companies and Southpower would establish a holding company to own the businesses in such a way that they operated independently of each other.
The Commission acknowledged that Southpower's contraventions occurred at an early stage of the sector's transition from regulated monopolies to competitive enterprises and that it was not the intention of Southpower to break the law. The Commission also acknowledged that Southpower's proposed restructuring, once implemented, would assist in fostering the development of effective competition in areas where competition was possible.
The Government became concerned with the barriers to retail competition that the case had revealed. In its view, distributors had:
- failed to provide low cost systems to enable electricity consumers to switch retailers;
- unreasonably restricted access by competing retailers to their distribution networks; and
- used monopoly rents to cross-subsidise retail customers at risk to competitors.
In addition the Government raised concerns that there was the potential for distributors to cross-subsidise generation activities from monopoly rents.
A key concern was how to ensure that gains from further generation reforms would be passed through to final consumers. It would not be acceptable for the gains from lower wholesale prices to be captured by downstream distributors and/or retailers.
Electricity Industry Reform Act 1998
The Government's growing concern was that local electricity companies, being vertically integrated natural monopolies, had both the ability and incentive to use their market power in distribution to exclude competition at the retail level. The Government accepted the view that companies in this position can and do use their market power to benefit their owners. Regulatory solutions were seen as second best solutions, while a structural solution (i.e. ownership separation) was preferred as a way to deliver the best outcomes to consumers.
To mitigate those concerns and deliver a structural solution to deal with cross subsidisation, the Electricity Industry Reform Act was introduced in 1998.
This Act prohibited common ownership of electricity distribution businesses and of either an electricity retailing or electricity generation businesses (other than minor cross-ownerships). In addition no person was permitted to have material influence on both kinds of business, for example by way of common directorships.
The Act is intended to create a better environment for increased efficiency and consumer benefits through increased competition in generation and retail markets.
The Commission was given wide powers to exempt businesses and persons from the provisions of the Act. Since its introduction in 1998, the Commission has considered 36 applications for exemptions under the Electricity Industry Reform Act. The Commission has declined three applications during that time, and is currently considering four applications.
When considering applications for exemption under the Electricity Industry Reform Act, the Commission has focussed on the impact that any cross ownership has on competition. In other words, an exemption is granted only if it is considered that consumers are still able to gain the benefits of competition, particularly in terms of competitive retail prices. In all cases, the Commission has granted exemptions subject to a range of conditions intended to ensure these benefits to consumers are realised.
The Electricity Industry Reform Act allows distribution companies to own a small amount of generation. Over time, the amount of generation distribution companies are permitted to own may increase as any excess profits are removed by the thresholds regime.
Electricity thresholds regime
The Electricity Industry Reform Act separated the ownership structure to remove potentially anti-competitive cross subsidisation. However, a remaining issue was a perception of monopoly prices by distribution companies.
In February 2000, the Government announced a Ministerial Inquiry into the electricity industry. The Government's objective for the industry is "to ensure that electricity is delivered in an efficient, fair, reliable and environmentally sustainable manner to all classes of consumer". In short, the objective is to ensure that consumers benefit.
The Inquiry sought industry solutions where possible, and regulatory solutions where necessary. It specifically looked at whether changes were required to the regulatory regime for transmission and distribution to ensure efficient prices and service delivery.
The Inquiry panel supported continuation of the self-regulation approach, but recommended the introduction of targeted price control for all electricity lines businesses – namely the 28 distribution businesses and Transpower (the state-owned transmission company).
As a result of the Inquiry, the Commerce Act was amended in August 2001 to provide a targeted control regime for electricity lines businesses under which the Commission:
- was given power to control the price, revenue and quality of electricity lines businesses which breached thresholds set by the Commission (uniquely for electricity lines, no Ministerial decision on control is involved); and
- was to administer the electricity lines information disclosure regime (and to review the appropriate asset valuation methodology for lines businesses).
The Commission has now put in place its targeted control regime for electricity lines businesses. Under the regime, businesses are only potentially subject to control if they cross either of two thresholds of performance. The regime is "targeted" because only those businesses that cross the thresholds, trigger the Commission to identify lines businesses whose performance may warrant further examination, and if necessary, control of prices, revenues and/or quality.
Once a lines business has breached a threshold, the Commission must determine whether a declaration of control would benefit consumers in the long term by: limiting the ability of the business to extract excessive profits; providing strong incentives for the business to improve efficiency and to provide services at a quality that reflects consumer demands; and ensuring the business shares the benefits of efficiency gains with consumers, including through lower prices. Should the Commission determine that such is the case, it cannot automatically impose control, but must first consult with interested parties.
The two thresholds adopted by the Commission, and which apply until 2009 for all electricity lines businesses (with the exception of Transpower), are:
- compliance with a specified CPI minus X price path; and
- compliance with specified reliability and consumer engagement criteria.
While lower prices are a potential outcome of the targeted control regime, they are not a fait accompli. The Commission has set the X factors in the CPI minus X price path based on a high-level benchmarking analysis of relative business productivity and profitability, rather than on a bottom-up building block analysis. These X factors range from +2% to â€'1%, which means that some businesses are able to increase prices in real terms without breaching a threshold.
At the present time, the Commission is completing its first round of assessments against the thresholds, and is beginning its second round. As a result of the first assessments, the Commission has decided that further scrutiny is warranted in the case of only three of the 12 businesses identified to date as having breached the thresholds.
Even those businesses involved in post-breach inquiries may not be subject to control. The Commission has had discussions with those businesses and has made it clear that if they are able to put acceptable undertakings about future pricing behaviour on the table, the Commission will be prepared to exercise its discretion not to declare control. Having said that, the Commission will undertake detailed investigations to establish whether such undertakings are in fact acceptable.
Hence, while the perception may be that New Zealand is moving closer to other jurisdictions model for regulating electricity sector monopolies, the targeted control regime ensures that the control of prices, revenues and/or service quality, will likely continue to be the exception rather than the rule.
Also, as experience with the regime is gained over the next five years, the Commission may find that more-targeted thresholds, involving lower compliance costs across the industry, might be able to meet the purpose of the legislation at the time the thresholds are reset. For example, it may be possible for the Commission to exercise its discretion not to assess all businesses every year where it is clear that businesses are achieving efficiencies and quality improvements, and cost savings are being passed on to consumers.
Telecommunications
The state monopoly was corporatised as Telecom Corporation of New Zealand in 1987. The Telecommunications Act 1987 set out a timetable for the phasing in of competition. Restrictions on the supply of all telecommunications equipment were removed by mid 1988 and Telecom's statutory monopoly right over the provision of telecommunication network services was removed on the 1st April 1989. This made New Zealand the only country to liberalise its telecommunications market without establishing an independent regulatory body.
Telecom was then sold in 1990 complete with the national telephone network, including the local loop, to a joint venture between local investors and two large United States telecommunication companies.
No industry specific regulation existed, apart from limited disclosure regulations with regard to Telecom's pricing under the Telecom (Disclosure) Regulations 1990 and under the Telecommunications (International Services) Regulations 1989.
In the absence of regulation, the Commission faced the same problems most enforcement agencies faced worldwide dealing with the telecommunications industry under generic competition law. A major issue was differentiating between competitive and anti-competitive behaviour. The Commerce Act does not prevent the incumbent from competing vigorously.
Interconnection
Interconnection pricing is a difficult and vexed issue to deal with under competition law. In New Zealand there was no clear framework for access to infrastructure assets.
It is a widely held view that the courts are not best placed to decide interconnection disputes. An entrant and the incumbent in New Zealand spent four years and tens of millions of dollars on litigation under the Commerce Act. After the case reached the highest and final court, the Privy Council, the judgment was that any price up to the efficient component pricing rule (ECPR) was not necessarily in breach of the Commerce Act. This rule, as is well known, unfortunately locks in any monopoly rents that might already be in existence.
Another issue with interconnection pricing is the extent that the cost of the USO is included in whatever interconnection price is agreed, and whether the USO cost that is included, is appropriate.
Double Hypothetical Counterfactual Test
Another issue arising from that same case was the Privy Council ruling requiring any analysis of anti-competitive behaviour by a dominant incumbent to be measured against a double hypothetical counterfactual test. That test requires an analysis of what a competitive market would look like and then a determination of what a hypothetical competitor in that hypothetical market would do under similar circumstances.
Arbitrage of interconnection prices for internet access and other call sinks became an issue in New Zealand as it did in other jurisdictions. In most jurisdictions regulation was available to resolve any issues. That was not the case in New Zealand.
The incumbent, Telecom, unilaterally moved all internet traffic to a network that was arguably outside of the existing interconnection agreements it had with competitors and put in place economic incentives for consumers to switch to that network. It then stopped paying for interconnection related to the internet.
The Commission considered that in a competitive market, the incumbent would have been required to renegotiate the interconnection agreement and that would require the incumbent to pay the opportunity cost of the competitor for giving away the arbitrage opportunity. That had not happened so the Commission commenced court proceedings against Telecom which are still underway.
Ministerial Inquiry leading to Telecommunications Act 2001
A Ministerial Inquiry was established in March 2000. The Inquiry, which resulted in the introduction of regulation, concluded that the reliance on courts, arbitration or self regulation led to significant delays and costs; there was no clear access framework; and access prices were not cost based and there was nothing to prevent gaming.
The Government's response to the Inquiry's report was released in December 2000, and the resulting Telecommunications Act was passed in December 2001.
The Telecommunications Act established the position of the Telecommunications Commissioner, who is a member of the Commerce Commission.
The Commission's primary role is essentially a dispute resolution role when the parties are unable to negotiate solutions for regulated services.
The Commission's stated preference is for commercial negotiation consistent with the regulation. However, where agreement genuinely cannot be reached, an application can be made to the Commission for a decision.
Since the Act has been in place, the Commission has dealt with a number of long standing telecommunications issues such as interconnection and access to the local loop.
Interconnection and Resale
In the case of interconnection, the Commission received an application to set the fixed network interconnection price between the incumbent and the major entrant in May 2002. Seven months later the Commission set an initial price based on a benchmarked price and excluded the cost of the USO. The price, 1.13 cents per minute, contrasted with the previous price of 2.6 cents. Resolving this issue in such a short space of time was a significant outcome achieved under the new regulatory framework.
Since setting the price, both parties have applied for a review and the Commission has commenced this review using total service long run incremental cost (TSLRIC) methodology as prescribed by the Act. The Act prohibits the use of the ECPR rule. The concept of setting an initial price considerably reduced the cost of providing prices to allow the industry to get on with competing and provides some certainty.
The Telecommunications Act establishes an extensive regime for the resale of Telecom retail services. The Commission has established a 16 percent discount rate for non- price capped services in both the residential and business sectors. Resale of price capped services such as residential local access is now also available as a result of the Commission's decisions.
Establishing the cost of the USO is a separate responsibility of the Commission, as well as allocating that cost to the entire industry. This means the cost is explicit and excluded from any interconnection price.
Regulated services
The Telecommunications Act also provides for the Commission to undertake inquiries and make recommendations to the Government on changes to the regulated services. For example, the Commission was required under the legislation to examine whether the local loop or public data network should be regulated (unbundled).
The Commission recommended that the local loop should not be fully unbundled. The Commission could not see any evidence that full unbundling would, of itself, lead to significant benefits for residential customers or small businesses. However, the Commission did recommend that bit stream for Internet access at average speeds not less than 256kpbs be unbundled.
The Government accepted those recommendations in July 2004.
Of interest is the fact that near the conclusion of the inquiry, the incumbent presented an offer to unbundle partial data circuits. This had been a particular issue as the Commission had a long standing Commerce Act investigation into whether the incumbent's alleged behaviour of selling end to end data services at a lower retail price than it was offering the tails to competitors, was anti-competitive.
After the Commission delivered its recommendations to the Government on local loop unbundling, the Commission coincidentally completed an investigation and initiated court proceedings under the Commerce Act against the incumbent for its pricing behaviour on data tails.
The Commission has two roles, enforcement and regulation. The enforcement role addresses alleged unlawful use of market power, whereas the regulatory role addresses the market conditions that enable the lawful exercise of market power, and whether that market power needs to be constrained through control or access provisions to promote competitive outcomes.
The Commission recently commenced an investigation into mobile termination rates, and whether or not they should be regulated under the Telecommunications Act.
Gas Industry
New Zealand's gas industry was previously regulated, and the Commission's role (under the price control provisions of the Commerce Act) was to control the wholesale and retail price of gas and the price of gas transmission and distribution in New Zealand. In that instance, the Commission applied a rate of return to capital employed to determine prices.
Deregulation occurred in April 1993 and included such changes as the removal of price controls, the corporatisation of council-owned gas undertakings and the abolition of exclusive statutory territorial franchises for gas undertakings. It also included the introduction of competition enhancement measures including information disclosure by pipeline owners, aimed at transparency over rates of return and anti-competitive contracts.
Following deregulation, industry participants developed several voluntary agreements to provide for non-discriminatory access to transmission and distribution systems. Those agreements include a gas pipeline access code, a transmission information memoranda, reconciliation agreements; and transmission service agreements.
In this environment, section 36 of the Commerce Act (New Zealand's equivalent to s46 of the Trade Practices Act) was used to enforce access to gas transmission and distribution pipelines by gas wholesalers and retailers who wished to compete with incumbents. The generic competition provisions, including section 36 of the Commerce Act, controlled access.
Gas Pipelines Inquiry
In April 2003, after receiving conflicting reports on the level of returns obtained by gas pipeline owners, the Government required the Commission to carry out an inquiry, under the regulatory control provisions of the Commerce Act. The Inquiry is to enable the Commission to recommend whether gas transmission and/or distribution should be controlled.
The statutory criteria used by the Commission to determine its recommendation are:
- whether competition is limited in the relevant gas transmission and distribution markets; and
- whether control is necessary or desirable in the interests of acquirers of services in the relevant markets (ie gas wholesalers, retailers and consumers).
The Commission released its preliminary views in May 2004. The Commission's draft recommendation says the introduction of control would result in net benefits to acquirers of the services of NGC (transmission and distribution), Maui Developments (under any future open access regime), Powerco and Vector.
The Commission held a four day public conference in mid July to receive oral submissions on its preliminary view. The Commission is currently considering all submissions and will report to the Minister of Energy by 1 November 2004.
This is the second regulatory control inquiry undertaken by the Commission. In August 2002, the Commission completed an Inquiry requested by the Minister of Commerce to consider whether airport activities should be controlled at Auckland, Wellington and Christchurch international airports. The Commission recommended to the Minister that control was necessary or desirable at Auckland airport, but not at Wellington or Christchurch airports. In May 2003, the Minister declined to accept the Commission's recommendation.
The Commission's Approach to Regulation
The Commission has made no secret of the fact that its preference is to encourage commercial negotiation to resolve access issues. Commercially negotiated outcomes are likely to be superior and quicker than decisions imposed by regulators. After all, industry participants have better knowledge of their own industry.
Those commercial negotiations will be more likely if the participants understand the Commission's approach to regulation, and therefore what the regulatory answer might be. In line with this philosophy, the Commission has quite deliberately been very open about its approach to regulation and has, where possible, published guidelines and provided written reasons for its decisions.
The Commission has borrowed very heavily on its previous experience using open and transparent processes for considering authorisations under the Commerce Act. These processes, with minor modifications, have resulted in the free exchange of information which has placed the Commission in a better position to make decisions.
Having competition law and the regulatory responsibility for both telecommunications and electricity distribution under one roof has meant that the Commission has been able to achieve a consistent approach to a number of complex analytical issues such as the weighted average cost of capital and asset valuation. But the Commission has not been consistent for consistency's sake. Where there is an obvious need to make adjustments, the Commission has done so, and provided an explanation for those differences.
One area that has differed is the treatment of consumer benefits under competition law and the regulatory regimes. The Commerce Act recognises that there are some circumstances where anti-competitive arrangements or mergers can result in net benefits to the public of New Zealand. The gains in economic efficiency made possible by the arrangement or merger (e.g., cost savings through rationalisation of production) might be large enough to offset the loss of efficiency from the higher prices resulting from the lessening of competition. In comparing such benefits and detriments, the Commission's approach is to give equal weight to the consumer and producer benefits. Thus, cost savings count as benefits even if they are not passed on to consumers in the form of lower prices.
In addition, the Commission treats any transfers between New Zealand consumers and producers as having a neutral impact on overall economic welfare, since the gains and losses balance out. In short, the Commission's focus is on the economic efficiency that can be directly attributed to the arrangement or merger.
On the other hand, when the question arises about whether or not to introduce regulation, it is generally because reliance on competition law is not delivering competitive prices to consumers and economic rents are being earned. Part IV of the Commerce Act requires that under those circumstances, the appropriate test is to place greater weight on the transfer of these rents to consumers. The Commission takes a similar approach under the Telecommunications Act.
Conclusion
Internationally, it is emerging that there is more interest in less complex and more cost-effective regulatory solutions. Increasingly, we are seeing a number of jurisdictions starting to review the need for ongoing sector specific regulation and rely more extensively on generic competition law, with regulation addressing only those areas that competition law does not adequately resolve.
New Zealand's approach is consistent with this. The Commission has focused its efforts under generic competition and consumer law and will continue to need to be satisfied that there is a clear benefit to consumers of recommending further sector specific regulation. Where it is demonstrated that regulation is necessary and desirable, the Commission will look for targeted, incentive-based regulation that is cost-effective and as non-intrusive as possible.
In a short time, much has been achieved.
In the electricity area, key achievements include:
- generic consumer and competition law applicable to the whole electricity industry is now complemented by a "targeted" regulatory regime specific to electricity lines businesses;
- the targeted control regime implemented cost-effectively through a price path threshold and a quality threshold using benchmarking comparisons rather than building blocks;
- businesses choosing to comply with the thresholds retaining incentives to invest in their networks to maintain quality of supply, while being limited in their ability to make excessive profits;
- price or other control only being implemented by the Commission for businesses that breach the thresholds and where there are clear net benefits to consumers in the long term; and
- the possibility over time of a more-targeted regime involving even lower compliance costs being developed.
In the telecommunications area, key achievements include:
- rapid resolution of the pricing of interconnection;
- availability for resale of wide range of residential and business retail services at a regulated discount;
- availability (shortly) of an unbundled bitstream service; and
- the creation of certainty about carriers' obligations in relation to the TSO.
In addition to the sector specific regulation, the Commission continues to take proceedings under the generic competition law, including the proceedings already mentioned in the telecommunications sector plus current proceedings against an electricity company in respect of access to metering equipment.
The Commission is also concerned to ensure fair competition in the retail markets by relying on the New Zealand Fair Trading Act to address unfair practices relating to customer switching and misleading representations about price increases.
Competition law and industry specific regulatory regimes deal with separate issues. In the case of telecommunications, competition law proved unable to efficiently set interconnection pricing or remove excessive rents. The jury is still out on whether it can deal with predatory behaviour.
Having been through a period of relying only on competition law, New Zealand has now introduced industry specific regulation in the electricity, telecommunications and dairy markets in order to resolve issues more efficiently. Accepting that, there is always room for regulatory error and gaming.
There are some economies available from being a small organisation and having the dual responsibilities of competition law and regulation. The infrastructure, processes and support were already available when the new legislation was introduced. The Commission also has the ability to achieve a consistent approach to a range of analytical issues that are common across industries. The Commission is accountable through the appeal process or judicial review.
A hallmark of the New Zealand jurisdiction is the openness and transparency of the Commission's processes. These processes have served the Commission well and have resulted in the Commission being able to make well information decisions in the best interests of consumers.
The Commission's purpose across all of its work under the legislation it enforces is to promote dynamic markets so that New Zealanders benefit from competitive prices, better quality and greater choice.
