We start the new year finalising the first default price-quality paths (overall price limits and service quality requirements) for gas pipeline businesses. These paths will set the revenue and quality constraints for the five regulated suppliers.
We also anticipate our first customised price-quality path proposals from electricity distribution businesses. Customised price-quality paths allow a business to propose an alternative to the current (2010-2015) default price-quality path.
We will also be setting new information disclosure requirements for the monopoly national grid provider, Transpower, and receiving and analysing the first information disclosures for electricity distribution and gas pipeline businesses.
The effectiveness of the information disclosure regime for Wellington, Christchurch and Auckland airports will be under the spotlight as we complete reports to Ministers, the first in February. These reports will consider whether competitive market outcomes are being achieved for airports through the increased transparency provided by their disclosure of information to the public.
The first merits appeals hearings relating to input methodologies for electricity lines, gas pipelines, and airports will be completed in February. Unlike previous hearings on regulation of these industries, the Court is looking at the substance of our decisions. We look forward to receiving the Court’s decisions.
We are also scheduled to set a new cost-based price for Chorus’s unbundled bitstream access (UBA) service by June. The Commission has been required to move from a ’retail-minus’ approach to a cost-based approach under the Telecommunications (TSO, Broadband, and Other Matters) Amendment Act 2011.
And, we will complete the first annual Telecommunications Development Levy (TDL) liability allocation determination. This process identifies what share of the levy telecommunications providers will have to pay. The $50 million a year levy funds services including the relay service for the hearing impaired, the Rural Broadband Initiative and upgrades to the 111 emergency calling system.
Our first review of Fonterra’s milk price calculation will be completed later this year. This review follows our first annual review of Fonterra’s milk price manual, and looks at the actual calculation of the price and whether it is consistent with the purpose set out in the 2012 amendments to the Dairy Industry Restructuring Act (DIRA) legislation.
For more detailed dates and consultation timeframes see our regulatory calendar.
Meanwhile, our competition work continues at pace – at the time of writing we have five clearance determinations for companies wishing to merge, 16 investigations into anti-competitive practices, and 144 complaints under investigation of potential breaches of the Fair Trading and/or Credit Contracts and Consumer Finance Acts.
The areas we are focusing on under the Fair Trading Act at present, both for enforcement and increased compliance, are telecommunications and major retailers, particularly in the markets for appliances and electronics, homeware and groceries.
Under the Credit Contracts and Consumer Finance Act we are continuing to focus on lenders who do not provide adequate disclosure to borrowers, and contributing to the reform of the Act.
2013 will be a year of considerable change to the laws underpinning our work. New provision in the Consumer Law Reform Bill to ban unsubstantiated representations will have significant implications for the Commission as it will make it easier for us expose misleading claims and representations. The Consumer Law reform will also see some other pieces of legislation moved in under the Fair Trading Act, including layby sales and door-to-door sales.
Amendments to the Commerce Act include the introduction of a new price-fixing prohibition, new exemptions and, most importantly, criminal sanctions for cartel conduct.
One of those new exemptions is for collaborative activities. This is a novel exemption that is intended to capture joint ventures, but to be wider than the existing joint venture exemption. The collaborative activity exemption is designed to encourage and enable pro-competitive arrangements.
We expect the new laws to be in place early in 2013, with the criminal sanctions coming into force two years later.
We are also hoping for legislative reform to clarify uncertainty in how to practically apply section 36 of the Commerce Act, which deals with monopolistic conduct. The uncertainty has arisen following a decision by the New Zealand Supreme Court involving the Commission’s case against Telecom for alleged misuse of market power in the internet dial-up industry. As a result, we have completed only two unilateral conduct cases in the last year. Given the complexity and cost of these types of cases we are choosing to investigate only those involving clear harm.
In 2013, we will also finalise revisions to our Mergers and Acquisitions Guidelines and will be issuing new Authorisation Guidelines. The updated merger guidelines will aim to reflect recent Commission decisions and New Zealand cases, similar guidelines in the United States, Canada, the United Kingdom and Australia, and the Commission’s plain English standard. The Authorisation Guidelines update the 1997 Benefits and Detriments Guidelines, reflecting developments in case law and our practice, as well as making the Guidelines as readable and practical as possible. Both draft guidelines will shortly be put out for public consultation.
Advocacy and education are an important part of the Commission’s toolkit as clearly those with a good understanding of the law have a better chance of complying with it.
We target our advocacy and education efforts at industry sectors where we see emerging issues or have ongoing areas of concern. In 2013, our focus will be on the rebuild of Christchurch following the earthquakes, and the health sector.
Christchurch will be the hub of economic activity and growth for the New Zealand economy for up to the next 10 years. Overseas experience tells us that after a disaster there is considerable potential for fraud and collusion as money begins to flow in the reconstruction phase. Therefore we need to ensure we are doing all we can to improve markets’ understanding about the benefits of competition and anti-competitive practices that may be undermining that competition. To this end we will continue to meet with stakeholders such as associations for loss adjusters and quantity surveyors, Christchurch City Council, CERA and others.
Our health advocacy project aims to help ensure health professionals are aware of their obligations under the Commerce Act. The shift in the health sector to more integrated models of care with better coordination and collaboration between different health professional groups can bring with it risks under the Commerce Act, and we see our role as helping to educate the sector on their legal responsibilities.
