Hon LIANNE DALZIEL (Minister of Commerce) Link to this
I move, That the Commerce Amendment Bill be now read a third time. The bill is a major rewrite of the price control provisions in Parts 4 and 4A and in certain parts of Part 5 of the Commerce Act 1986. Its overall aim is to provide protection for consumers against excessive prices and poor quality when buying what are important infrastructural services where there is no real prospect of competition, while at the same time ensuring that suppliers have incentives to invest, innovate, and improve efficiency. The bill draws upon best practice overseas to achieve these objectives. In particular, it seeks to ensure that regulation is not imposed unnecessarily, and that where it is required, it is applied in the most efficient way to promote the long-term interests of consumers.
The main changes in the bill can be summarised as follows. First, a purpose statement has been set for price control, for the first time. That will ensure that any regulation is well focused and delivers on objectives, including providing incentives for investment. Second, the tests and processes for deciding whether, and how, to regulate have been improved. An inquiry by the Commerce Commission will need to show there is little or no likelihood of competition, that there is scope for the exercise of substantial market power, and that the benefits of any regulation will materially exceed the costs. Third, the Commerce Commission will be required, as a priority, to set clear and explicit rules called input methodologies, relating to regulatory decisions. This is designed to give businesses certainty about what to expect and to improve their confidence in the regulatory regime. Fourth, lighter-handed forms of regulation are made available as fit-for-purpose alternatives to price control. They include information disclosure, a negotiate-arbitrate regime, and a default customised regime. Lastly, the bill puts in place improved approaches for the three sectors that are already subject to economic regulation—namely, electricity lines, gas pipelines, and airports.
The bill will also improve confidence in the integrity of regulatory decisions by providing for appeals to the High Court, assisted by lay experts on input methodologies, on final decisions made by the commission. Conducting appeals on input methodologies, as I mentioned in the Committee stage, will present some novel challenges for the High Court, and some concerns have been expressed about this. However, the statutory time frames for determining methodologies and lodging appeals mean that the timing of the appeal process is likely to be known well in advance. That will give ample time to appoint suitable and available experts to the panel of lay members. It will also enable the High Court to consider the best way to optimise the appellate process so that it is fair to all, while dealing efficiently with the issues raised in appeals. Once this legislation is passed, as I said again in the Committee stage, I intend to write to the Rules Committee, which essentially makes the rules for the processes to be followed by the High Court, to encourage it to develop appropriate processes for the best consideration of these input methodology appeals.
In conclusion, can I again thank the officials who worked on this bill. They have worked tirelessly on very complex legislation. Can I also pay tribute to all members of the Commerce Committee. In particular, I am going to single out Simon Power for being a very willing and able individual who has worked very closely with us to ensure that the bill has been able to make its way to the House in better shape than when it was first introduced to the select committee. This was a good process, and it has been contributed to by the many, many submissions that were received on it, as well. I commend the bill to the House.
SIMON POWER (National—Rangitikei) Link to this
The Commerce Amendment Bill, of course, has been before the Committee of the whole House in recent moments, and now we find ourselves moving swiftly through the third reading. There is no need to be concerned about that pace in this particular instance. Normally speaking, the Opposition is opposed to procedural urgency motions, and we remain opposed to this one, but this legislation, by and large, does have the support of the very large majority of members in this Chamber. I thank the Minister for involving the National Party in discussions and briefings about the bill from the start. It certainly made understanding some of the complex issues contained in this legislation easier to deal with, and I am grateful for that.
There is, of course, a very complex make-up to this bill, as we have heard on the second reading report back and in the Committee stage. Many of the matters have been canvassed by the Minister in her speech to this third reading. I do not intend to cover off those matters again, because they have been covered off a number of times in the last 24 hours. I will just emphasise, though, a comment that I made in the Committee of the whole House—that is, although legislators are put in a position of having to foresee over a 2, 3, or 5-year period how legislation they have passed in this House will impact on industry and consumers, we never have a crystal ball. That means that many of the things we pass into law can have an effect we do not anticipate. That is why it is important to keep a close watch on the Commerce Commission’s work in the area of determining these input methodologies.
The inability for legislators to see the future is also why it is important to keep a close watch on the Rules Committee and the way it will be instructed or checked on by the Minister, and that is why it is important to keep a watching brief on consumer-based lines companies, to make sure that the regulatory framework surrounding them, which is different from the one being proposed in this legislation, is effective, and that consumers are not disadvantaged, and long-term investment is not disadvantaged, by that as well. That is why it is important, under Part 2, to make sure that the delicate balance that has existed for so long in this portfolio between airlines and airports is also looked at pretty carefully, and monitored in terms of information disclosure regimes that are being put in place with this legislation. That is an argument that I have no doubt will continue past the passing of this legislation.
The inability to see the future is also why it is important to spend some time, from time to time, making sure that the purpose clause of commerce legislation is updated and reviewed, and that we can make sure that all the processes involved in that are clearly monitored.
I also have one last point in respect of something I raised very early in this process; it relates to the merits review process. The Minister, rightly in my view, recommended to the Committee that we have a two-stage appeal process—firstly, at the point where import methodologies are determined and, secondly, at the point of final implementation. The fact that initial determinations will stay in place, if indeed any appeal rights or merit review rights are exercised, provides for a minimisation of any potential for gaming in these areas, and that is important. The Minister was right when she said in her opening remarks that legislation in the commerce area is designed to provide certainty. That applies not only to businesses under regulations themselves but to the consumers who are in receipt of the goods and services produced by those businesses.
The Commerce Amendment Bill enjoys the support of the National Party, has done through all stages, and will continue to do so through the third reading.
Hon PAUL SWAIN (Labour—Rimutaka) Link to this
In the minute that has been allocated to me, it will be very difficult to traverse the work—the thorough work—of the Commerce Committee on the Commerce Amendment Bill. But I will say that, as the previous member outlined, anything to do with commerce and competition requires a very delicate balance. If we get it wrong, if the balance is too heavy in one way or too light in the other, it creates perverse outcomes. That is no more so than with electricity. We know that electricity lines companies are monopolies, so if we regulate them in too tough a way, it then means that boards do not have to do much and they blame the Government—if the lights go out it is the fault of the Government for setting the regulations at too tough a level, and for not allowing enough retained earnings for putting back into capital expenditure. If companies are regulated too lightly, then there is the opportunity for a monopoly to gouge, and for consumers, who have no other alternative means of access to electricity, to have to pay monopoly rents.
This is a very delicate business, and in my view the select committee worked extremely diligently on this legislation to improve the balance in a number of areas. I think the committee worked extremely well, and I think that as a result, the balance in this area, which will have to be looked at continually, from time to time, has been much improved. I support the passage of this bill.
LINDSAY TISCH (National—Piako) Link to this
The Commerce Amendment Bill has been an interesting exercise. It has been a fundamental rewrite of the Commerce Act’s provisions relating to regulation of the sectors with little or no competition or prospect of competition. The new purpose statement in Part 4, in new section 52A(1) substituted in clause 4, states that the bill’s purpose is “to promote the long-term benefit of consumers …”, such that suppliers “(a) have incentives to innovate and to invest, … (b) have incentives to improve efficiency and provide services at a quality …, (c) share with consumers the benefits of efficiency gains …, and (d) are limited in their ability to extract excessive profits.”
The bill we have debated provides the Government with many more tools for regulating, other than the imposition of price controls, including information disclosure, negotiation or arbitration of a regime, a price control path, and customised price control. Of course, the test will be whether to regulate, and that has changed. There will be only one process after deciding whether to regulate and how to regulate, rather than two separate processes. This is very complex law, it is very technical, with wide-ranging implications, I have to say, that will make it difficult for policy makers to predict the outcome.
National will be watching very closely as we monitor the progress of this bill, under the Commerce Commission, to see that the points we have raised will be realised. There was a question mark over resources and how the changes will be able to be implemented in the time frame that has been set. I have been assured by the Minister, during the Committee stage, that the time frames for the transitional changes are shorter than have certainly been mooted before. That is a good sign. However, we will be monitoring those as we go through. Good commercial law depends very much on sound and reliable implementation by both the independent agencies and Ministers. With those points considered, National is happy to support the third reading.