News
Commerce Commission signals shift in approach
First published in NZLawyer, 25 June 2010.
Last month, the Commerce Commission released its 2010-2013 Statement of Intent (SOI), a document which sets out the Commission's strategic priorities and the outcomes it is targeting over the next few years. The SOI is the first released under the Commission's new leadership – Chair, Dr Mark Berry, and Chief Executive, Nick Hill. The SOI indicates that the Commission has heard and taken on board some of the concerns about its approach and processes that have been voiced by the business community over the past few years.
Moving beyond deterrence
Twelve months ago in this column we said that the economic environment, a change of Government and a changing of the guard at the Commission provided an opportunity for the Commission to place greater emphasis on resolving cases earlier and at lower cost to New Zealand Inc.
Our view was that the legacy of the Commission under Paula Rebstock's leadership was a knowledgeable, well resourced and sophisticated Commission with an established reputation as a strong regulator with both "bite" and "bark".
We described the evolution of the Commission under Paula Rebstock's stewardship as a "deterrence" phase. Having established its standing and reputation, we said that while deterrence remained an important goal, there was limited benefit for New Zealand Inc in the Commission continuing to focus principally on a deterrence reputation.
Accordingly, we urged the Commission to seek to engage more with business to find solutions that achieve the correct policy outcome for the least cost, on a case by case basis, so as to promote better outcomes for New Zealand Inc. Now, the Commission's SOI indicates that it is consciously moving in this direction.
Achieving the best outcome – identifying a fit for purpose response to issues
The Commission has outlined a new organisational purpose in the SOI, namely to "achieve the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders".
In setting out this organisational purpose, the Commission has also said that "we are clear that our success depends on choosing the right mix, type and nature of activity to achieve the best possible outcomes" and its Strategic Priorities also include an aim to focus interventions to achieve the greatest impact in the most cost-effective way. The Commission's new Head of Enforcement, Kate Morrison, has echoed these sentiments when she said the Commission's "aim is to get outside the binary litigate/don't litigate choice, and to make sure that we consider alternatives to litigation where they exist". We welcome this focus on achieving fit for purpose responses to issues as they arise - although of course, that is not to say that the Commission will (or should) not take enforcement action where it is justified.
An interesting aspect to this is the Commission's development of a methodology for evaluating the economic benefits resulting from direct intervention in markets. The Commission has said it is leveraging internationally accepted processes used to define proxies for estimating detriment and consumer benefit. The aim of the evaluation process is to ensure that actual benefit realised is greater than the cost of the Commission's intervention and the Commission has said that it intends to report the results externally in the 2011/2012 year.
These are positive initiatives and will help to ensure the Commission achieves, and is accountable for achieving, regulatory best practice by ensuring the costs of intervention are justified by the benefits to New Zealand Inc, and that these benefits are achieved at lowest cost – taking into account alternative approaches to regulation.
Greater engagement with business
As we said in our May 2009 article, in addition to the identification of non-litigation solutions – much time, cost and effort could be avoided, and better outcomes for New Zealand Inc could be achieved, through a forthright discussion with the relevant parties about the Commission's concerns at an early stage of an investigation – with the aim of achieving a pragmatic and effective solution.
In its SOI, the Commission has recognised a need to engage more with the business community. It has said that it:
...is focused on better understanding others' perspectives and better explaining our own and is committed to further improving our engagement and communication, consulting with interested parties and better understanding their respective views before reaching decisions.
Our experience is that the Commission is making progress in seeking to engage with business, although inevitably such changes require some time to become institutionalised. This means that there is still a need to be proactive and positive in engaging with the Commission rather than waiting for the Commission to initiate an engagement. This is not a criticism of the Commission, it merely reflects the fact that in practice, it will take time for the Commission's strategic approach to permeate to all levels of the Commission.
Greater engagement does not mean that business and the Commission will agree on every issue – and nor should they. However, we strongly believe that a more forthright exchange of views, at an early stage will assist all parties in resolving issues more quickly and at lower cost.
Continued alignment with Australia's ACCC
The continued moves towards a single economic market with Australia, combined with the proliferation of businesses with operations which span the Tasman, means that any moves to streamline the ACCC's and Commerce Commission's operational policies and procedures is likely to be beneficial for business. This alignment commenced under the Rebstock-led Commission and the SOI indicates that this Commission will continue to seek greater consistency in this area.
While operational alignment is desirable, substantive changes in policy or approach should only be adopted where doing so is in the best interests of New Zealand Inc. The New Zealand and Australian economies are very different, with market size being perhaps the most relevant difference in terms of competition law. As New Zealand business increasingly looks to offshore markets in order to grow, the need to gain scale is becoming ever more important. This is recognised in the SOI, and we caution that New Zealand's competition law should not simply mimic Australia's – where to do so might undermine or inhibit such export-orientated growth strategies.
