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The Commerce Commission is a New Zealand government agency charged with enforcing legislation that promotes competition in the country's markets and prohibits misleading and deceptive conduct by traders. It is an independent, quasi-judicial body, established under the Commerce Act 1986. The purpose of the Act is to promote competition in New Zealand's economy. It prohibits conducts that restricts competition (restrictive trade practices) and the purchase of a business's shares or assets if that purchase leads to a substantial lessening of competition in the market.
- 1 Introduction
- 2 Specific roles of the Commerce Commission
- 3 Cartel leniency policy
- 4 Regulated industries
- 5 Commission members
- 6 References
- 7 External links
The Commission is accountable to the Minister of Commerce and Associate Minister of Commerce for its performance. It is intended to be an independent and impartial promoter and enforcer of the law, with a purpose of achieving the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders.
Specific roles of the Commerce Commission
The Commerce Commission has specific roles under various Acts, as follows:
Fair Trading Act 1986
The Fair Trading Act 1986 was developed with the Commerce Act to encourage competition and to protect consumers from misleading and deceptive conduct and unfair trading practices. The Act applies to all aspects of the promotion and sale of goods and services – from advertising and pricing to sales techniques and finance agreements.
The Act also applies to pyramid schemes, and provides for consumer information standards covering country of origin (clothing and footwear labelling, fibre content labelling, care labelling and supplier information notices relating to motor vehicles. The Commission also enforces six product safety standards relating to baby walkers, pedal bicycles, flammability of children’s night clothes, cigarette lighters, household cots and toys for children aged up to three years.
Electricity Industry Reform Act 1998
The Commission has an enforcement role under the Electricity Industry Reform Act 1998. The Act prohibits cross involvement between electricity lines businesses with either electricity retail or generation activities.
Dairy Industry Restructuring Act 2001
The Commission has both enforcement and adjudication roles under the Dairy Industry Restructuring Act 2001. The Act provides for the Commission to undertake enforcement action and requires the Commission to issue determinations to resolve disputes between Fonterra and other parties.
Telecommunications Act 2001
The Telecommunications Act 2001 regulates the supply of telecommunications services in New Zealand. It requires the Commission to make determinations in respect of designated access and specified services and to undertake costing and monitoring activities relating to the Telecommunications Service Obligations.
Credit Contracts and Consumer Finance Act 2003
The Commission assumed responsibility for enforcing the major provisions of the Credit Contracts and Consumer Finance Act 2003 on 1 April 2005. This Act repealed the Credit Contracts Act 1981 and the Hire Purchase Act 1971, placing obligations on creditors with respect to disclosure requirements; calculation of fees, charges and interest; and oppressive conduct. It also enables consumers to seek reasonable changes to credit contracts on the grounds of unforeseen hardship. The part of the Act which relates to oppressive contracts known as buy-back transactions was enacted on 14 October 2003 and was already enforced by the Commission prior to April 2005.
In 2011, former National Finance director and convicted fraudster Trevor Allan Ludlow was the first person to be indefinitely banned by the Commission from working in the consumer finance industry.
Cartel leniency policy
The Commission has a cartel leniency policy to assist in the investigation of anti-competitive arrangements between competitors that are often secret and difficult to detect. The Commission wishes to encourage those involved in cartel conduct to report the cartel to the Commission. The Commission will grant immunity from Commission-initiated proceedings to the first person involved in a cartel to come forward with information and formally apply for leniency, provided they co-operate fully with the Commission in its investigation and prosecution of the cartel.
The leniency policy applies to arrangements between competitors which substantially lessen competition. It does not include conduct which amounts to a company taking advantage of a substantial degree of market power.
The Commerce Commission has a role in the regulation of some markets where there is little or no competition. The markets where the Commission is currently involved include: electricity transmission and distribution, gas transmission and distribution, telecommunications, airports and the dairy industry. The Commerce Act Part 4 contains specific provisions for regulation in these markets with a purpose of promoting outcomes that are consistent with outcomes produced in competitive markets such that suppliers of regulated goods or services:
- have incentives to innovate and to invest, including in replacement, upgraded, and new assets; and
- have incentives to improve efficiency and provide services at a quality that reflects consumer demands; and
- share with consumers the benefits of efficiency gains in the supply of the regulated goods or services, including through lower prices; and
- are limited in their ability to extract excessive profits
The regulatory frameworks are defined using input methodologies that establish the rules, requirements, and processes applying to the regulation, or proposed regulation, of goods or services under Part 4 of the Commerce Act 1986. The input methodologies typically cover the approach used to evaluate or determine cost of capital, valuation of assets, allocation of common costs, pricing methodologies, regulatory processes and rules, and the criteria that the Commerce Commission will use to evaluate any proposal.
Commission members are appointed for their knowledge of, and experience in, areas relevant to the Commission’s interests. The Commission comprises a chair and deputy chair, and up to three members. The Telecommunications Act created the position of Telecommunications Commissioner. Associate members and up to two cease and desist members may also be appointed.
The current members are:
- Dr Mark Berry – Chair
- Susan Begg – Deputy Chair
- Dr Stephen Gale – Telecommunications Commissioner
- Patrick Duignan – Commissioner
- Anna Rawlings – Commissioner
- Elisabeth Welson – Commissioner
- Dr Jill Walker – Associate Commissioner
- Hon Sir Bruce Robertson KNZM – Cease and Desist Commissioner
- Michael Behrens QC – Cease and Desist Commissioner
- "Credit Contracts and Consumer Finance Act 2003 No 52 (as at 30 August 2011), Public Act – New Zealand Legislation". legislation.govt.nz. 2011. Retrieved 7 December 2011.
- "Ludlow banned from finance industry". stuff.co.nz. 2011. Retrieved 7 December 2011.
Convicted fraudster Trevor Allan Ludlow has become the first person to be banned from working in the consumer finance industry under the Credit Contracts and Consumer Finance Act.
- "Input Methodologies". Commerce Commission. Retrieved 14 July 2012.