Competition Law and Policy

  • Paul Scott “Competition Law and Policy: can a generalist law be an effective regulator?” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). The answer is ‘yes’ to the question this paper poses in the title. The author takes the view that it is not the law itself, particularly section 36 of the Commerce Act that was the problem, but the application of that law which was too lenient on monopolists. Not only that, the author proposes that the New Zealand courts took a too literal view of the legislation and ignored overseas jurisprudence and scholarship to determine competition law liability. The turning points in the paper that the author highlights are the Privy Council’s decision in Telecom Corporation of New Zealand v Clear Communications Ltd where the leniency to monopolists increased and the New Zealand Court of Appeal Data Tails decision where that leniency to monopolists has decreased. This later decision where Telecom has clearly taken advantage of its market power and therefore breached section 36, demonstrates how the court’s decision making processes now seems more willing to consider overseas jurisprudence and case law and are less focussed on the sole literal interpretation of section 36. Overall the paper examines competition law from the Commerce Act in 1986 through to the present day and questions conclusions that the size of New Zealand’s economy had any effect on the failure of competition law.

  • See also Paul G Scott “Competition Law and Policy” in Susy Frankel (ed) Learning from the Past Adapting to the Future: Regulatory Reform in New Zealand (LexisNexis, 2011).

  • Paul Scott and David De Joux “Uncertainty and Regulation: Insights From Two Network Industries” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). The telecommunications industry, broadly speaking, has been through four phases since the mid-1980s.[81] The first phase was massive liberalisation and privatisation, with the regulation of the sector entrusted to the courts and general competition law. The second started with the Telecommunications Act 2001, enacted because of the widespread dissatisfaction with the lack of competition in the market and the feeling that the light-handed regulation had failed. This led to the creation of the Telecommunications Commissioner, an industry-specific regulator. A third phase was discernible with the "stock take" in 2005. The involvement of the government became more visible; the inquiry was undertaken by the Ministry of Economic Development and the operational separation was supervised by the Minister of Communications and Information Technology rather than the Commissioner.

  • Paul Scott and David de Joux “Uncertainty and Regulation: Insights from Two Network Industries” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). If vertical integration was the primary cause of the regulation cycle, there is a second one – the ownership of natural monopolies. Natural monopolies are characteristic of a dysfunctional market. They present all the shortcomings generally associated with monopolies and the absence of competition: allocative; productive; and dynamic inefficiency.[94] Regulation can only do so much. It can regulate prices, impose open access, require non-discrimination, and limit the influence of the natural monopolist over related markets. Regulation can influence behaviour only to a restricted extent. More specifically, investment in, and development of a network under private ownership will probably be an issue. Because a private operator has, as its main aim, its own profit, if it does not face competition it will have a tendency to live from its rents, without reinvesting in its assets.[95] Why would it invest in a new technology if it does not enhance its returns? This has been a concern in the regulation of Telecom since its privatisation and required numerous governmental interventions, for example, because of a lack of investment in the rural infrastructure,[96] development of the FTTN network,[97] or upgrading the network for broadband development.[98]

  • Mark Bennett and Joel Colón-Ríos “Public Participation in New Zealand’s Regulatory Context” in Susy Frankel and Deborah Ryder (eds) Recalibrating Behaviour: Smarter Regulation in a Global World (LexisNexis 2013). The standard regulatory concern from an economic point of view is to ensure competition and efficiency in the market. The relationship between these economic concepts is complex, but basically competition between sellers increases efficiency in markets.[9] The Commerce Commission has observed that:[10] Economic efficiency is generally enhanced in markets that are competitive. Firms that are subject to competitive pressures from other firms that are supplying the market, or from the threat of new entry, have an incentive to meet the demands of their customers (allocative efficiency), at minimum cost (productive efficiency), as they would otherwise lose market share to more responsive and efficient competitors. Such firms also face an incentive to invest and innovate over time, in order to achieve and maintain a competitive advantage over their rivals (dynamic efficiency). The electricity regulation literature often focuses on allocative efficiency, where resources are used to meet consumer demand, which is "maximised where price is equal to marginal cost".[11] Therefore, one of the major concerns in electricity regulation is that of natural monopoly, where it is economically efficient for a single firm to provide services or products to a market, giving the largest supplier a cost advantage over competitors and new entrants.[12] Indeed, utilities are often said to be the paradigmatic industry requiring regulation for this reason, because the costs of building the networks over which the utility service is distributed to consumers are very high, and there are economies of scale and scope that favour provision by large companies.[13]