Competition watchdog ‘hasn’t fully utilised its legal war-chest’
The Government and the Commerce Commission don’t appear to be eye-to-eye on whether the competition watchdog has the cash it would need to fully crack down on big businesses it suspects of monopolistic practices.
Commerce Minister Andrew Bayly told
Stuff he believed the Commerce Commission was in the main performing well, but said that was something the Government was “monitoring very closely”.
“The Commerce Commission spans many different activities in different areas. I think, inevitably, there are some areas where they're very strong and others where there might be more work required, he said.
Bayly made clear he would not object to the commission taking more risks when deciding whether to bring prosecutions and that he thought they had the funds to do so.
“The first step is they have a fund — a litigation fund — and I've said to them they should be using the litigation fund,” Bayly said. “I have said as their minister that if they want to pursue actions that might be more risky I fully endorse it.
“It's up to them to do it, it’s not my decision, but as the minister, I'm very happy for them to pursue what they think is relevant.”
However, Commerce Commission chairperson John Small said it was having to manage its litigation fund “very carefully”.
“We've got two significant matters that have been approved for litigation, where we're going through the pre-filing niceties.
“You can expect to see more litigation, and litigation against powerful opponents. Watch this space over the next couple of months.”
But Small said the commission was “now in a position where we're bumping up against the limits of our litigation fund”.
The commission was “okay at the minute”, but “could do more with more money”, he said.
In response, Bayly reiterated his view that the commission had been managing its litigation fund conservatively up to now.
“I have encouraged the Commerce Commission to fully utilise all of its litigation funding and it hasn't previously done so,” he said. “I've said to the Commerce Commission, I expect it to be active, which is appropriate, and to fully utilise that fund that's been provided.”
The commission has two major Commerce Act investigations under way from market studies it has conducted into the supermarket and building materials industries, although it is not clear the pending litigations referred to by Small are related.
The commission kicked off an inquiry nearly two years ago into whether Woolworths NZ and Foodstuffs breached the Commerce Act by including clauses in covenants and lease agreements they entered into that prevented a wide range of retailers from operating near many of their stores.
The commission said in its final report into the groceries industry in 2022 that it had identified more than 190 such agreements which it described as “an aggravating factor” that had prevented rivals from setting up shop.
MPs were told in 2022 that one such agreement even required a landowner to lobby against rival developments that could adversely effect a supermarket’s interest, at their own cost.
The commission first became aware the covenants and leases could be an issue in December 2020.
But it indicated in March last year in response to an Official Information Act request that, as of then, its investigators had held just three external online meetings and made no phone calls to external parties during the course of their investigation.
While in Opposition, Bayly labelled the amount of time the commission had spent on the inquiry without reaching a decision on whether to prosecute as “extraordinary” and said the low level of external investigatory activity raised the question of what the commission had been doing.
Small last week continued to insist the matters involved in the supermarket covenant investigation were complicated, and it is understood at least one of the supermarket groups remains hopeful of any matters being settled out of court.
The second unresolved Commerce Act investigation, which has been underway since November 2022, stemmed from concerns that volume-based “rebates” on Gib board offered by Fletcher Building subsidiary Winstone Wallboards were anti-competitive.
Small said in the wake of its market study into that industry that the commission believed “quantity-forcing rebates” made it harder for new suppliers to get a foot in the door in the supply chain.
But Fletcher Building said such discounts were very common in the building materials and other industries.
It agreed to scrap the the volume-based Gib discounts in light of the commission’s concerns, but competition advocate Tex Edwards said the commission needed to complete that investigation regardless in order to avoid being gamed.
A competition lawyer said the commission tended to be keener to bring prosecutions under the Fair Trading Act and for cartel behaviour as those types of cases tended to be easier to win.
But commenting on its general performance, Small said the commission had a strong ambition to be very effective.
“We are aware of the value of taking cases right through,” he said.