Necessary or Desirable
9.176 As noted in Chapter 2, under Part IV of the Commerce Act goods and services may be controlled if it is necessary or desirable for those goods and services to be controlled in the interests of acquirers. The potential benefits and costs to acquirers of controlling the airfield services supplied by WIAL have been identified above. The Commission considers that, if the weighing of these benefits and costs demonstrates that an improvement in the economic welfare of acquirers would result, then control would be demonstrated to be necessary or desirable in the interests of acquirers.
9.178 Table 52 brings together the Commission's estimates of the potential benefits and costs to acquirers of introducing control for airfield activities in terms of acquirers' interests. The figures shown in Table 52 are an average of the three years 2001-2003. Results for individual years are shown in Appendix 15.
Table 52: Estimates of the Potential Benefits and Costs to Acquirers of Control of Airfield Activities Supplied by WIAL, Average Per Annum ($000s)
| | Over WACC Range | At Point Estimate |
|---|
| Total Benefits | -34 to 1,352 | 713 |
| Total Costs | 959 to 1,475 | 1,201 |
| Net Benefits to Acquirers | -1,512 to 393 | -488 |
9.179 Overall, the Commission considers, on the balance of probabilities, that there are unlikely to be any net benefits to acquirers (in this context, specifically the aircraft operators and any indirect acquirers such as airline passengers) if the airfield activities supplied by WIAL were to be controlled. The costs that may be incurred by controlling WIAL outweigh the likely benefits. The Commission estimates there are between $0.4 million net benefits and a $1.3 million net loss per annum to acquirers over a period of three years. At the Commission's point estimate, there would be an estimated $0.4 million loss to acquirers per annum, or some $1.2m loss in total over three years.
9.180 The Commission has not found evidence that WIAL earned excess returns historically, and forecast excess returns are not significant. The potential net benefits are not sufficiently large to warrant control, given the associated costs. In short, the Commission considers control is not necessary or desirable in the interests of acquirers of airfield activities.
9.181 In calculating the costs of control, the Commission has assumed price cap regulation, as this is one of the more common forms of regulatory control overseas. Use of this form of control, for the purpose of estimating the costs of control, should not be seen as predetermining the form of control that the Commission would employ if control were declared. The Commission notes that a wide range of regulatory controls are available under Part V, which are likely to be less intrusive or less costly than price cap regulation. It would also need to be determined, however, how effective different control mechanisms would be in achieving the benefits of control, i.e., the overall cost-effectiveness of control would need to be assessed for control mechanisms besides price cap regulation. The Commission has not considered the efficacy of other forms of control.
9.182 In terms of other control mechanisms, section 70(2) enables the Commission to use formulas or other methods from which prices or revenues, or any part of a price or revenue, may be determined. One suggestion, from BARNZ, is that the parties could commercially negotiate, based either on the principles resulting from this report, or pricing principles established by the Commission as a form of control. In addition, the Commission notes there may be other policy options available to the Minister. Irrespective, the Commission is cognisant that any form of control utilised would need to be commensurate with the level of market power available to WIAL, the size of the anticipated excess return, and resulting net benefits to acquirers.
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