Chapter 2: Current Regulatory Control Provisions Under the Commerce Act
2.1 Part 4 of the Commerce Act
27. Part 4 of the Commerce Act allows for goods or services to be placed under price/revenue and/or quality control (regulatory control) subject to specific tests being met.
28. In particular, section 52 allows goods or services to be controlled if competition in the relevant market is limited or likely to be lessened and there are positive net benefits of control to the persons acquiring or supplying the goods or services.
29. The final decision on whether or not to impose control is taken by the Minister of Commerce or, in the case of energy matters, by the Minister of Energy. The Minister may (but is not obliged to) request that the Commerce Commission undertake an inquiry and make recommendations on whether control may and should be imposed. The Commerce Commission may also undertake an inquiry and make a recommendation on its own volition.
30. Since 2001 (when the Commerce Act was substantially amended) there have been Part 4 inquiries into whether regulatory control should be declared in respect of airport activities and gas pipeline services. In 2003, the Minister of Commerce decided not to impose control over airport activities. In 2005 regulatory control was declared over some gas pipeline services.
2.2 Part 4A of the Commerce Act
31. In addition to the generic control provisions in Part 4 and sections 70-74 of Part 5, Part 4A of the Commerce Act allows for individual electricity lines businesses to be placed under regulatory control by the Commerce Commission if they breach price or quality thresholds set by the Commission. This regime was introduced in August 2001 and covers all "large" electricity lines businesses (currently 29 in total), including Transpower.
32. Thus, control is targeted, in the sense that lines businesses are not controlled by default. A business may only be controlled by the Commission if it has crossed some "threshold" of performance. Businesses that do not breach the thresholds are not subject to regulatory constraints beyond a requirement to file an annual thresholds compliance statement and comply with the electricity lines information disclosure requirements. Where an electricity lines business breaches a threshold, sanctions are not immediately imposed. The Commission might investigate further through a post-breach inquiry. During the post-breach inquiry, the Commission may decide to take no further action against the business, it may resolve the matter through an administrative settlement, or it may determine to declare control. The latter decision requires the Commission to publish its intention to declare control and undertake further analysis and consultation. Control, if imposed, would be under Part 5 of the Commerce Act.
33. While legislation provides high level objectives for the targeted control regime, the Commerce Commission is responsible for the design and implementation of the regime. The Commission has used "benchmarking" to set the thresholds.
2.3 Part 5 of the Commerce Act
34. Once a decision to impose control has been made (under either Part 4 or Part 4A), the controlled good or service may not be supplied unless an authorisation to supply has been made by the Commerce Commission under sections 70-74 of Part 5.
35. Under section 70 of the Act, the Commission may make an authorisation in respect of all or any component of the prices, revenues, or quality standards that apply in respect of the supply of controlled goods or services, using whatever approach it considers appropriate.
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