SOEs CRIs and the Commerce Act

Science, Research and Technology Minister Pete Hodgson, State Owned Enterprises Minister Trevor Mallard and Commerce Minister Lianne Dalziel have announced a proposal to allow State Owned Enterprises (SOEs) and Crown Research Institutes (CRIs) to cooperate without breaching the Commerce Act.

It is proposed that the Commerce Act be amended so that SOEs and CRIs are treated as interconnected bodies and are not subject to Commerce Act restrictions on their ability to cooperate –

• To the extent they are acting in accordance with the requirements of a ministerial direction, and
• Where the direction states that shareholding ministers in consultation with the Minister of Commerce consider this to be in the public interest.

The proposed amendment would apply to all SOEs and CRIs except the three electricity generators Meridian Energy, Mighty River Power and Genesis Energy.

On 19 March 2008, the Cabinet Economic Development Committee (EDC):

1. noted that in the private sector, many companies derive their strength from being subsidiaries of larger conglomerates and from having committed and supportive owners, who will ensure competition between subsidiaries of the same group is avoided and cooperation maximised;
2. noted that the Commerce Act 1986 states that no body corporate shall be regarded as a subsidiary of the Crown and therefore that State-owned enterprises (SOEs) and Crown Research Institutes (CRIs) cannot enter into arrangements with each other that may substantially lessen competition in a market unless the benefits to the public outweigh the detriments from the reduction in competition;
3. noted Ministers' concerns about their inability to carry out the role of supportive owners and, in some cases, issue directions to SOEs and CRIs regarding co-operative behaviours without risking a breach of the Commerce Act of without having to seek an authorisation from the Commerce Commission;
4. agreed that the Commerce Act should be amended so that SOEs and CRIs (other than inter-relations between Meridian Energy, Mighty River Power and Genesis Energy) are treated as interconnected bodies:

4.1 to the extent they are acting in accordance with the requirements of a ministerial direction, and
4.2 where the direction states that shareholding ministers (in consultation with the Minister of Commerce) consider this to be in the public interest;

5. noted that Minister of Finance, the Minister of Research, Science and Technology, the Minister of Commerce, and the Minister for State Owned Enterprises propose that the changes be included in the next Commerce Act Amendment Bill relating to Part 5 of the Commerce Act (likely in late 2008 or 2009);
6. invited the Minister of Commerce to issue drafting instructions to the Parliamentary Counsel Office to give effect to the above decision;
7. noted that the Minister of Finance, the Minister of Research, Science and Technology, the Minister of Commerce, and the Minister for State Owned Enterprises intend to announce the above decision.

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