Productivity Commission spurs rethink on shipping and air rules

Wednesday 3rd October 2012

Commerce Minister Craig Foss has asked a parliamentary select committee to look at bringing shipping lines and civil aviation under the nation's competition legislation on the recommendation of a Productivity Commission report into the country's international freight costs.

Parliament's Commerce Committee will test the water with an initial consultation on whether to bring global shipping lines and international civil aviation under the Commerce Act as part of its report on the Commerce (Cartels and Other Matters) Amendment Bill, according to its interim report. The competition regimes for shipping lines and civil aviation are covered by industry-specific acts, and Foss wants the committee to consider streamlining that regulation.

The minister's request comes after the Productivity Commission earlier this year recommended ditching price-fixing exemptions for international shipping lines and to consider bringing global air services under the Commerce Act regime.

"The Productivity Commission's recommendations have raised a broader question as to whether it is appropriate to continue to regulate competition under sector specific regimes, or whether to repeal the exemptions and transition to a Commerce Act regime," Foss said in a Sept. 3 letter to committee chairman Jonathan Young.

"Transitioning to a regime under the Commerce Act would go further than the Productivity Commission recommendations," he said.

The committee is considering its response to the bill which would introduce criminal sanctions for so-called 'hard-core' cartel behaviour.

In respect of bringing shipping lines under the Commerce Act, Parliament's commerce select committee will look the safeguards built into the legislation to give ocean freight firms flexibility to collaborate to provide maximum capacity for New Zealand, what the risks of a transition to a new regime would be, and if those risks could be managed.

For civil aviation, the committee has been asked to investigate whether there are any mechanisms that would have to be introduced to ensure New Zealand met its international obligations, whether the Commerce Commission's authorisation process grants enough flexibility for airline alliances, if there are any risks to a transition, and how existing arrangements would be affected by a shift to a new regime.

The committee would also look at whether any industry specific regulation is needed to deal with the relationships between airlines, travel agents and their customers.

"While the proposal appears to be within the purview of the bill, we would like to conduct a final round of consultations with interested parties to canvass the acceptability of the Minister's proposal," the committee said.

In a Sept. 6 written submission on the bill, law firm Russell McVeagh picked up on the Productivity Commission report, saying the exemption for shipping lines was out of line with New Zealand's trading partners.

"An industry specific exemption seems contrary to the purpose of the Commerce Act which is to promote competition for the long term benefit of New Zealand consumers," the law firm said. "This is particularly relevant for New Zealand given its economy is heavily reliant on international sea freight for imported products and for the competitiveness of its exports."

Foss would support the committee taking another six weeks to accept submissions on bringing shipping lines and civil aviation, he said. The committee's report is due on March 11 next year.

BusinessDesk.co.nz

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