Fuel market competition questions

Fuel market competition questions

BusinessNZ says legislation requiring more transparent petrol pricing will probably be well-received, but there are concerns about the market study that prompted it.

The Government has announced it is drafting a Fuel Market Bill to introduce requirements for  more transparent pricing by petrol retailers, and requirements for fair contracts between fuel wholesalers and retailers.

The Bill results from recommendations made following a market study into the fuel market last year.

BusinessNZ has concerns about market studies, set up to investigate whether certain markets may be anticompetitive.

It says investigating entire markets cannot do much more than simply turn up instances of anticompetitive behaviour by firms, if that is happening.

Restrictive trade practices and contracts lessening competition are already outlawed under the Commerce Act, and can be investigated and prosecuted accordingly.

Having an investigation into an entire market does not add to the value of being able to prosecute individual or groups of market participants for anticompetitive behaviour.

Meanwhile, market studies bring concerns of their own.

Market studies require all firms operating in a certain market to provide large amounts of commercially sensitive data to investigators, imposing significant compliance costs on those firms.

BusinessNZ says market studies are an intrusive power that can lead to regulated industries and increased regulation of the economy overall, and should be used with great care.

A market study, or the threat of a market study, could be used by a Government to influence firms to reduce prices or make other changes.  This sort of influence could be popular with voters, but could be to the detriment of effectively functioning markets.

BusinessNZ says when the proposed Fuel Market Bill eventuates, it should receive firm scrutiny to ensure that its requirement for ‘fair contracts’ does not raise flags about governmental intervention in commercial contracts.




27 Feb, 2020

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