NZ Government

Major review of competition to lift productivity

The Government has launched an ambitious review of New Zealand’s competition rules to combat monopolies and improve economic productivity, Commerce and Consumer Affairs Minister Andrew Bayly says.

“Improving competition is one of the most important ways to boost productivity and lift living standards,” Mr Bayly says.

“When competition is working well, businesses are incentivised to invest, grow and innovate. This has wide ranging advantages for Kiwi consumers who benefit from more choice and lower prices.

“However, OECD research has found New Zealand lags well behind our international peers when it comes to competition. Unfortunately, most New Zealanders do not need an expert to tell them this. 

“Kiwis face limited choice and high prices in a number of key sectors from groceries to banking and building supplies. I’m sure many Kiwis remember with frustration the plasterboard crisis in 2022, which was an extreme example of competition failure.

“That’s why we have launched a two-pronged approach to:

  • update the competition settings in the Commerce Act to ensure our legal framework is right; and 
  • review the governance and effectiveness of the Commerce Commission to ensure our regulatory and enforcement framework is right.

“The review of the Commerce Act will have a particular focus on the merger settings. Mergers can improve market efficiencies but can also entrench market power and create monopolies. Our merger regime has not been reviewed in over 20 years and since then the economic landscape has changed significantly, and we have witnessed the consolidation of market power in a number of sectors.

“Meanwhile, the review of the Commerce Commission will consider the Commission’s organisational capability to ensure that it has the ability to make good decisions and prioritise its resources for the benefit of our economy at large.

“In order to have robust, genuinely competitive markets, we need to have fit-for-purpose laws and a regulator that has the tools and commercial nous to oversee the law. The two go hand-in-hand.

“The targeted and rapid review will consider, amongst other things, the Commission’s governance arrangements, for example whether a board operating in ‘divisions’ with sector specific commissioners contributes to accountability and cohesive strategy.

“Now is a good time to take stock. Australia is conducting a similar review of their competition settings, and it makes sense to align ourselves given our close economic ties. It also follows a period of rapid growth in the Commission’s regulatory responsibilities with new functions in the groceries, fuel and payment sectors. 

“The review will be led by respected economist and former chair of the Commission Dame Paula Rebstock, with Professor Allan Fels and David Hunt, and will be completed by May 2025.

“Improving competition to drive down the cost of living and increase productivity is one of the Government’s top priorities. This set of initiatives are about establishing a robust competition framework that will withstand the test of time for the benefit of all New Zealanders.”