Last month we published the draft report on our study into the retail fuel market – our first market study under the Commerce Act.
The draft report attracted considerable media coverage, the majority of which has done a good job of detailing our preliminary views of the issues we see in the market.
Understandably, there has been some slight confusion at times about what a market study is compared to merger or trade practices investigations or our regulatory price setting processes.
It is worth emphasising that a market study does not ask if the Commerce Act has been breached. This study also is not about setting a fair price for petrol across New Zealand, or attempting to draw conclusions on what a fair price might be.
The purpose of a market study is to look at whether the market at issue is working well for consumers over the long term and what we have done is assess a range of outcomes that can indicate this in the context of the fuel market. These include the choices available to consumers, the quality of the fuel and services on offer and levels of investment, innovation and profitability.
Where we have seen some outcomes that suggest competition is not working as well as it could be – and we have – we have sought to identify what the causes might be. The focus of our study in this respect has settled on the wholesale market, where there does not appear to be the strong price competition we would expect for large volume contracts.
The consultation phase of the market study process that we have now entered is important. There are a number of areas we are keen to explore further with industry, experts and consumers, including our profitability analysis and current understanding of wholesale supply relationships and discounting.
In addition, we are looking forward to discussing the potential options we are considering in greater detail. We want to understand if the options identified are the right ones, whether they are practical to implement and would help improve competition in a way that benefits consumers in the long term.
The consultation process will play a key role in determining our ultimate conclusions and any recommendations that we decide to make. If you have an active interest in the study we would like to hear from you.
Comments on the draft report are due by Friday 13 September. We will also be holding a conference in central Wellington from 24 to 27 September, with post-conference comments to be received by 11 October. If you have any questions on the consultation process please get in touch at firstname.lastname@example.org.