Welcome to the May edition of Bulletin and my first as the Commission’s Chief Executive.
The Commission aims to make New Zealanders better off through well-functioning markets and consumers and businesses being confident market participants, and I am excited to be able to play a role in that. We have a great team of people here and it has been a real pleasure getting to know staff and to see the passion and professionalism they bring to their work. I also look forward to meeting many of you over the coming months.
There is a range of legislative reform on the horizon for the Acts that the Commission enforces or operates under. In early April, we made a written submission on the Commerce (Criminalisation of Cartels) Amendment Bill to the Economic Development, Science and Innovation Select Committee. If passed, this Bill would criminalise cartel conduct. Other areas of potential change include the introduction of market studies regime into the Commerce Act, a new regulatory framework for fixed line fibre services in the Telecommunications Act, and changes to the Credit Contracts and Consumer Finance Act. We continue to develop our plans to put in place the people, processes and systems that we will need to implement any changes.
In 2016 we sought the opinion of the High Court on how the Credit Contract and Consumer Finance Act 2003 (CCCFA) applies to consumer loans entered into with peer-to-peer lender Harmoney. The Commission’s view was that Harmoney’s platform fee was a credit fee under the Act and that Harmoney is a creditor. Last week Justice Patricia Courtney released her decision finding Harmoney is a creditor and its platform fee is a credit fee under section 5 of the CCCFA. The implications of those findings are that Harmoney’s fees cannot be unreasonable under the Act and must only recover transaction-specific costs. Our separate civil proceedings against Harmoney over the reasonableness of its platform fee that were stayed pending the High Court’s decision can now recommence.
We filed proceedings against Prices Pharmacy 2011 and its directors for alleged price fixing. The company and its directors allegedly facilitated a price fixing agreement with competing Nelson pharmacies agreeing to increase the charge consumers paid for full funded prescription items from $5 to $6. We also filed charges against Noel Leeming for allegedly misrepresenting consumers’ rights under the Consumer Guarantees Act and Vodafone for allegedly engaging in false and misleading conduct in relation to its FibreX broadband service.
The first sentence in our steel mesh investigation was handed down by the Auckland District Court in April. Timber King Limited and NZ Steel Distributor Limited were fined $400,950 for making false and misleading representations relating to their steel mesh products which are used to strengthen buildings. Two more companies (Brilliance Steel Limited and Steel and Tube Holdings) are due to be sentenced later this week. April also saw the largest fine so far handed down against a mobile trader. Mobile Shop Limited was fined $330,000 for breaches of both the Fair Trading Act and the Credit Contracts and Consumer Finance Act.
In our mergers work, we granted clearance to MDF manufacturer and supplier Daiken New Zealand to acquire Dongwha New Zealand Limited. We received an application for global payment services company Ingenico Group SA to acquire Paymark Limited. Paymark is owned by four major banks in New Zealand and operates a payment switch which directs requests for fund transfers from businesses to the appropriate bank for transfer.
On the regulation front, we have approved Wellington Electricity’s and Powerco’s proposals to invest in their networks. Wellington Electricitywill spend $31 million on improving its network’s resilience to a major earthquake. We are satisfied that the expenditure is needed and costed appropriately to ensure Wellington’s network is better prepared to withstand a major earthquake. Powerco will spend $1.27 billion over the next 5 years replacing parts of its network which were built in the 1950s and 60s and nearing the end of its life. In approving these proposals we were conscious of striking the right balance between keeping electricity affordable and ensuring safe, secure, and reliable networks for New Zealanders.
We have also released our draft report on our review of Auckland International Airport’s pricing decisions for the 5 years from 1 July 2017. The report outlines our concerns that the airport’s profits may be too high as it is targeting returns of 7.06% which is above our mid-point benchmark of 6.41%. This difference in target returns could result in customers paying an additional 61 cents per flight over the next 5 years, or an additional $47 million in profits after tax for the airport. Submissions on the draft report close tomorrow.