In markets where there is little or no competition, we may need to regulate the price and quality of goods and services for the benefit of consumers. Part 4 of the Commerce Act sets out the particular goods and services that are subject to regulation and the legislative rules governing that regulation. It also sets out the process for us undertaking inquiries into whether regulation of other goods and services may be needed.
For more information on how each sector is regulated follow the links above.
Who decides what industries are regulated?
Parliament decided that electricity lines services, gas pipeline services and certain airports services should be regulated under Part 4. Regulation under Part 4 by be imposed on other goods and services by the Governor-General on the recommendation of the Minister of Commerce following a Part 4 inquiry by us.
What is a Part 4 inquiry?
A Part 4 inquiry is an investigation by us into whether certain goods or services should be regulated under Part 4.
Such an inquiry can be undertaken on our own initiative or at the direction of the Minister of Commerce.
Following an inquiry into particular goods or services, we must make a recommendation to the Minister of Commerce on whether those goods or services should be subject to regulation.
The Commerce Act sets out what we must consider when undertaking a Part 4 inquiry. This includes considering whether:
the goods or services are supplied in a market where there is both
little or no competition; and
little or no likelihood of a substantial increase in competition; and
there is scope for the exercise of substantial market power; and
the benefits of regulation materially exceed the costs.
What this final point means in practice is that the benefit to consumers through lower prices or improved quality would be greater than the costs of regulation, which include the cost of setting up and administering a new regulatory regime (which consumers would ultimately pay for). The size of the industry in question is one factor that can have a significant bearing on the assessment of the benefits of regulation.
We can only recommend to the Minister of Commerce that goods or services should be regulated under Part 4 if all parts of the above test are met.
What is a preliminary assessment?
Given the cost and time involved in undertaking a Part 4 inquiry, before initiating one we will generally first undertake what we refer to as a 'preliminary assessment'. This involves us undertaking an initial assessment of whether the test for regulation (as set out above) is likely to be met for the goods or services in question. Following a preliminary assessment, we would only proceed to a formal Part 4 inquiry where we consider it sufficiently likely that the inquiry would result in us recommending regulation.
What happens after an inquiry?
After we have completed our inquiry, we will make a recommendation to the Minister of Commerce on whether, and if so how, the goods or services should be regulated.
The Minister must then consider our recommendation decide whether to recommended to the Governor-General that regulation be imposed and, if so, which types of regulation. The Minister must publish our recommendation and, if the Minister's decision is different from our recommendation, the Minister must make the reasons for his or her decision publicly available.
On the recommendation of the Minister of Commerce, the Governor-General may then impose regulation by making an Order in Council.
Regulatory inquiries prior to 2008
Information about regulatory inquiries we undertook prior to the introduction of the current Part 4 inquiries process in 2008 is available on the other regulatory inquiries page.