Issued 24 March 1997/31 EMBARGOED until delivery at 11am, March 24
The Commerce Act applies to water suppliers, and the Commerce Commission has already investigated and warned one local authority that part of its water management policy was in danger of breaching the Act.
Commission Chairman Dr Alan Bollard spoke to the New Zealand Water Management Conference this morning about how the Act applies to local authorities that supply water.
Dr Bollard said the Commission had warned a council that allowing only one contractor to make connections to its water supply puts it at risk under the Act.
The Act does not require a council, nor any other organisation, to do business with everyone who comes to it, they can say "no". It is the reason for saying no that is important - it must not be anti-competitive.
In the case of water supply, there are significant health and safety issues that other local authorities have met by setting standards that contractors must meet. Consumers then chose which of the approved contractors they use.
Dr Bollard said it is important that local authorities understand that they are not exempt from the Commerce Act. Local authority by-laws are covered by the Act and must not be anti-competitive. The only exemptions to the Commerce Act are other Acts of Parliament and Orders in Council made by the Government or Parliament.
The Act does not tell local authorities how to run their water supplies nor any other businesses. What it does, is prohibit anti-competitive behaviour. Its objective is to promote competition in markets in New Zealand because through healthy competition consumers get more choice and better prices.
The Act also protects local authorities from anti-competitive behaviour.
In many cases there are only a small number of firms that can provide particular services. The fewer there are, the easier it is for them to collude.
Tendering firms may agree to collectively raise their tendered prices or to take turns to tender the lowest price. Another strategy might be to market share, by agreeing not to tender for services outside of established areas.
All of these activities are illegal, and local authorities can take their own legal action or provide information to the Commission.
Sections of the Act that are of particular significance to local authorities are those that prohibit:
· contracts arrangements or understanding that have the purpose or effect of substantially lessening competition;
· contracts arrangements or understanding that prevent, restrict or limit the supply of goods or services to or from another organisation;
· contracts arrangements or understandings that result in price fixing; and
· an organisation dominant in a market, using its dominance for an anti-competitive purpose.
Copies of Dr Bollard's speech are available from the Commission's Wellington office.
Media contact: Communications Officer Vincent Cholewa
