Commerce Commission Chairman Dr Alan Bollard said in the Commission's 1995-96 annual report that there have been more education activities, investigations, warnings, settlements and court actions carried out than in previous years.

He said that as a result of this, businesses and consumers are now becoming more aware of the Commerce Act and Fair Trading Act, of each others rights and responsibilities, of their own abilities to take action and of the Commission's role.

"The increased output this year has been achieved by the application of high quality, highly trained staff, with no increase in funding," he said.

The Commerce Commission significantly increased its enforcement of the Commerce Act and Fair Trading Act in the 1995-1996 financial year.

Fair Trading Act achievements

"Under the Fair Trading Act the central issue is accuracy of information," Dr Bollard said. "Accurate information is vital for competition. If information is false or misleading, then consumers lose out, competitors are disadvantaged and competition is distorted."

During the year considerable work was done by the Commission to define when "free" and "interest free" promotions were misleading. Decisions from courts, including one from the Court of Appeal, have made big changes to the way such promotions are used.

Misleading interest free promotions have effectively disappeared and businesses have clear direction from the Court that the common sense approach that free means no extra costs is correct.

Other major Fair Trading Act issues dealt with during the year included pricing, product safety, country of origin labelling, land and building sales and direct marketing and selling.

In addition court penalties are rising to more realistic levels in Fair Trading Act cases and there have been significant precedent decisions from the courts.

Commerce Act achievements

Under the Commerce Act, the most significant trade practices investigation to date, alleged price fixing by North Island meat processing companies, ended with the Commission starting court action against 12 companies and 21 individuals.

Other significant court action included the continuation of the case alleging price fixing of bread by two bakeries and the Court of Appeal hearing of Port Nelson's appeal against $500,000 penalties it was ordered to pay for three breaches of the Act.

The competitive behaviour of companies controlling natural monopolies continued to be monitored and investigated. The industries involved included telecommunications, electricity, ports, natural gas and LPG.

Also, the Commission is pleased with initiatives taken by the Department for Courts to increase the efficiency of the court system.

However, under the Commerce Act there is still a reluctance by courts to impose anything like the maximum $5 million penalties allowed by the Act.

"The Commission questions whether the current level of penalties has the desired deterrent effect in some cases, despite the costs of litigation," Dr Bollard said.

He was concerned that while the court system is increasing its efficiency it still causes delays. In addition, counsel are able to use the court environment for strategic business reasons to deliberately delay or obfuscate issues.

Commission moves to increase efficiency - Annual Plan 1996 - 1997

While the Commission's 1995-1996 annual report shows it has had considerable success in the last year, it must continue to increase its efficiency or it will lose the gains made.

The three key areas it intends to focus on in the current financial year are:

· developing more detailed measures of its own effectiveness so it can further improve its education, investigation and enforcement activities

· putting more emphasis on its use of warnings and settlements to resolve Commerce Act and Fair Trading Act issues

· increasing public understanding of its role.

Its measures of effectiveness will look at more than the budget and operational measures about which it must report annually to Parliament.

It will look at how aware business people are of the Commerce Act and Fair Trading Act, whether they accept them as legislation they must comply with, and how compliance can be best defined and measured.

Warnings and settlements are a key part of the Commission's enforcement activity and are used far more often than court action. Follow-up to date shows that they are extremely good at changing business behaviour to make sure it does not breach either Act, and they get results far quicker than court action. More work will be done to ensure they are used at the right times and their continued effectiveness.

The key to understanding the Commission's role is that the Commerce and Fair Trading Acts work together to promote healthy competition in New Zealand.

They do not determine what, or how, businesses should develop. Nor do they protect businesses that struggle because of competition. Ultimately, it is choices made by customers and competitors that determine the shape of the marketplace.

Where the law protecting this process is clear and people and organisations have access to redress, then a Crown agency like the Commission should not necessarily be involved. Parliament gave companies and individuals rights under the Fair Trading Act and the Commerce Act and they must exercise these for their own benefit.

The Commission's role is to focus on areas where the law needs to be reinforced, because it has been significantly or repeatedly broken, or because it needs to be developed. The Commission does not write the law, but develops it by taking court action to have the courts set precedents.

Irrespective of whatever the Commission does or does not do, anyone can take their own action under both Acts. This could be going directly to the business involved, to a trade or professional body, an industry Ombudsman, the Disputes Tribunal or a court.

Copies of the Commission's annual report and annual plan are available from its Wellington office, 7 floor, Landcorp House, 101 Lambton Quay.

Media contact: Manager Corporate Services Jo Bransgrove

Phone work (04) 498 0921, home (04) 475 9000

Communications Officer Vincent Cholewa

Phone work (04) 498 0920, home (04) 479 1432