The Commerce Commission has today advised local authorities when their water and waste contracts risk being anti-competitive and breaching the Commerce Act, and what they can do to avoid this risk.

Commission Chairman Peter Allport gave the advice during a speech to a New Zealand Water and Waste Association conference in Wellington.

Mr Allport said that while local authorities are increasingly aware that the Act applies to their trading operations, many still do not understand how it applies.

He said that significant changes are underway bringing more competition to the water industry, and local authorities must understand competition law to protect themselves and their ratepayers.

Mr Allport said the features of contracts that were potentially anti-competitive were:

? Bundling together in one contract the expertise and equipment intensive work of maintaining networks with relatively straightforward connection work. Bundling prevents smaller contractors who can do connection work from competing.

? Awarding exclusive contracts without competitive expressions of interest in the tendering process. Such exclusive contracts are often let to in-house business units or local authority trading enterprises.

? Long-term contracts that shut out existing competitors and prevent new competition developing.

He said that the features of good processes were:

? Seeking widespread expressions of interest against transparent, publicly available criteria.

? Creating lists of contractors approved to work on water and waste networks. To be approved, contractors would have to meet transparent, publicly available criteria covering issues like experience and skills, health and safety record, public liability insurance and reputation.

? Assessment of which contractors should be approved, by an independent body.

? A process for hearing appeals against exclusion from the list of approved contractors.

? Separate contracts for maintenance and connection work.

? Relatively short-term contracts.

Mr Allport said that it is important to note that the Act also prohibits anti-competitive behaviour by tenderers. If tenderers act anti-competitively, then local authorities can take their own legal action or contact the Commission.

Examples of illegal anti-competitive collusion by tenderers include agreeing who should win a contract and then parties not tendering or deliberately tendering too high prices; discussing or agreeing on prices or parts of prices; and agreeing to tender for work in only specified areas, this includes agreements over geographical areas and types of work.

Copies of Mr Allport's speech notes are available from reception at the Commission's Wellington office, 7th floor, Landcorp House, 101 Lambton Quay.

Media contact: Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its website www.comcom.govt.nz