Commerce Commission Chairman Dr Alan Bollard said that the Commission has noted the remarks made by the Insurance Council today that New Zealand insurance companies will not insure against problems caused by computers failing in the year 2000.
Dr Bollard said that any attempt to co-ordinate a response in the industry could be at risk of breaching the Commerce Act. However, if the companies have acted independently and the Council was reporting what had happened, then there are likely to be no concerns.
Dr Bollard said the Commission would make a decision if it should investigate fully within a few days.
He was speaking in Wellington at a conference on the convergence of the banking and insurance industries into fewer, possibly eventually only one, finance industries.
The theme of his presentation was that customers and competitors can have confidence that New Zealand's competition law, the Commerce and Fair Trading Acts, is well suited to regulating the rapidly changing finance industry.
If evidence of anti-competitive collusion is found the Commission has sufficient power to act effectively against the collusion, and the courts can impose significant sanctions, including penalties of up to $5 million.
Dr Bollard said that the key to New Zealand's legislation coping with the rapid changes in the industry is that it applies common-sense to market definition. It does not define markets that firms must fit into, but looks at the commercial reality of what firms are doing and defines the markets using that information.
The law is highly flexible, and as the roles of banks, insurance companies and other financial institutions change, so do the market definitions.
In contrast to New Zealand's system, Australia has a much more rigidly regulated finance industry. Australia has six commonwealth government regulators, a seventh has been proposed and the state governments have their own regulators. New Zealand has three regulators, the Commerce Commission, the Securities Commission and the Reserve Bank; and it has no plans for more.
Dr Bollard said the Commission has only one significant concern about the law as it stands: both Commerce and Fair Trading Acts have a three year limitation period, and this is too short.
Problems with housing, savings and insurance often will not become obvious within three years, but court action must be started within three years of a breach having occurred. The Commission has raised its concerns with the Government.
Dr Bollard also noted that some key services are centrally owned and controlled. For example, EDS owns Databank, and EFTPOS is owned by a joint-venture of trading banks. However, there is no evidence of competitors being denied access to these services. In addition, recent court action over access issues in other industries has set important precedents for all businesses controlling key services.
"The deregulation New Zealand went through 10 years ago is showing its value in this industry. As technology and the country's needs change, the industry changes and our competition law is keeping well abreast of the changes," he said.
Media contact: Communications Officer Vincent Cholewa
