In a settlement with the Commerce Commission, the North Shore City Council has agreed to change its water connections practice to ensure it is not anti-competitive.

The Commission's Commerce Act Manager, Jo Bransgrove, said that currently the Council has three contracts with one of its own trading enterprises, NSM Contracting Limited, for all maintenance and connection work on the water and sewerage networks. The contracts were won by open tender.

Ms Bransgrove said that the Commission's view is that the contracts put the Council at risk of breaching the Commerce Act.

"The Council has been fully co-operative with the Commission, has provided all the information we asked for, and has now agreed to amend its practice," she said. "We are pleased with its attitude and with how it has responded to our concerns."

The existing contracts include both maintenance and connections to the networks. Maintenance of the networks requires significant equipment and technical expertise, while connections work is relatively straightforward. The Commission considers such "bundled" arrangements are likely to prevent small contractors competing to provide the connection services.

The council has agreed that at the expiry of the current contracts, the arrangements for connection services will be separated from the arrangements for maintenance services on the networks.

The Commission accepts that there are significant public health and safety issues associated with water and wastewater, but other councils have shown that these can be dealt with without having to use potentially anti-competitive contracts.

The Council will decide what specific processes it will use to let the new contracts and to ensure that health and safety concerns are met, while also ensuring those arrangements comply with the Commerce Act.

Background

Section 36 of the Commerce Act prohibits organisations that are dominant in a market from using that dominance for an anti-competitive purpose.

In the Commission's view North Shore City Council is dominant in the market for water and sewerage services because the networks it owns are monopolies that cannot be economically duplicated.

The Commission considered that the Council risked breaching the Commerce Act by using that dominance anti-competitively in markets that are competitive - those for making connections to and maintaining the networks.

Media contact: Commerce Act Manager Jo Bransgrove

Phone work (04) 498 0958

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

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