Proposed approach for airport activities price control study

The Commerce Commission has announced its preliminary view on how it will conduct its study of prices of airport activities at Auckland, Wellington, and Christchurch airports.

This follows the request by the Minister of Commerce that the Commission report to him on whether price control should be imposed.

Commission Chairman Peter Allport said that the Commission is now planning the procedures that will be used and is seeking comments on:

• the approach the Commission proposes to take;
• any preliminary issues interested parties might wish to raise about the scope and nature of the Minister of Commerce's request to the Commission; and
• the use of electronic communications to gather and distribute information.

Mr Allport stressed that the Commission does not yet want submissions on, for example, whether price controls should be imposed nor at what level they should be.

The proposed procedure closely follows that set out in the Commerce Act for determining authorisation applications. The Commission's authorisation procedure, which is an open and effective process, has been used on many occasions in the past.

The proposed procedure would involve the Commission carrying out preliminary research and receiving submissions from interested parties about airport price controls. It would then publish a draft report and invite submissions on that report. A conference would be held to allow interested parties to provide further information and the Commission to ask questions. The final report would bring together the information from the Commission's preliminary research, the submissions and the conference.

A separate document is available from the Commission airports@comcom.govt.nz and http://www.comcom.govt.nz outlining the proposed process and other relevant matters.

To help the flow of information, the Commission proposes to encourage the use of e-mail and to maintain a publicly accessible Internet site holding all electronic submissions.

Commission's proposed timetable

Media contact: Commerce Act Manager Jo Bransgrove

Phone work (04) 498 0958

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

E-mail to airports@comcom.govt.nz

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

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Process and Preliminary Issues

Introduction

Pursuant to section 54 of the Commerce Act 1986 (the Act), the Minister of Commerce (the Minister) requires that the Commerce Commission (the Commission) report to him on whether he should recommend to the Governor-General that an Order in Council be made declaring that the prices for certain goods or services be controlled in accordance with the Act.

The goods or services specified by the Minister are airfield activities as defined in the Airport Authorities Amendment Act 1997. Airfield activities

"means the activities undertaken (including the facilities and services provided) to enable the landing and take-off of aircraft; and includes-

(a) The provision of any one or more of the following:

1. 1. Airfields, runways, taxiways, and parking aprons for aircraft:
   2. Facilities and services for air traffic and parking apron control:
   3. Airfield and associated lighting:
   4. Services to maintain and repair airfields, runways, taxiways, and parking aprons for aircraft:
   5. Rescue, fire, safety, and environmental hazard control services:
   6. Airfield supervisory and security services:

(b) The holding of any facilities and assets (including land) acquired or held to provide airfield activities in the future (whether or not used for any other purpose in the meantime):"

The Minister gave notice in writing to the Commission by letter dated 26 May 1998. The Commission will give notice that the requirement has been made in the Gazette. The Commission is required to report to the Minister by no later than 14 December 1999.

This paper outlines the Commission's proposed approach and proposed timetable for conducting the price control study and for requesting identification of any preliminary issues. It also seeks comments on the use of electronic communications.

Report Requirements

Pursuant to section 54 of the Act, the Minister requires the Commission to report on the following matters:

"A whether there is evidence that airfield activities provided by the three major international airports (Auckland, Wellington and Christchurch) are supplied or acquired in a market in which competition is limited or is likely to be lessened; and it (is) necessary or desirable for the prices of these goods or services to be controlled in accordance with the Act in the interests of users, or consumers, or as the case may be, suppliers; and

B whether market conditions are such that the Commission believes that (the Minister) should recommend to the Governor-General that he make an Order in Council under section 53 of the Act invoking price controls over charges for airfield activities at the three major international airports."

Specific matters which the Commission is required to consider and report to the Minister on are:

"1. Whether charges should be introduced for airfield activities at one or more of the three major international airports.

2. If the Commission is of the view that price control should be introduced, to which (i) regions, areas, or localities in New Zealand; (ii) quantities, qualities, grades, or classes; and (iii) different persons or classes of persons, should price control be applied?

3. What conditions, tests, or thresholds does the Commission consider would be useful in judging whether (i) airfield activities are or will be supplied in a market in which competition is limited or likely to be lessened; and (ii) it is necessary or desirable for the prices of airfield activities to be controlled in accordance with the Act.

If price control was introduced (i) what form of price control would the Commission apply; (ii) and why; (iii) how would the Commission operate this form of price control; and (iv) what time and/or in what conditions should price control end?"

Preliminary issues

The Commission now seeks comments from potentially interested parties who may have any issues in relation to the scope and nature of the Minister's requirements or the Commission's interpretation of them. The Commission believes that such issues (if any) should be raised at this stage to enable them to be considered and, if need be, addressed now.

Proposed approach

The Commission proposes to model the approach to its price control study on the process the Commission uses for authorisations. This would involve the following sequence of steps:

• seeking comments from interested parties on process and preliminary issues by 30 June 1998;
• basic monitoring of prices for airfield activities;
• entering the formal phase of the price control study on 2 August 1999;
• seeking formal submissions on price control from interested parties by 31 August 1999;
• preparing a draft report identifying issues on which the Commission requires further information, analyses or submissions. The draft report would be similar in purpose to the draft determination issued as part of the authorisation process;
• making available the draft report to interested parties and seeking further submissions from them and, if appropriate, from other parties;
• convening a conference in a similar format to that undertaken for an authorisationand hearing additional submissions from interested parties, their counsel and experts. As with authorisation applications, confidential information will be protected by appropriate confidentiality orders and restrictions; and
• undertaking further investigation as appropriate, completing the Commission's report, and providing this to the Minister.

The Commission may commence the study at an earlier or later date, consistent with meeting the Minister's reporting deadline of 14 December 1999, if it considers this appropriate. Under the provisions of the Act the Minister is responsible for the publication of the Commission's report.

Proposed timetable

The likely timetable for the Commission's price control study is:

4 June 1998 Initiate request for comments on the proposed procedures

30 June 1998 Submissions on procedural issues close

31 July 1998 Commission publishes formal procedures and timetable

2 August 1999 Formal phase of study commences

31 August 1999 Submissions due from interested parties

10 September 1999 Commission's draft report released

1 October 1999 Submissions from interested parties due on draft report

13 - 14 October 1999 Conference on draft report

29 October 1999 Final Report completed

Use of electronic communications

The Commission is currently considering whether it can facilitate the conduct of its price control study, and in particular the flow of information, through the use of e-mail and internet facilities. For example, the Commission could receive and distribute submissions by electronic means and maintain a publicly accessible internet site holding electronic submissions (excluding confidential information). The Commission believes that such an approach could improve availability of information. The Commission notes that many interested parties will already have access to such facilities and that access is commonly available through public libraries and other public institutions.

If this approach were adopted the Commission would request that all submissions and documents be provided in electronic format, and that the Commission would distribute these to others on a similar basis. The Commission electronically publishes information in Adobe Acrobat format (.pdf) and uses Microsoft Word (.doc) internally.

Comments

The Commission is now seeking comments, to be made by no later than 30 June 1998, in respect of:

• the Commission's proposed approach to its price control study;
• any preliminary issues arising out of the Minister's requirement which may need to be addressed prior to the Commission commencing its price control study; and
• the use of electronic communications to facilitate its price control study.

The Commission would not expect confidential material to be included in these comments and, unless good reasons exist, all comments will be made publicly available. Submissions on the issues which are the subject of the price control study itself will be sought at a later date.

Comments should be addressed to:

Price Control Study of Airfield Activities

Commerce Commission

P O Box 2351

Wellington

Or by fax to (04) 4710771

Or by E-mail to airports@comcom.govt.nz

Any queries can be sent to the above address, fax number, or E-mail address.

Commerce Commission

4 June 1998

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98/292

File: BL 6/1

Mr Peter Allport

WELLINGTON

Dear Mr Allport

I am writing in response to your letter of 5 May 1998 regarding the inquiry into prices for airport services.

In reference to my letter to you of 27 March 1998, you note that the relevant goods or services for the inquiry have been referred to as airfield facilities. These were stated to be those defined as airfield activities in the Airport Authorities Amendment Act 1997 ("the Act").

In your letter, you note that although the distinction between airport activities and airport facilities may be of a minor nature, but for the sake of clarification it would be preferrable that the Commission be required to report on whether airport activities (as defined in the Act) should be controlled in accordance with the Commerce Act 1986.

I concur with your view. Thus, acting pursuant to the power in section 54(1) of the Commerce Act 1986, I require the Commerce Commission to report to me by no later than 14 December 1999 on the following matters:

1. whether there is evidence that airfield activities provided by the three major international airports (Auckland, Wellington and Christchurch) are supplied or acquired in a market in which competition is limited or is likely to be lessened; and it necessary or desirable for the prices of these goods or services to be controlled in accordance with the Act in the interests of users, or consumers, or as the case may be, suppliers; and
2. whether market conditions are such that the Commission believes that I should recommend to the Governor-General that he make an Order in Council under section 53 of the Act invoking price controls over charges for airfield activities at the three major international airports.

Specific matters on which I require the Commission to consider and report to me on are:

1. Whether charges should be introduced for airfield activities at one or more of the three major international airports.
2. If the Commission is of the view that price control should be introduced, to which (i) regions, areas, or localities in New Zealand; (ii) quantities, qualities, grades, or classes; and (iii) different persons or classes of persons, should price control be applied?
3. What conditions, tests, or thresholds does the Commission consider would be useful in judging whether (i) airfield activities are or will be supplied in a market in which competition is limited or likely to be lessened; and (ii) it is necessary or desirable for the prices of airfield activities to be controlled in accordance with the Act.

If price control was introduced (i) what form of price control would the Commission apply; (ii) and why; (iii) how would the Commission operate this form of price control; and (iv) what time and/or in what conditions should price control end?

The definition of "airfield activities" is as defined in section 2 of the Act.

Once again, I look forward to receiving your report in due course.

Yours sincerely

Hon John Luxton

Minister of Commerce

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