Bayly was particularly wary of private equity firms going on buying sprees in particular sectors, rolling up their acquisitions, then selling them off in bundles.
He was also cognisant of the current law making it difficult for the Commerce Commission to stop an established player in a sector from seeking to acquire a newcomer that may pose a serious competitive threat in the future.
The commission can’t consider what could have been if the budding business wasn’t bought by the powerful incumbent.
Bayly said big banks buying technology firms that offer lower-cost payment services using open banking was a potential example of this.
Another element of the Commerce Act MBIE is consulting on deals with businesses communicating or signalling their pricing intentions to their competitors.
MBIE said it had anecdotal evidence of this occurring, sometimes via intermediaries, like industry associations that collect commercially sensitive information from their members and publish price forecasts to help members stay in step with the market.
Accordingly, Bayly believed the rules that addressed collusive behaviour needed refining.
While he believed price signalling was problematic, he acknowledged there were instances where beneficial co-operation within a sector was being prohibited by the law.
He pointed to efforts by banks and telcos to combat financial scams as an example.
The third issue MBIE’s review addresses explores whether new industry-specific codes, aimed at promoting competition, could be implemented more easily.
Coinciding with efforts to modernise the Commerce Act, Bayly has appointed a former Commerce Commission chairwoman, Dame Paula Rebstock, to review the competition watchdog’s organisational capacity and performance.
He stressed he had confidence in commission chairman John Small, and didn’t want to slate the organisation’s work, but believed creating more accountability within the agency could improve its performance.
Specifically, Bayly questioned whether the commission’s board operating in divisions, with sector-specific commissioners, helped create a cohesive strategy.
Rebstock is due to complete her review by May.
No extra funding is being made available – at this stage, at least – to implement changes that might be brought about by both the organisation and legal reviews.
“Now is a good time to take stock,” Bayly said.
“Australia is conducting a similar review of their competition settings, and it makes sense to align ourselves given our close economic ties.”
Bayly said the reviews also followed a period of rapid growth in the commission’s regulatory responsibilities, with new functions in the groceries, fuel and payment sectors.
He hoped to start making changes to the Commerce Act next year, following the conclusion of MBIE’s consultation.
“Improving competition to drive down the cost of living and increase productivity is one of the Government’s top priorities,” Bayly said.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in Government and Reserve Bank policymaking, economics and banking.
