Changing of the guard at Commerce Commission

Big business leaders will be celebrating as the Commerce Commission's Paula Rebstock departs, but how far will the Government go to rein in the watchdog? Photo / NZ Herald

The incisive economist who rattled some of New Zealand's most powerful business leaders will no longer be blasting cartels and monopolies.

Paula Rebstock departs as Commerce Commission chairwoman on March 31 after what competition lawyers say was a major push at the start of the year by big business leaders - some opposing the commission and some focused on Rebstock herself.

After six years as New Zealand's most powerful regulator, Rebstock had been keen to renew another term. Neither she nor her replacement, Mark Berry, were accepting calls yesterday.

But it is understood that Rebstock was ultimately disappointed by the way things turned out and would have liked to stay on.

The expansion of the Commerce Commission's functions and firepower came largely as a result of the Commerce Act amendments in 2001, but its transition from paper tiger to raging lion has also been due to Rebstock.

Competition lawyers say she was a strong leader through a period of growth.

The last-minute timing of her departure is perplexing, leading some to question the behind-the-scenes developments between her, the Government and Rebstock's big business critics.

With a new National Government and a more business-friendly ethos, big business critics have been calling to have the lion de-clawed.

Competition lawyers - who make a lot of their money from dealings with the commission - were surprised by the heightened antagonism clients felt towards Rebstock.

Andy Matthews, competition partner for Minter Ellison Rudd Watts, noted "what appeared be an orchestrated campaign calling for changes to the commission headed by big corporates or, as they were termed in Australia, The Big End of Town."

Rebstock's departure signals a less activist commission. One senior competition lawyer, who would not be named, said her replacement Mark Berry had a solid background in competition law and would not be a stooge to help monopolists or cartels.

But unlike Rebstock, Berry had a low-key style.

He was seen as "a compromiser" and that leadership style would likely affect the commission's approach.

Labour Finance spokesman David Cunliffe has sounded the alert. He says Rebstock's departure is part of National's unfolding and pronounced attack against regulatory bodies.

"I'm hearing there was a lot of pressure from the Old Boys Club," said Cunliffe, who was a chairman of the commerce select committee when Rebstock was appointed in 2003.

"Paula has been a fantastic chair - she is robust, she is clear and nobody is going to die waiting to know what she thinks."

He sees her departure amid business calls for a reined-in commission as part of a radical agenda by National.

He would not pre-judge Berry, who had long-standing experience.

"He has big shoes to fill and he will need to prove that his appointment does not signal the Government gutting the commission."

Elsewhere there is doubt that Prime Minister John Key would support an attack on the commission which would help big business and incumbent market leaders while shutting out new players.

Commerce Minister Simon Power said: "If New Zealand is to get through the current financial crisis it is important we take a long-term view. Business needs certainty of direction and the markets need stability. We need a regulatory environment that provides that certainty so business can invest, employ staff and grow the economy.

"The commission is in the process of implementing a new regulatory regime for regulated electricity and gas businesses and it needs to get on with it."

The Herald revealed on February 19 that some big businesses had begun the year lobbying for Rebstock to be replaced and for wider changes to the role of the commission.

Telecom and Air New Zealand have had notable clashes with the commission in the past year, with the airline particularly critical. The airline would not comment on her departure but since its announcement has renewed its battle over freight cartel accusations, launching its own court action and calling for changes to the way some cases are dealt with when the Government "reappraises" the role of the commission.

Another who publicly criticised its direction under Rebstock, Todd Energy managing director Richard Tweedie, said this week it was time to "reset the compass", although adding much was achieved during her time at the helm.

A parliamentary insider said that Cabinet ministers - such as Trade Minister Tim Groser, Foreign Affairs Minister Murray McCully and Economic Development Minister Gerry Brownlee - had made no secret they favoured changes at the commission.

"Air New Zealand have been beating the drum about the attitude she imbued," said the Wellington source.

Telecom, which had hoped that its split into three new divisions would cover many of its regulatory issues, has complained bitterly at an increasingly strict regulatory regime. The commission is investigating "termination charges" that can be used by Telecom and Vodafone to stifle a new competitor, the New Zealand Communications mobile phone network. Telecom CEO Paul Reynolds has strenuously objected to queries on lobbying. This week the company said: "Telecom is not, and never has, lobbied for the 'abolition' of the commission."

The PR campaign for change reached a height with a commentary by the Chapman Tripp competition lawyer Grant David, who happens to work on competition issues with Telecom.

His commentary - which the big business lobby group the Business Roundtable says is stronger than its own wishes for the commission - questions whether New Zealand could afford competition law and called for a full review or disbanding of the commission.

David insisted he had not discussed his comments with Telecom.

But antagonism to Rebstock and the commission goes beyond companies that are in its sights.

One competition lawyer sympathetic to Rebstock and her activist leadership style said that Rebstock and the commission grew in 2006 and 2007 with the flood of mergers and takeovers.

It reached a peak with the commission's dogged rejection of clearances that would have allowed Woolworths Australia or Foodstuffs to buy The Warehouse Group.

"I have never seen such an orchestrated attack on the commission. A lot of people had a lot of immense investment risk around the Warehouse sale - the commission stance hurt these vested interests substantially."

Business Roundtable executive director Roger Kerr insisted the big business group had not lobbied against Rebstock but there were widespread concerns about the commission's approach. The Roundtable wanted the Government to form a group of four or five people to come up with amendments to the Commerce Act in the same way it had done with the Resource Management Act.

"We are not against good regulation - you need that to operate properly. But regulation can be used for anti-competitive purposes such as with the RMA and the supermarket wars.

"The Government should be considering reining in the commission," he said.

Cunliffe points out the timing of a shift away from regulation while the world faces an unprecedented financial fall - blamed by many on inadequate regulatory oversight.

Kerr said the issues over the financial system were leading to countries examining regulatory issues, but there were no signs of a shift to more controls for competition issues.

In the legal world, there was admiration for Rebstock's role building a regulatory body that had been regarded as toothless into a strong and well-resourced unit.

But even admirers say it needs to pick its fights more carefully. The question now is whether the commission will be tweaked, or lurch toward favouring big business - changes which are not necessarily in the interests of the majority of New Zealand businesses facing barriers to compete in their patch.