Brian Fallow: Helpful steps towards a mirage

In competition matters the vision of a single economic market with Australia may be a bit hazy - a mirage even.

But some useful steps in that direction can be taken.

New Zealand's Commerce Act is closely modelled on Australia's Trade Practices Act. Australian judgments are treated as important precedents.

But administrative and procedural differences between the two countries give rise to delays and costs that businesses could do without.

Finance Minister Michael Cullen and Treasurer Peter Costello have endorsed the work programme recommended by the Australian Productivity Commission to more closely integrate the two countries' competition frameworks.

"But we see those recommendation and the report as very much a first step towards the greater goal of establishing a joint regime rather than as ends in themselves," Cullen said.

"Generally we see a two-step process - harmonisation leading over time to joint supervision."

This is at odds with the Productivity Commission's overall conclusion, delivered just before Christmas after extensive consultations, which was broadly that it ain't broke, so don't fix it.

It rejected full integration, requiring identical competition laws and a single institutional framework, and partial integration, which would involve retaining the two national regimes but establishing a single system to handle matters with an Australasian dimension.

In both cases, the costs would outweigh the benefits, it concluded.

It recommended improved co-operation between the Commerce Commission and the Australian Competition and Consumer Commission on enforcement and research.

In practice that has already started. Provision for information-sharing between the two bodies, for example, has been stepped up.

The Productivity Commission also backed provision for a "single track"' approach for some approvals, but still with separate decisions in each country.

For Cullen and Costello, this is all very well as far as it goes, but it does not go far enough.

"Our goal,' Costello declared, "ought to be that for competition purposes Australia and New Zealand are viewed as one market."

He has talked of ad hoc panels drawn from both commissions to consider transtasman cases.

As political rhetoric, talk of "one market" may sound stirring and visionary.

The trouble is that competition law is all about market definition.

Well established rules common to both sides of the Tasman define the markets which would be affected by a transaction.

Sometimes those markets are nation-wide. Often they are smaller. Almost never would they be Australasian.

Even in the Air New Zealand-Qantas case, a rare exception, the Tasman routes represented only a minority of the markets the Commerce Commission had to consider.

The danger from the consumer's point of view in this lofty rhetoric about one market is that, in general, the more broadly a market is defined the less likely it is that a transaction will be seen as creating an anti-competitive concentration of market share. Hopefully the law on market definition can handle that, but institutional arrangements based on "Australasian" markets might prove a retrograde step for the consumer.

Competition lawyers such as Andrew Matthews of Minter Ellison Rudd Watts and Mark Williamson of Phillips Fox say setting up a structure to deal with once-in-a-blue moon cases where there is a genuinely Australasian market to consider is something of a red herring.

By contrast a "single track" - streamlining the procedures for dealing with mergers and acquisitions which have implications for distinct markets on both sides of the Tasman - would be a worthwhile thing to pursue.

The Productivity Commission report referred to about 25 matters each year which involved both regulators, Matthews said.

"The proposals for common timetables, forms, information sharing, etc will really help the process in those cases," Matthews said.

Williamson said that in the case of applications for clearance for acquisitions which give rise to possible competition issues on both sides of the Tasman, the law on what constitutes a substantial lessening of competition was identical in both countries.

But administrative procedures were irritatingly different.

Matching them to the point of having a single common application document with the same set of questions would give a considerable saving in compliance costs and billable hours.

He envisaged, as a first stage, having a common application submitted to both existing competition authorities, which would consider the markets relevant to them.

Later, such applications could be considered by a single body. The difficulty arose in the appeal process.

"There is no prospect of an appeal body being established that would cover Australia and New Zealand. It gives rise to significant constitutional issues in Australia."

So the possibility of different decisions by different courts in the two countries would remain.

But that is as it should be, since they would be dealing with different markets.