New commerce watchdog treads softly

In the past, new Commerce Commission chairman Mark Berry has been engaged as lawyer by both merger parties and opponents of mergers. Photo / Mark Mitchell

Mark Berry, the Commerce Commission's soft-spoken and scholarly new chairman, chooses his words with a lawyer's care.

Asked what he would say to those who are looking for a new attitude or approach from the commission now that he has succeeded Paula Rebstock, he said, "Paula's background and mine are different. She's an economist; I'm a lawyer - and for that reason you tend to look at things a bit differently."

But the commission acts as a team, he said. "No one commissioner is a unilateral decision-maker.

Typically we act in divisions of three - that's the beauty of this kind of institution - so you have a lawyer, an economist and someone with business experience. It is that combined wisdom that comes to a decision, assisted by substantial input from the commission's staff."

The change of chair had to be seen in that light, he said.

As a quasi-judicial body its independence is important.

"In my experience - and I am not just talking about my time on the commission, but anecdotally from all the other commissioners I have spoken to over the years - it is something which has always been respected. And I would have thought that would be the public perception as well."

Berry laughs off, with some asperity, media attempts to link him with the radical views of Chapman Tripp partner Grant David. David has argued that producers are now in greater need of protection than consumers and questioned the need for the commission, which he regards as having become overly interventionist.

Berry said he had worked at Chapman Tripp as a consultant for just one year in 2001/02 after his previous stint on the commission.

"I haven't worked with Grant for seven years and had nothing to do with his piece of work. He likes to be provocative."

Berry "stumbled into" competition law early in his career but has stuck with it because he enjoys the intellectual challenge it presents. "It's an exceedingly complex area of law and economics. There is a meeting of more than one discipline. You have got to be able to speak several languages, you might say."

And it is essential to the hygiene of the country's commercial life.

"Competition fosters the efficient working of markets and that is where consumers benefit, through efficient markets. They get products at least cost and the benefits of innovation. And competition law gives producers the certainty of knowing the rules as to what is legitimate conduct."

Berry was deputy chairman of the commission between 1991 and 2001 and acting chairman when it was asked to rule on the dairy co-operative merger which set up Fonterra.

The commission put out a preliminary view indicating the authorisation would not be granted, but before the public hearing could be held, it was pre-empted by legislation which created the dairy giant and over-rode the commission's jurisdiction in the matter. "It is the only time it has ever happened, that I can recall, in New Zealand's history. It was a purely political decision. We don't make the law."

A former partner in law firm Bell Gully, Berry has also taught law at Otago University. Since 2003 he has been in private practice at the bar, specialising in competition law and economic regulation.

He has acted for a range of clients, not only corporates but Government agencies. He was counsel assisting the commission on the Qantas/Air New Zealand merger application.

"I've acted for merger parties and for opponents of mergers. When you are in legal practice you end up taking positions on different sides of the fence, so to speak," he said. "It is not like being an independent expert like an economist where a certain consistency over time is expected."

Berry takes office when the economy is in a slump. In such times the pressure to go easy on business on the competition law front can be intense. As Rebstock has pointed out, in the United States in the 1930s, anti-trust law was suspended altogether.

The difficult times might well have consequences for the kind of conduct that goes on and the kind of adjudications the commission is called upon to make, Berry concedes.

"There has been a significant downturn in merger clearance applications. It may be the merger applications we receive for the foreseeable future are the result of target [companies] being in some distress. To that extent the economy will have a bearing on the kind of work we do."

The commission might get cases where the "failing firm" defence is invoked. "That is where the target company says it will inevitably exit the market. Whether the merger takes place will make no difference to the market because if it is not allowed to be taken over it will simply fall over."

As for a greater risk of price-fixing cartels, there are international studies which suggest that in times of financial stress there are greater incentives for firms to collude, Berry said.

"I make no predictions or anticipations as to whether that may hold true here. We will simply look at every case that comes, in terms of whether it is a breach of the rules on price-fixing," he said.

"The Commerce Act says that price-fixing is per se unlawful, although there is still an element of discretion about the magnitude of consumer harm arising from that conduct, and you have to make a judgment call."

The leniency programme, which creates an incentive for a member of a cartel to blow the whistle, has driven the price-fixing cases the commission has before it, Berry said. "These matters have simply come to the commission's attention and it is responding to them."

The biggest thing on the commission's plate over the year ahead arises from legislative changes last year to the price control provisions of the Commerce Act, which apply to natural monopolies like electricity lines companies, gas networks and airports.

Drawing a line between where the permissible ends and the exploitative begins in their pricing comes down to deciding how to value their assets for regulatory purposes, what an appropriate weighted average cost of capital is, and how to allow for investment.

The commission has been given until June next year to promulgate the rules which will give companies some certainty in these vexed areas.

Like the commission's role under the Telecommunications Act, these are functions the commission has been given since Berry last served on it. His experience of them is as an advocate not a commissioner.

And an immediate priority is to bring to a conclusion the commission's long-running inquiry into whether there is abuse of market power in the wholesale electricity market.

"It is on the radar screen for next month," he said.

MARK BERRY
* Born 52 years ago in Invercargill.
* After completing a law degree at Otago University he went to work for Bell Gully.
* He completed his masters at Monash University under the guidance of eminent competition scholar Maureen Brunt, while working for Mallesons in Melbourne.
* Did his doctorate at Columbia University in New York.
* Taught contract, competition and securities law at Otago.
* Became a partner at Bell Gully.
* Served as deputy chairman of the Commerce Commission 1999 to 2001.
* In 2003 set up a chambers, Barristers.Comm, with three other former Bell Gully partners.
* An avid collector of New Zealand art - "of different generations and different styles" - and a lover of classical music.