Ernie Newman: Business needs watchdog with teeth that bite

Opinion

Ordinary businesses that are not in positions of market dominance should go on high alert at Fran O'Sullivan's column on the background to Paula Rebstock's abrupt departure from the Commerce Commission. Even more so, at the suggestion of a push to get rid of the commission entirely.

The regulatory debate is sometimes characterised as between "the business sector" who don't want regulation, and "the rest" who do. Nothing could be more wrong.

Targets of regulation are in many cases progeny of former government organisations that ran essential services such as telecommunications, energy and air travel. They inherited positions of invincibility which, in the absence of regulatory oversight, would have left them as perpetual monopolists at huge community cost.

The vast majority of businesses are not like that. They have to fight their way in open markets on their merits. They are customers of the ones with dominant positions who are subject to regulation.

Under Rebstock, the commission has done a superb job of defending the interests of ordinary businesses and consumers. Its work has paid off a hundredfold by eliminating the high prices and poor service that characterised the monopolists.

Ironically, the same companies named in O'Sullivan's column as having "crossed swords" with Rebstock are also beneficiaries of the commission's work in markets in which they sit on the demand side.

Air New Zealand, for instance, has benefited from lower telecommunications costs resulting from the commission's intervention in that sector, while Telecom has achieved a corresponding benefit in its travel costs.

Yes, the cost of running the commission has blown out - $40 million is a lot for a small country. But that has to be weighed against the cost to consumers and businesses overall of not having such a regulator.

We tried that in the 1990s and learned that smaller businesses and consumers paid the price.

An increase in the commission's costs was inevitable once we joined the world in privatising utilities. Sadly, there is a regulatory cost to this which does not scale downwards just because of our small population. It's a cost we have to bear because the counterfactual is worse.

It's good to see Chapman Tripp taking a community lead in opening the debate. As adviser to many of the regulated companies, there's one very practical way they and their legal colleagues could help. If lawyers encouraged their big clients to be more realistic about regulatory decisions and litigate less liberally, they would make a big dent in the cost of the regulatory process for all parties.

Whenever lawyers fire the big guns, they fuel a regulatory arms race in which the commission and other parties have to respond, raising costs for everybody. It's a bit rich that the same lawyers then criticise the commission's costs.

The commission exists as the guardian of the overwhelming majority of New Zealanders. These people, in their businesses and private lives, need defending against the small but important minority of businesses which have the benefit of market power.

Rebstock has led her team through a challenging time with great success.

The Government may come to regret being influenced by a small, skewed group of disaffected stakeholders who enjoy a position of market privilege. It should think with enormous care, and consult far more widely, before weakening the commission any further.

* Ernie Newman is chief executive of the Telecommunications Users Association of NZ (TUANZ).