Key Points:

A recent call for disbanding the Commerce Commission asserts that "competition law is a luxury New Zealand could not afford". Diplomatically, Commerce Minister Simon Power is quoted in response as hinting at changes saying that he was "casting a fresh eye on the commission".

While not wanting to legitimise calls for disbanding the commission by expressing a contrary view, such overtures are not new.

It has long been part of extreme right wing economic ideology that there is no need for a law regulating competition because monopolies and cartels which exploit their position will cause new companies to enter the relevant market to take advantage, and that this will solve any problem.

The trouble with this theory is that, even if correct, it invariably takes some time for the breakdown to happen and, in the meantime, the consumer continues to be exploited and, in the case of cartels, the fraud persists.

However, more to the point is that in practice monopolies or cartels do not give up their market power easily - for example, it took Helen Clark to demand the freeing up of the Telecom network, after long procrastination.

In New Zealand, we probably do not, as the Americans do in their anti-trust laws, give enough credence to the importance of competition free from restrictive practices or monopolies.

It is in fact also the cornerstone of our economic organisation, ensuring best prices, quality, service, etc.

Our circumstances are different from America. We are a small, low-barrier country vulnerable to world markets.

But that is hardly a sufficient reason for abandoning a law preventing artificial restraints on competition within its boundaries or which affect its local interests - it may allow exceptions only. Tough times do not justify a relaxation - more the reverse.

Without a competition law, we would return to the days of the robber barons, or when New Zealand business was operated through clubbish trade associations, or when politicians were inundated with pleas to promote one merger partner or the other.

I ignore for the moment that the proposal to abandon competition law as a luxury was made by Grant David, a lawyer for Telecom, and that it coincides with the breakdown of the Telecom monopoly.

A review of the Act and the Commission is reportedly supported by three other competition lawyers and specific instances are cited.

Thus, it is said that the Commerce Commission prevented a sale of The Warehouse. However, it was almost certainly right in ruling that The Warehouse was a potential competitor to the supermarket chains and hence an important constraint on their behaviour.

Also, the attempts over the years by Qantas and Air New Zealand to regulate the transtasman market between them are sufficiently well documented to suggest that the commission may have been right in preventing such co-operation there also.

The commission's attempts to oversee the profits and services of monopolies such as the electricity lines companies, like Vector, are proper given the profit and blackout records.

It is all very well for lawyers to argue on behalf of those with something to lose from competition laws but there is another side of the coin - the numerous small businesses which may be impeded by cartel or monopoly behaviour.

That is not to say that there might not be improvements made in relation to the commission. For example:

(a) The commission does appear to have been subject to political influences and vested interests. The commission has to oversee government trading interests and those of its supporters - and it is essential that it be strictly neutral and free from political interference. It is for this reason that, when appointed as chairman of the Commerce Commission in 1984, I resigned my membership of the National Party and did not renew it until the term was completed in 1989.

(b) The commission has been strong on invective but short on action. In particular, it has been weak on vertical restraints and collective joint buying schemes which also have the effect of excluding competitors. It propounds the obvious but not always the difficult issues.

(c) It has arguably been lazy in its preoccupation with using overseas evidence to deal with their impact upon New Zealand rather than concentrating on New Zealand activity - or perhaps it is a lack of resources required to delve.

(d) The commission has been lumbered with price control and regulation which is the antithesis of competition. Businesses will always price up to the regulated price. Not only are its resources in relation to competition and fair trading diluted, it means that it is effectively charged with preventing price competition as well as promoting it - a difficult dual role.

Many of the problems of the commission today stem from the rushed sell-off of State assets without providing protections for competition - and yet these were, oddly, promulgated by far-right politicians who might be expected to welcome strong laws to promoting competition.

It has seemed that the far right are more interested in promoting the interests of big business than in promoting the effective competition which is the basis of our society.

* John Collinge is a former chairman of the Commerce Commission and president of the National Party.