Thursday, June 08, 2006

Conspiring against the public

There's an old quote from Adam Smith on the inevitable tendency of businessmen to collude in the market:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

This seems to be exactly what is going on with the proposed Air New Zealand - Qantas deal. While the two airlines claim that it will simply allow them to operate more efficiently, an analysis by Auckland University economist Tim Hazeldine shows that it could raise airfares to Australia by up to 25%. It is simply a shabby deal to jack up prices by creating a cosy little oligopoly. So why the hell are we even considering allowing it?


"So why the hell are we even considering allowing it?"

Because even big corporates have the right to natural justice - to say "That Auckland economist is wrong, and here's why...".

The real questions to be asking are probably among the following:

1) Why will the decision on this proposal be made by the Transport Minister, instead of the Commerce Commission (it was the ComCom that rejected the proposed merger a few years back)?

2) Isn't it a little dodgy that the person making the decision about whether Air NZ and Qantas can co-operate on Trans-Tasman routes is effectively the majority shareholder in Air NZ?

3) Why won't the Transport Ministry tell anyone how the decision will be reached (in stark contrast to the very public process the ComCom would follow if it were deciding)?

4) Why doesn't the government amend the Civil Aviation Act so that the provisions within it relating to internation code-sharing arrangements cannot be used to circumvent scrutiny under NZ's competition laws?


Posted by Graeme Edgeler : 6/08/2006 01:32:00 PM

Yes, they have a right to natural justice. But you'd think that given the obvious anti-competitive nature of the proposal, that it would be bound to fail (and that our corporates would know better than to bring such stupid proposals).

And yes, the decision-making procedure is dodgy as hell. It should be in the hands of the Commerce Commission, not a financially interested Minister.

Posted by Idiot/Savant : 6/08/2006 01:50:00 PM

"But you'd think that given the obvious anti-competitive nature of the proposal, that it would be bound to fail"

This is of course the major the problem with the process being followed: without ComCom oversight who's to say that effect on competition will even be considered?

I'd also note that it may not be so clear cut - while the proposed merger was rejected by the ComCom (upheld on appeal to the High Court); it was not similarly rejected in Australia (whilst the Australian Competition and Consumer Commission found similarly to the ComCom, the appeal to the Australian Competition Tribunal was successful - it determining that the anti-competitive detriment to Australia was small).

Posted by Graeme Edgeler : 6/08/2006 02:10:00 PM