The most expensive government agency in the country is the Commerce Commission

Tuesday, 18 February 2025

The Commerce Commission is meant to regulate the way markets operate and to ensure consumers get a fair deal. But that just isn’t happening in New Zealand, says the Banking Reform Coalition.

Kent Duston is the convener of the Banking Reform Coalition.

OPINION: When we think of big-spending Government agencies, we normally have areas like welfare or education or justice in mind. But they pale into insignificance when it comes to the tens of billions of dollars of financial and economic costs caused by the Commerce Commission, the worst-performing agency in the public sector.

The Commerce Commission is meant to regulate the way markets operate and to ensure consumers get a fair deal. But that just isn’t happening in New Zealand, as everyone who has a credit card or went to the supermarket recently or paid the power bill knows.

Kiwis are being fleeced by the big end of town. Bank profits are double what they should be, supermarket prices are far higher than is fair, and power prices are set to climb even further into the stratosphere. While the rest of the nation struggled through the economic fallout of the COVID-19 pandemic, these sectors all increased their margins at our expense.

Kent Duston from the Banking Reform Coalition tore into high bank profits at the Finance and Expenditure select committee banking inquiry recently.

The Commerce Commission is meant to prevent companies abusing their market power and price-gouging consumers, and they have entire Act of Parliament – the Commerce Act 1986 – to give them the power to do exactly that.

But as profits have climbed and families have suffered, the Commerce Commission has stood idly by, twiddling its collective thumbs. Exactly no banks, supermarkets or power companies have been dragged into court and prosecuted by the Commission, despite their flagrant profiteering.

And it’s not like the Commission doesn’t know about the scale of the problem. It regularly writes high-quality reports about entire sectors, the latest one of which – the market study into personal banking – was published in August last year.

In its market study, the Commerce Commission called out the four Australian-owned banks – ANZ, ASB, BNZ and Westpac – as an oligopoly, which are collectively making excessive returns. By our calculation, $3.5 billion in un-earned and unjustified profit is being extracted by the four banks and exported to their Aussie shareholders every year.

Commerce Minister Andrew Bayly says he wants the Commerce Commission to be a “courageous litigator”.

Given the scale of the looting – that’s around $10 million a day we’re collectively losing – we’d reasonably expect the Commerce Commission to take action forthwith. But in the six months since the market study was released, exactly nothing has occurred.

Rather than fixing the problems with the banks, the Commerce Commission seems content with merely supervising the dysfunction, watching our national wealth flood out of the country, and perhaps writing a few reports along the way.

This is entirely surprising, given the Prime Minister saying he wants more competition, Commerce Minister Andrew Bayly saying he wants the Commerce Commission to be a “courageous litigator”, and Dr John Small, the energetic and focused Commissioner, pushing hard for more action.

The problem seems to be timid and ineffectual leadership at the Commission, which seems disinclined to step up and do its job and hold the banks and supermarkets and power companies to account.

Minister Bayly appears frustrated with the underperformance of this key agency, so has ordered an external review. This is good, and the review will hopefully motivate the entirely somnambulant leadership team.

But more is clearly needed. It’s not good enough that the Commerce Commission can continue to quietly snooze in the corner as Kiwis are taken to the cleaners, to the tune of tens billions of dollars a year. So we think it’s time for a root-and-branch restructure of the entire agency, as a matter of urgency.

What’s required is much better leadership, an executive team that is prepared to act rather than just talk, and a rapid end to the long-running culture of institutional cowardice in the face of big business. We need a Commerce Commission that regulates and prosecutes, rather than one that merely spectates and commentates.

And this needs to happen soon. If the US Department of Justice can drag Google into court and get a conviction for monopolistic behaviours, there’s no reason why the Commerce Commission can’t do the same with our banks and supermarkets and power companies.

So we look forward to the results of Minister Bayly’s review – and then rapid and decisive action to reform and energise the Commerce Commission, so it finally starts acting in the best interests of New Zealanders.