Google prosecution shows Commerce Commission how it should be done

Wednesday, 14 August 2024

Commerce Commission chair John Small tells MPs about the low fines companies face for breaking the Fair Trading Act.

Kent Duston is convener of the Banking Reform Coalition, which is advocating for structural separation of the banking industry and a break-up of the Australian-owned banks.

OPINION: Last week the unimaginable happened: Google was convicted of being a monopolist by a US court. The judge found it had been using its market power to unfairly restrict competition, which made profits it wasn’t entitled to.

The court ruling underlines how pervasive and far-reaching Google’s reach has become, and should begin to usher in an era of better-behaved and less predatory tech giants.

And the US Department of Justice’s historic victory against one of the biggest companies on the planet is thanks to the leadership of the fire-breathing Jonathan Kanter, the head of the antitrust division. He’s rightly being celebrated by pro-competition advocates around the world.

Reportedly, on Kanter's first day on the job, he addressed his gathered lawyers and asked them to raise their hands if they'd never lost a case. It was a canny trap: as the proud, victorious DOJ lawyers thrust their arms into the air, Kanter quoted James Comey, who did the same thing on his first day as district attorney for the Southern District of New York: “You people are the chickenshit club.”

The US Department of Justice’s historic victory against one of the biggest companies on the planet is being celebrated by pro-competition advocates around the world, writes Kent Duston.

Kanter and Comey’s point is that a prosecutor who never loses a case is a prosecutor who only goes after easy targets, and leaves the worst offenders untouched.

So under Jonathan Kanter the Department of Justice found its mojo, fought the hard case against Google, and won. But this kind of major victory for consumers has little chance of ever happening in New Zealand.

Here, the Commerce Commission fills the same role as the antitrust division of the DOJ: it’s meant to break up monopolies, make sure markets work effectively, and defend all us consumers from the depredations of predatory corporations. It’s an important role, but one which the commission has all but abandoned.

Our economy is now dominated by oligopolies, small groups of large companies that are extracting excessive profits from captive markets. Whether it’s the ridiculous price of Gib board, the cost of the bag of groceries at the supermarket, the inflated credit card and mortgage interest rates, the sky-high Paywave fees, or the upwardly-mobile power prices, whole sections of our economy are now expensive and dysfunctional and immensely profitable for the handful of companies that control them.

So we’d assume the Commerce Commission would be doing exactly what Jonathan Kanter has done: going after the banks and the supermarkets and the electricity companies, dragging them into court, fining them for their abuses of market power, breaking them up, and getting markets working again. But we’d be wrong about that.

Instead, the Commerce Commission’s lawyers are going after cleaning companies in Christchurch and used car dealers. It’s only taking cases it knows it will win, when (like the cleaning company) they can’t afford lawyers, or when they’ve already admitted guilt.

Kent Duston believes supermarkets are a prime target for the sorts of prosecutions the Commerce Commission should be taking.

Even Commerce Minister Andrew Bayly is imploring the commission to get stuck in, saying he wants it to be a “courageous litigator”, and to be more ambitious and take on more risky cases. In response, the commission returned half its annual legal fund, unspent.

And it’s not like the Commerce Commission doesn’t have the tools. More than a year ago, the commission was handed new powers in section 36 of the Commerce Act – but it hasn’t used them once; it looks like they haven’t even been taken out of the wrapper.

The poster child for the commission’s timidity is last week’s $3.25m settlement with Foodstuffs over anti-competitive land covenants, which had been going on for years.

The size of the fine is a tiny fraction of the sum the commission itself estimated the supermarkets made in excess profits. That's not a penalty – it's just the cost of doing business.

Commerce Commission chairperson John Small is prepared to back the big calls, but its lawyers and managers are overly timid, argues Kent Duston.

It looks awfully like the commission went for a symbolic wet-bus-ticket fine, rather than risking a showdown in court with a rich and undoubtedly lawyered-up corporation.

It’s pretty clear there’s a wide, deep and very rich vein of institutional cowardice at the Commerce Commission. Instead of championing fair markets and robust competition, and taking action against the big end of town when it breaks the rules, the commission is relentlessly punching down.

The Commerce Commission is doing exactly what Jonathan Kanter and James Comey thinks is the mark of a second-rate regulator: only taking the easy cases.

The commission has all the tools it needs; an ample budget, a minister who is cheering it on, and – particularly in the form of the chair, Dr John Small – commissioners who are prepared to back the big calls. So the overly timid executives and managers and lawyers at the commission need to summon their courage and step up to the big league.

And this needs to happen fast. The country can no longer afford the billions of dollars in economic damage from these oligopolies – and we have little use for a timid and ineffectual regulator that seems determined to stay a lifetime member of the chickenshit club.