Tuesday, 20 June 2006

Censorship by stealth

Today’s guest commentary comes from an investment banker who must remain anonymous lest he jeopardise his firm’s position and, consequently, his career.

From the NBR: Air NZ slapped with $600,000 fine

Air New Zealand has been ordered to pay $600,000 in fines and nearly $65,000 in costs by the Comm[unist] Commission. The airline was prosecuted for misleading customers about the real price of its airfares. The Commission says the penalty is one of the highest ever imposed under the Fair Trading Act for misleading advertising and follows Air New Zealand's conviction on a total of 112 charges brought by the Commission.
Oh but they are full of themselves.

What they don’t say, however, is that Air NZ did tell consumers the full cost of their airfares (you could hardly book a ticket without having to consent to government charges being booked against your credit card). What’s more, it's only proper for Air NZ to compete on prices which they could control – and other airlines were doing the same.

So why else would the government’s bully boys go after Air NZ, and why Air NZ first?

One explanation is that in advertising their fares and govt levies separately, Air NZ exposed just how cheap airfares could be if we didn't have to pay unnecessary govt taxes along with them. But that’s not all that’s worrying in this news article.

In an agreement with the Commission, the airline has undertaken to move to using all-inclusive prices for both its international and domestic airfares.

In her book The God of The Machine, Isabel Paterson pointed out that a state education system would necessarily have to be supportive of the current government structure under which it operated because the bureaucrats in charge would not tolerate dissent from the teachers they controlled.

That same principle applies here. As an 80% govt owned company, Air NZ are hardly likely to stand up for their right to free speech to show how wasteful government is, are they? I scarcely think the largest shareholder would be happy for Air NZ to lambast a department for whom a fellow minister is responsible.

So if this case is now used as a precedent to prosecute other companies (as this other article suggests), we will have one government department able to prosecute private companies based on a precedent contested by what amounts to, well, a prosecution against another government department. And thus we will have seen another pernicious example of what happens when government owns businesses they shouldn't.

Update: And they're already at it: ComCom on the warpath

Kathmandu and Etop accused of false advertising

Kathmandu and Auckland Parallel importer Etop are the latest companies caught up in the Commerce Commission's blitz on false advertising.

I went to the Communist Commission's website to find out what they advertise themselves as doing. Here's what:

The Commerce Commission enforces legislation that promotes competition in New Zealand markets and prohibits misleading and deceptive conduct by traders. The Commission also enforces a number of pieces of legislation specific to the telecommunications, dairy and electricity industries. In ensuring compliance with the legislation it enforces, the Commission undertakes investigation and where appropriate takes court action; considers applications for authorisation in relation to anti-competitive behaviour and mergers; and makes regulatory decisions relating to access to telecommunications networks and assessing compliance with performance thresholds by electricity lines businesses.

We should prosecute them for false advertising:

  • They fail to break up government monopolies or call for their divestiture (where they would face the same capital costs as their competitors);
  • They fail to recommend the abolition of legislation that prevents small companies being able to compete with big companies (the RMA, the OSHA, corporate taxes);
  • In telecommunications and other industries, they penalise the most competitive company and keep less competitive companies alive (and their vocal - or, more accurately, nasal – CEOs in employment) through advocating corporate pork policies;
  • They delay mergers from which operational synergies can be gained, thereby raising costs, lowering wages and profits and thus capital accumulation and wages again; and
  • They raise investment uncertainty and thus capital costs and investment hurdle rates, such that new services that might benefit consumers are still born, never to see the light of day.

Quite simply, they are the legislative manifestation of the tall-poppy-syndrome - they attack any big private business and do nothing meaningful to the protected positions of bloated, wasteful, bullying government organisations.

TAGS: Economics, Politics-NZ


  1. ...and the "regulation" of the electricity & gas industry is not much better. When they "price controlled" they made vector & powerco immediately reduce charges by something like 12%, and then mandated that further price increases are only allowed at the rate of inflation, less one percent. Any wonder why there is stuff-all reinvestment in these industries, when return on investment is lower than the cost of capital?

    Secondly, they also price controlled the gas meter business, which is actually not a monopoly; it is competitive!

    As I understand it, these decisions can't be appealed, which basically means that Paul Rebstock et al are judge, jury & executioner.

  2. "they attack any big private business"

    Etop Limited? Ron Ross and Ross’s Super Meat Store? Banks Autos?

    really going after some big business there.


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