Vector Ltd v Commerce Commission

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IN THE SUPREME COURT OF NEW ZEALAND

SC 46/2012
[2012] NZSC 99

BETWEEN VECTOR LIMITED
Appellant

AND COMMERCE COMMISSION
Respondent

Hearing: 9 and 10 October 2012

Court: McGrath, William Young, Glazebrook, Blanchard and Anderson JJ

Counsel: A R Galbraith QC, A S Butler, C M Marks and R H Versteeg for Appellant
B W F Brown QC, V E Casey and K C Millard for Respondent

Judgment: 15 November 2012

JUDGMENT OF THE COURT

AThe appeal is dismissed.
B The appellant is to pay the respondent costs of $40,000 together with disbursements to be fixed, if necessary, by the Registrar.

____________________________________________________________________

REASONS
(Given by William Young J)
Table of Contents
Introduction................................................................................................ [1]
Our approach – an overview..................................................................... [5]
The legislative setting................................................................................. [7]
...... The former pt 4A and the criticisms it attracted................................... [7]
...... Pt 4 – scope and purpose...................................................................... [9]
...... Types of regulation provided for........................................................ [10]
...... Price-quality path regulation............................................................. [12]
...... Default price-quality paths................................................................. [17]
...... Customised price-quality paths.......................................................... [20]
...... Input methodologies............................................................................ [22]

The transition to the sub-pt 9 regime and how it has been
implemented to date................................................................................. [28]
...... Roll-over of existing thresholds – 1 April 2009.................................. [28]
...... Reset of default price-quality path – 1 April 2010............................. [29]
...... Publication of input methodologies.................................................... [32]
...... Revision of default price-quality paths set under s 54K..................... [33]

Vector’s challenges................................................................................... [37]
Is the s 54K(3) power able to be exercised in the manner provided
for in s 53P(3)(b) in the absence of a published input
methodology (or methodologies) specific to starting price resets?...... [38]
...... An overview........................................................................................ [38]
...... The approaches of the High Court and Court of Appeal.................... [39]
...... Vector’s argument.............................................................................. [45]
...... An overview of s 52T(1) and (2)......................................................... [49]
...... Section 52T(2)..................................................................................... [54]
...... Certainty and merits review................................................................ [56]
...... Legislative history............................................................................... [62]
...... An overall assessment......................................................................... [68]

Whether s 54K(3) permits the Commission to reset the starting
prices fixed for the regulatory period which commenced
on 1 April 2010?....................................................................................... [78]
...... Preliminary comments........................................................................ [78]
...... Section 53ZB....................................................................................... [81]
...... The approach of Clifford J................................................................. [83]
...... The approach of the Court of Appeal................................................. [85]
...... Vector’s argument.............................................................................. [86]
...... Our evaluation.................................................................................... [88]

Disposition................................................................................................ [91]

Introduction

The Commerce Commission has price control functions under pt 4 of the Commerce Act 1986 (the Act) which came into effect on 14 October 2008[1] and replaced the previous pts 4, 4A and 5. Vector Ltd is subject to this Part in two capacities: under sub-pt 9 as an electricity distributor and under sub-pt 10 as a gas distributor. Sub-pt 9 – which is primarily important in this case – provides for price control through default and customised price-quality path regulation. An important component of price-quality path regulation is the setting and resetting…

CaseChat Overview and Summary

Vector Ltd is an electricity distributor subject to the Commerce Act 1986 (the Act), which regulates the price and quality of goods and services in markets with little or no competition. Sub-part 9 of part 4 of the Act provides for price-quality path regulation, which sets maximum prices and minimum quality standards for suppliers. The Commission was required to reset starting prices by 1 April 2010, which govern the prices that can be charged at the beginning of a regulatory period. The Commission had two options for setting starting prices, either by rolling over the prices applicable as at 31 March 2010 or by assessing the current and projected profitability of each supplier. The Commission chose to roll over the prices. The Commission did not publish input methodologies until 22 December 2010. Vector argued that the Commission was required to publish input methodologies specific to starting price resets and that the absence of such methodologies precluded the Commission from resorting to its s 54K(3) power to reset prices. The Court held that the language and purpose of the Act did not require the Commission to publish input methodologies addressing starting price resets and that the absence of such methodologies did not preclude the exercise of the s 54K(3) power. The Court also held that s 54K(3) permitted the Commission to reset starting prices for the regulatory period commencing on 1 April 2010, despite the absence of published input methodologies. The appeal was dismissed and Vector was ordered to pay costs.

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CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established