Application of the public benefit test to the air New Zealand/Qantas case

Abstract

The proposed cartel between Air New Zealand was rejected by the NZ Commerce Commission, supported on appeal by the High Court. The case was an important and interesting application of the Net Public Benefit test in competition policy, under which the assessed costs or detriments of a determined substantial lessening of competition (SLC) are weighed against any offsetting benefits, for the purposes of authorisation. In this paper quantification of the detriments is shown to depend on the identity of those affected – consumers/producers; New Zealand/Australian/foreign. Impacts on the long‐run performance of markets and on related markets were claimed and are evaluated. The basic legitimacy of the public benefit test in this context is assessed, in terms both of the purpose of the NZ anti‐trust legislation and of the economics of long‐term market performance. The much simpler traditional SLC‐focussed implementation of anti‐trust might perform better overall.

Notes

Department of Economics, The University of Auckland t.[email protected]