Commerce Commission: Watchdog or Mad Dog

A Guest Post Series from Mr A. Investor.

There has been some news coverage of the big drop in Chorus Networks’ shareprice over the last few days thanks to a “draft proposal” by the Mad Dogs of the Commerce Commission.

It seems the Commerce Commission’s unexpectedly large interference in the so called re-benchmarking of copper prices has seen a calamitous drop in the share price of Chorus. (Re-benchmarking is the spin weasel name for the state forcing a company’s prices down).

Unlike Kiwiblog, we don’t think it’s wonderful news.

There are going to be some ongoing consequences from this mad dog attack, so we’ll be taking a closer look at the costs of this state agency intervention over the next few days, and examine some of the potentially disastrous effects the Mad Dogs have created for the Government.

Last Friday, Chorus lost $103million in shareholder value, thanks to the Commerce Commissions blunderbuss approach to forcing Chorus’ price down. The magnitude of Chorus’ loss was amplified by a combination of the unexpectedness and the ferocity of the Mad Dog attack. Chorus got bit, and bit hard.

Yesterday, investors continued to flee the bitten victim. Chorus lost another $80million in value, meaning investor losses totalled $180m for the two days.

That includes YOUR money if you happen to have investments in KiwiSaver, mutual funds or directly owned shares.

The flow on effects of this attack contributed to negative sentiment for the NZ sharemarket for those past two days. (Of course, Monday’s losses included concerns over Europe, but only Chorus fell like drunk down a staircase).

It’s not just about Chorus. Other utility and infrastructure companies face ongoing significant regulatory uncertainty thanks to the Mad Dogs at the Commerce Commission.

Power companies like Vector and Contact, plus other infrastructure companies have all faced unexpected regulatory burdens thanks to a state agency which clearly doesn’t care about the mess it creates for others.

The big worry is this – if Chorus (who only split out of Telecom last year to satisfy regulatory concerns) is capable of being bitten by a mad dog, then what attacks await the mixed ownership model companies that will be offered to investors later this year and next?

Why is the Commission behaving like this?

And who needs a half full crap-bag of smelly hikoi walkers protesting against SOE sales, when a state agency is doing a bang-up job of scaring investors away – from ALL of the NZ sharemarket? Sharebrokers like First NZ Capital are warning that overseas investors had taken notice and would stay away from NZ’s sharemarket.

So then, what’s the National Government going to do to reduce regulatory uncertainty? Or will they let the mixed ownership models face failure because they’re not prepared to restrain their mad dog?


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  • Phar Lap

     Well the Nats can start with restructing the Commerce Commission.Seems they are under the radar when it comes to getting bang for the taxpayers buck If the IRD can be restructerd,and they are the most important Government Dept .why cant the pedantic overbearing ,over the top Commerce Commission get some of the blow torch treatment.

  • insider

    The govt has chosen to regulate prices by some utilities. If it’s going to regulate, it needs someone to do the work. There is always going to be tension in pricing decisions. Would you prefer consumers were overcharged?

    Comcom decisions are consulted on and also judicially reviewable so they don’t work in a vacuum and just impose a regulation on a whim. Just because the market panics isn’t the comcom’s fault and shouldn’t be its concern either.

    Lines companies do quite well out of the comcom – guaranteed return on assets, guaranteed CPI adjustments and almost no business risk in terms of defaults on payments.

    Contact is not regulated by comcom so not sure what their concerns would be – you seem to not understand the comcom’s role. Contact and the other generator/retailers only have to worry if they are colluding, which is illegal.

  • Rocky

    I got burnt when the Labour Govt. interfered in Telecom, and now again that under National there is interference in Chorus. I was intending to invest in the Power Company floats but now no way.

    • Guest

      You got it one mate.

      • insider

        Yes have a read of the 30 page policy statement on electricity governance if you think the power market is a free one and not riddled with contradictory agendas.

  • Mark

    What do you mean?Now is a great time to pick up some Chorus shares from out of the bargain bin!

  • Aunt Zinnia

      Please don’t blither on about regulatory burden and state intervention as if utility companies have arisen from the market.  None of these utility çompanies are part of a market in the sense of many competitors resulting in the mythical efficient market. They are former state monopolies.  What you are saying is the share price went down because cocmcom was looking at restricting Chorus monopoly position – bit sad really and nothing at all to do with the utilitiy’s efficiency or productivity, which might have been good for NZ Inc..