Late last week, the New Zealand Energy Minister, the Hon Judith Collins MP, released the terms of reference for the conduct of a national Inquiry into retail petrol prices around the country.

The release followed an announcement by the Minister last month that a national inquiry into retail petrol prices would be conducted in response to a public perception that average retail margins have increased significantly in recent years.

The Inquiry is being conducted by the Ministry of Business, Innovation and Employment with specialist assistance to be provided by consultants.

While Australia is no stranger to the conduct of petrol price inquiries, the New Zealand approach is notable on three counts.

First, the inquiry has no legal basis. Rather, participation is voluntary and all the major players have publicly indicated that they will fully co-operate by providing all necessary information. These include BP, Z Energy, Mobil and Gull (the company that is set to be acquired by Caltex Australia in the near future).

“Such an approach is not unusual in New Zealand, but the clear inference is that the Government would have resorted to a statutory inquiry had the major players elected not to participate”, said Andy Glenie (a Director at Anderson Creagh Lai, Auckland).

Secondly, the Inquiry has been charged with determining whether New Zealand petrol prices are “fair and reasonable”. This determination will be made by calculating each company’s asset base (on both historical and replacement cost bases) and then comparing actual company returns on average capital employed in the market since 2011 – and then comparing these benchmarks with “comparable” overseas businesses such as those that operate in Australia.

Finally, the Inquiry will investigate the nature of current barriers to market entry as well as the barriers to expansion of the smaller players. The rationale here is that, should such barriers exist, they may be assisting a small number of larger players to earn above-average profits.

“Depending on the Inquiry’s findings, the NZ government could respond in a number of ways but direct regulatory intervention in the market currently seems unlikely”, said Andy.

One strategy, for example, could be to follow Australia’s lead by increasing fuel price transparency of petrol prices via fuel pricing apps such as MotorMouth, Gas Buddy and Petrol Spy – making it easier for motorists to shop around for the best fuel price.

The Inquiry is due to hand down its findings at the end of June 2017 – just three months out from the September 2017 General Election.

The full Terms of Reference for the Inquiry can be downloaded at: https://www.beehive.govt.nz/sites/all/files/TORfuelpriceinquiry.pdf.

Andy Glenie is a Director at Anderson Creagh Lai in Auckland, specialising in competition and regulatory law. Andy can be contacted at andy@acllaw.co.nz.