Major Gas Users’ Group v Commerce Commission

This case concerns the regulation of competition law regarding gas pipeline services in New Zealand. The plaintiff, representing the largest gas consumers in the country, sued New Zealand’s competition regulator, the Commerce Commission. They challenged decisions in which the Commission effectively allowed the country’s largest gas pipeline operators to raise prices to recover higher short-term costs in light of New Zealand’s announced phase-out of fossil fuels. The Commission essentially adjusted the useful lives of gas pipeline assets to account for this phase-out and accelerated the depreciation of those assets. The first of the two decisions hinged on a challenge to the Commission's selected "input methodologies" in making its decision. Section 52Z of the Commerce Act states that challenges to the Commission’s input methodologies can only succeed if the plaintiff identifies an alternative methodology that is “materially better in meeting the purpose” of the Commerce Act’s competition regulation provisions. In this instance, the Court determined that the plaintiff failed to identify a materially better methodology, concluding that the Commission’s decision fulfilled the purposes of the Act—such as promoting the long-term benefit of consumers by reflecting long-run supply costs and acknowledging the risk of stranded assets. The Court rejected arguments claiming that the decision was premature, contrary to the specific purposes of input methodologies, or that it overcompensated suppliers at the expense of consumers. In the second decision, the Court concluded that the Commission’s ruling did not satisfy the threshold of an error of law (namely that the Commission had not failed to apply the correct legal test, had not misconstrued or misunderstood the law, and had not made a clearly untenable decision).