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16/04/14

Let the chips fly! Competition Policy Review releases its Issues Paper and Review timetable

The Competition Policy Review Panel led by Professor Ian Harper has now released its Issues Paper and is calling for submissions by 10 June 2014.  Given the breadth of the Terms of Reference for the Review, the Issues Paper is necessarily wide-ranging, running to 59 pages in total with 7 high level questions and 55 specific questions that stakeholders are invited to consider (Issues Paper is available here).

The Issues Paper makes it clear that the Review is firmly focussed on micro-economic reform to promote productivity growth

Consistent with calls for clear delineation of the policy objectives for the Review 1, the Government revised the introduction to the final Terms of Reference to include the following key areas of focus:

  • identify regulations and other impediments across the economy that restrict competition and reduce productivity, which are not in the broader public interest;
  • examine the competition provisions of the Competition and Consumer Act 2010 (CCA) to ensure that they are driving efficient, competitive and durable outcomes, particularly in light of changes to the Australian economy in recent decades and its increased integration into global markets; 
  • examine the competition provisions and the special protections for small business in the CCA to ensure that efficient businesses, both big and small, can compete effectively and have incentives to invest and innovate for the future;
  • consider whether the structure and powers of the competition institutions remain appropriate, in light of ongoing changes in the economy and the desire to reduce the regulatory impost on business; and 
  • review government involvement in markets through government business enterprises, direct ownership of assets and the competitive neutrality policy, with a view to reducing government involvement where there is no longer a clear public interest need.

The Issues Paper reflects this focus, and clearly sets out the Panel’s overarching objective ‘to identify competition-enhancing microeconomic reforms to drive ongoing productivity growth and improvements in the living standards of all Australians’.  Professor Harper noted that the Review—which has been labelled “Hilmer Mark II” by both the Government and the Panel—will be:2

wider than Australia’s competition laws and institutions, focusing…on how to deliver the benefits of competition more broadly across the economy and how to support ongoing reform by establishing appropriate institutional frameworks… the review is [also] an opportunity to take stock of past reforms and to lay down a competition policy blueprint for the decades ahead. 

A range of questions are identified in each of the principal areas of review, with scope for stakeholders to identify priorities 

While the overarching objective of the Review is grounded in identifying microeconomic reforms, the Issues Paper sets out a number of specific questions and calls for submissions against each of the principal areas of the review, including:

  •  competition policy principles;
  •  regulatory impediments to competition; 
  •  government involvement in business activities; 
  •  sectoral review and reform; 
  •  a review of the existing competition laws; and 
  •  the administration of competition laws and policy.  

The structure of the Issues Paper gives some indication as to the focus of the Review Panel.  It is notable that questions such as regulatory impediments to competition and the appropriate role of government in commercial business activities feature at the top of the list of areas of review. 

However, the Issues Paper makes clear that the Panel has not yet identified clear priorities.  The Panel has also not determined that particular areas should not be within the scope of the Review on the basis that the issues have been reviewed recently in another forum. 

The Issues Paper identifies what it describes as 7 key questions.  The first question opens up the Review to interested parties to identify what they consider to be the priorities for a competition policy reform agenda.  These 7 key questions are supplemented by a specific discussion of particular issues against each area of review and a further 55 specific questions.  Interested parties are invited to respond to questions as they consider appropriate.

Key questions for the Review to consider4

A number of key questions arise from the Terms of Reference:

  •  What should be the priorities for a competition policy reform agenda to ensure that efficient businesses, large or small, can compete effectively and drive growth in productivity and living standards? 
  •  Are there unwarranted regulatory impediments to competition in any sector in Australia that should be removed or altered? 
  •  Are government-provided goods and services delivered in a manner conducive to competition, while meeting other policy objectives?
  •  Is there a need for further competition-related reform in infrastructure sectors with a history of heavy government involvement (such as the water, energy and transport sectors)?
  •  Would there be a public benefit in encouraging greater competition and choice in sectors with substantial government participation (including education, health and disability care and support)? 
  •  Are the current competition laws working effectively to promote competitive markets, given increasing globalisation, changing market and social structures, and technological change?
  •  Are competition-related institutions functioning effectively and promoting efficient outcomes for consumers and the maximum scope for industry participation?
  •  What institutional arrangements would best support a self-sustaining process for continual competition policy reform and review? 

Indeed, stakeholders have the ability to shape the Review 

The questions in the Issues Paper are all open-ended and broad, which gives stakeholders the ability to shape the Review.  Indeed, it appears that the Panel has not pre-judged any issues within the Review’s ambit, if the high-level treatment of them is anything to go by.  

To take one example, after stepping through possible reform in energy, water, transport and telecommunications on a single page, the Panel poses a broad question:5 What are the competition policy reform priorities in sectors such as utilities, transport, and telecommunications?  

Similarly, after summarising the mergers provision (section 50 of the CCA) and the three merger review processes in three concise paragraphs, the question is again a broad one:6  Do the merger provisions of the CCA operate effectively, and are they being applied effectively by regulators and the courts?  

While the review of the existing competition laws and the administration of competition law and policy has been relegated, the Issues Paper asks all the relevant questions 

While the Issues Paper relegates the review of the existing competition laws and their administration to the bottom of the list, the Issues Paper squarely raise issues specific to the key CCA provisions, including the mergers provisions, the misuse of market power provision and provisions relating to anti-competitive agreements, and also asks whether the CCA adequately enables efficient small businesses to compete effectively.  

More fundamentally, the Issues Paper raises the issue of whether to streamline the Competition and Consumer Act 2010, which is generally recognised to be overly complex and reliant on the use of codified per se contraventions.  For example, the Panel presents the current state of play in relation to authorisations and notifications, which shows the lack of consistency in their application, and asks the question: Do the authorisation and notification provisions of the CCA operate effectively, and do they work to further the objectives of the CCA? 

The Panel also calls for comment on the administration of competition policy, including stakeholders’ experiences in dealing with the ACCC, the Australian Competition Tribunal and other regulatory bodies.  The Panel asks: What institutional arrangements would best support a self-sustaining process for continual competition policy reform and review? 

The Issues Paper provides an indication as to the Panel’s approach to the Review 

The Panel has also set out its intentions as to how it will cover the breadth of issues set out in the Terms of Reference within the 12 month timeframe.  In particular, the Panel notes that:7

… the Panel [is required to] … prioritise its analysis and recommendations.  In general, more detailed proposals for change will be made where the issues at stake have previously been tested and debated, or in areas where specific suggestions will help advance the debate.  

In other cases, a principles-based approach can allow subsequent application to a wide range of sectors in the economy and provide greater flexibility at the implementation stage.

In the Issues Paper, the Panel also notes that it will not be analysing particular sectors on a level comparable to the ACCC’s recent grocery and petrol inquiries.  However, stakeholders will need to provide sufficient detail in their submissions to enable the Panel to test propositions properly. 

Responding to the Issues Paper and the Review timetable 

Stakeholders have just over one month to prepare their submissions in response to the Issues Paper.  The due date is 10 June 2014.  Other key dates are as follows:

  •  Consultation on Issues Paper – May / June 2014;
  •  Draft report due – September 2014;
  •  Consultation and submissions on draft report – October / November 2014; and
  •  Final report due – early 2015.

 

Footnotes

1.  For example:  Professor Fred Hilmer, ‘Competition Policy from 1992 to 2014’ (Speech delivered at the Gilbert + Tobin BCA Competition Policy Forum on the Commonwealth Government’s Root and Branch Review’, Sydney, 13 February 2014), available at http://f.datasrvr.com/fr1/614/64325/Competition_Policy_from_1992_to_2014...

2.  Professor Ian Harper, ‘Hilmer Mk II’ will take widest view’, Australian Financial Review, Tuesday 15 April 2014, 50. 

3.  Competition Policy Review Panel, Competition Policy Review Issues Paper (2014), 4 (Issues Paper).

4.  Issues Paper, 7. 

5.  Issues Paper, 21.

6.  Issues Paper, 34. 

7.   Issues Paper, 4.  

8. Issues Paper, 4.

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