Heads of Government at the 11 April 1995 Council of Australian Governments' Meeting agreed to a National Competition Policy regime that has two primary features. These are:

(a) the creation of markets and competition within them by following agreed competition principles and;

(b) the extension of the Commonwealth's Trade Practices Act (TPA) to State and Territory Government business and
unincorporated business activities to fully regulate those markets.

Accordingly, part of the NSW Government's obligations under the National Competition Policy, are to extend the application of Part IV of the Commonwealth's TPA, which regulates the conduct of participants in a market, to State Government business activities and a commitment to review legislation in light of the agreed competition principles.

The Competition Policy Reform Bill 1995 (Commonwealth) amending the TPA, including Part IV, passed the Commonwealth Parliament on 30 June 1995. The amended Part IV conduct rules commenced operation on 17 August 1995.

The Competition Policy Reform (New South Wales) Bill passed Parliament on 6 June 1995. It will operate to apply the Part IV conduct rules of the TPA to NSW businesses and agencies from 21 July 1996.

The National Competition Package also includes:

• the Competition Principles Agreement which provides the Commonwealth, States and Territories with guiding principles for the creation of competitive markets;
• the National Competition and Related Reforms Agreement which describes the payment of money by the Commonwealth to the States and Territories for the performance of obligations detailed in the Policy package; and
• the Conduct Code Agreement which details the formal notification protocols of jurisdictions as participants in the National Competition Policy, including the appointment of members to the various institutions set up under the Policy.

COMPLIANCE WITH PART IV

All NSW Government departments, authorities, agencies and local governments should now ensure that their practices will comply with the requirements in Part IV of the TPA by 21 July 1996.

It should be borne in mind that action against non-complying agencies can be brought by the Australian Competition and Consumer Commission (ACCC) or by individuals, particularly competitors.

Pecuniary penalties will not apply until 21 July 1997 however, other remedies will apply from 21 July 1996. Pecuniary penalties will not apply to Government departments, however, State authorities and local government will be liable. This does not mean, however, that departments may ignore the need to review their conduct and comply with Part IV where they engage in business activities.

Whilst there may be a possibility of seeking authorisation or notification under the Commonwealth legislation or exemption granted by the State Government in respect of certain conduct, agencies should be aware of the NSW Government's strong commitment to implement competition reform. Attempting to except conduct could undermine this approach.

Exemptions

Some agencies will already be exempt from application of the conduct rules by virtue of exemptions in legislation. These exemptions will last for 3 years from July 1995 unless in the appropriate form i.e. specifically referring to the nature of the conduct and its exemption from the TPA. All such exemptions should be reviewed.

In very limited circumstances, where the public benefit arguments outweigh all other arguments, the NSW Govemment may be prepared to make exemptions either to exempt conduct for a limited period (2 years to permit compliance) or indefinitely. It should be noted that 2 year exemptions made by regulation cannot be remade or revived. All applications for exemption should be forwarded to The Cabinet Office for evaluation, with full details of public benefits and countervailing considerations. To permit adequate time for consideration and appropriate action, applications should be received in The Cabinet Office no later than 1 January 1996.

Authorisations

Authorisation by the ACCC is another mechanism available for exemption from compliance with the Part IV conduct rules. It is specifically available for anticompetitive agreements, boycotts, some exclusive dealings and mergers.

The ACCC applies specific, stringent tests based on more precise public benefit arguments than envisaged for State Governments.

Agencies considering authorisation should provide all relevant details to The Cabinet Office before approaching the ACCC, to determine whether authorisation, exemption or a change of conduct is the more appropriate course of action.

The Cabinet Office should be approached as soon as possible, bearing in mind the longer processing period. It should nevertheless be kept in mind, however, that the NSW Government's preferred course is change of conduct rather than exemption or authorisation.

It should also be noted that the ACCC imposes a substantial fee for authorisation applications.

Notification

An agency may also seek to notify certain exclusive dealing conduct (defined in the TPA) to the ACCC i.e. to advise that the conduct is going on and is justifiable in the public benefit. The ACCC must find that the public benefit outweighs any lessening of competition. Application should be made to The Cabinet Office in the first instance. Notification is also subject to a substantial fee.

Contracts entered prior to application of conduct rules

Contracts entered prior to 19 August 1994 will not be required to conform with the conduct rules unless altered in scope or duration. All other contracts must comply.

Other exceptions

Part IV will not apply to licensing regimes where the conduct is specified in the legislation or to compulsory vesting of agricultural products. Nevertheless, both of these issues will be the subject of legislation review (see below).

Conduct Rules

The Commonwealth Government is currently preparing a summary of revised conduct rules. These will be forwarded to agencies w hen available.

It is understood that copies of the Commonwealth legislation are available for purchase from the Australian Government Bookshop.

OTHER COMPETITION ISSUES

Legislation Review

While agencies must review their legislation to check possible conflicts with the TPA, the Competition Principles Agreement also commits the Government to consider the potential anti-competitive effect of legislation more broadly.

The agreement requires that legislation should not restrict competition unless it can be demonstrated that the benefits to the community as a whole outweigh the costs; and that the objectives of the legislation require that competition be restricted. All governments must develop a timetable, by June 1996, for the review of anti-competitive legislation by 2000. Financial payments by the Commonwealth to the State will rely on fulfilment of these commitments.

In NSW, the review is likely to include legislation which:

• (as noted above) conflicts with Part IV of the Trade Practices Act;
• establishes statutory marketing bodies (beyond Part IV conflicts);
• restricts market entry/exit, through, for example, occupational and professional regulatory regimes or other licensing
  regimes;
• creates competitive advantages or disadvantages for privately or publicly owned market participants;
• establishes planning, land use and building approval systems that lead to excessive delays or unnecessary complexity;
• reduces market contestability (including by the imposition of significant costs) or inhibits business innovation.

The Competition Principles Agreement establishes an inter-governmental protocol for national reviews. Some Ministerial Councils have already developed timetables to review legislation of common interest. Whilst a national or co-ordinated approach may be desirable, it is important that Ministers or line agencies do not enter into agreements with other State or Commonwealth counterparts to undertake national or co-ordinated reviews without clearance from the Premier.

The legislative review is being managed by the Regulatory Review Unit in The Cabinet Office, in close co-operation with responsible agencies. It will consider national and co-ordinated reviews as part of this process.

The first stage of the NSW legislative review is the identification of relevant statutes. This task is being undertaken by the Regulatory Review Unit and will be complete by October 1995. The second stage will propose a timetable for the review, nominating priorities consistent with related structural reform undertakings. This will be ready for Cabinet consideration by January 1996.

The third stage will involve the development of guidelines to be applied by agencies when reviewing their legislation and a framework within which this work should be done. Documentation will be available by January 1996.

In the fourth stage, the Regulatory Review Unit will monitor the progress and quality of reviews. The Unit will provide training, advice and other assistance, including the convening of task groups where appropriate, to progress reviews according to agreed principles.

The progress of reviews and proposals for the reform of anti-competitive legislation will be reported to the Premier and Cabinet Committee on Micro Economic and GTE Reform. Annual reports on progress will also be provided to the National Competition Council, in accord with the Agreement.

Enquiries concerning legislation review may be directed to Ms. Caroline King, Policy Manager, Regulatory Review Unit, telephone 228.4706.

Access to Essential Facilities

The Commonwealth's Competition Policy Reform Act establishes a new Part IIIA of the TPA under which the Commonwealth will permit access to essential infrastructure, services or facilities. The purpose of such access is to encourage the growth of competition by permitting the private sector use of facilities otherwise too expensive to recreate.

States will also be able to establish access regimes pursuant to guidelines found in Clause 6 of the Competition Principles Agreement.

A circular will soon be circulated to all Ministers and agencies seeking their assessments of whether an access regime will be required by their agencies.

Competitive neutrality

Under the Competition Principles Agreement a NSW competitive neutrality policy statement will be required by June 1996. The NSW Treasury is presently engaged in developing this policy for the New South Wales Government. A similar statement for application to local government is also under preparation involving the Local Government and Shires Association and the Department of Local Government.

Structural Reform

The Competition Principles Agreement also requires action to be taken to ensure that public monopolies are reformed. In particular, regulatory mechanisms are to be separated from operational arms of an agency, whilst corporatisation is to be introduced progressively, where appropriate.

The Government's Financial Statement delivered on 8 June 1995 sets out New South Wales' timetable in this regard.

A policy statement covering local government is presently under discussion with the Local Government and Shires Association and the Department of Local Government.

Prices oversight of Government monopolies

The Competition Policy Reform Act of the Commonwealth establishes a regime for oversighting pricing by government
monopolies, or near monopolies, when individual States and Territories do not establish their own independent mechanisms.

The NSW Government Pricing Tribunal satisfies the requirements of the Commonwealth legislation, subject to minor amendments to be made in the Budget session to permit all monopolies or near monopolies to be covered by the Tribunal.

Bob Carr,
Premier.

Issued by: Inter-Governmental Relations Unit, The Cabinet Office.
Contact Officer: Peter Hendy
Phone: 228.4324
Date: 31 August, 1995