Wayne Leach, Nicola Jackson, Cindy Zhu, Maxine Rennie, Catherine Ku and Vicky Kuo explore the National Competition Policy Review recently announced by the Australian Government.
On 23 August 2023, the Commonwealth Department of Treasury announced a Competition Review to be held over the next 2 years.[1] The purpose of the review is to examine Australia’s competition laws, policies and institutions to ensure they remain fit for purpose for the modern economy, and will focus on reforms that will increase productivity, ease the cost of living and/or lift wages.
The Review will undertake rolling projects, involving public consultation and the publication of various issues papers on specific competition topics, and is supported by the Government’s expert advisory panel.
The Competition Review has already looked at Australia’s merger laws and processes, non-compete clauses and other restraints, and aviation, and is now considering the National Competition Policy (NCP) as its next project.
In December 2023, treasurers from the Australian states and territories agreed through the Council on Federal Financial Relations (CFFR) to work together to ‘revitalise’ the NCP, and the Competition Taskforce will continue to collaborate with all State and Territory Governments to develop a revitalised NCP for consideration by the CFFR.
The NCP was first recommended by the 1993 National Competition Policy Review chaired by Professor Frederick Hilmer (Hilmer Review). All Australian state and territory governments agreed to the NCP in 1995 through intergovernmental agreements that outlined competition principles, reform programs and institutional arrangements. From these intergovernmental agreements, the Australian Competition and Consumer Commission (ACCC) and National Competition Council (NCC) were born.
The Treasury is now considering whether the NCP as a national policy ‘remains fit for the purpose of driving pro-competitive government policy and action’.[2]
Consultation Paper
In August 2024, the Treasury published its consultation paper titled ‘Revitalising National Competition Policy’ (Consultation Paper), seeking public feedback on 3 potential elements of a revitalised NCP:
- National Competition Principles;
- National Competition Reform Program; and
- Institutions and Governance.
Invitations for submissions to the Treasury opened on 26 August 2024 and will close on 23 September 2024.
What happens after consultation?
Feedback received during consultation will inform the collaboration between the Commonwealth, States and Territories on what a ‘revitalised’ NCP could look like, together with modelling from the Productivity Commission’s report, advice from the Competition Review Expert Advisory Panel and other research.
The Productivity Commission has been tasked by the Commonwealth Treasurer with assessing the impacts of potential NCP reforms on GDP, economic growth, productivity, government revenue and consumer wellbeing. The Productivity Commission’s final report is to be handed to the Australian Government by 1 November 2024. The Australian Government and all state and territory Governments will seek to agree new competition principles by the end of 2024.
National Competition Principles
The National Competition Principles (Principles) are set out in the Competition Principles Agreement 1995 (CPA). Broadly, the Consultation Paper is considering improvements to the National Competition Principles in the following areas:
- Format: improving the current CPA format to be more user-friendly;
- Purpose: adding a purpose statement;
- Promotion of competition: including a requirement to promote competition in its purpose statement;
- Consumer empowerment: including a new principle on the ‘demand side’ of competition;
- Market design and stewardship: including a new principle on market design and stewardship; and
- Data sharing: including a new principle on governments and private entities safely sharing their data.
The Consultation Paper also explores reform to specific Principles. These include:
(a) Legislation Review Principle (CPA clause 5)
The Legislation Review Principle currently requires jurisdictions to review legislation that restricts competition, at least once every 10 years. The Review team is considering whether to broaden its scope to include government policies, to ensure legislation does not restrict competition, and to take targeted reviews of legislation that might impact competition or create barriers to entry of new technologies
(b) Competitive Neutrality Principle (CPA clause 3)
The Competitive Neutrality Principle aims to promote competition between public sector and private businesses such that government business activities do not enjoy any net competitive advantages (or disadvantages). The Review team is considering whether the Principle should provide requirements for cross-jurisdictional issues and multi-owner businesses, increase transparency and reporting requirements, and consider the independence of complaints bodies and processes.
(c) Structural Reform of Public Monopolies Principle (CPA clause 4)
The Structural Reform of Public Monopolies Principle allows governments to remove regulatory functions from public monopolies before introducing competition into those markets. The Review team is considering strengthening the requirements for activities that must occur before structural reform, such as an assessment requirement or expanding the Principle to cover activities such as government procurement or provision of human services.
(d) Access to Services Provided by Means of Significant Infrastructure Facilities Principle (CPA clause 6)
The Access to Services Provided by Means of Significant Infrastructure Facilities Principle provides for the operator of a significant monopoly infrastructure to provide access on reasonable terms. The Review team is considering:
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- whether an updated Principle could play a higher-level role,
- how to address non-physical infrastructure that is not necessarily economically feasible to duplicate or which requires a high degree of interoperability (such as how the Access Principle, which underpins the National Access Regime in Part IIIA of the Competition and Consumer Act 2010 (Cth) (CCA), might apply to key non-physical infrastructure such as digital platforms or large data holdings, or whether stand alone or revised requirements are needed),
- how to review the current policies around significant infrastructure monopolies, and
- how to improve the National Access Regime under Part IIIA of the CCA.
(e) Prices Oversight Principle (CPA clause 2)
The Prices Oversight Principle requires each state and territory to consider creating an independent source of prices oversight for government businesses. This Principle also requires these government bodies to receive submissions from interested persons and publish reasons for its pricing recommendations. The Review team is considering whether this Principle could play a higher-level role, and how it could be used as guidance to promote greater transparency on pricing decisions beyond government businesses.
(f) Public Interest Test (CPA clause 1(3))
The Public Interest Test requires a list of non-exhaustive factors to be taken into account when making policy decisions under the Competitive Neutrality, Structural Reform and Legislation Review Principles. The Review team is considering whether this test can be simplified with greater guidance and transparency.
National Competition Reform Program
The second element of the NCP’s proposed revitalisation is centred around the ‘National Competition Reform Program’ (Reform Program). Broadly, the Review team is focused on the following 5 themes:
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- Promoting a more dynamic business environment by endeavouring to ensure regulation reduces barriers to entry, expansion and exit, ensuring businesses do not face excessive compliance costs to participate in markets and promoting coherency of national regulatory frameworks and cross jurisdictional mutual recognition of regulatory approvals where benefits outweigh the costs;
- Harnessing the benefits of competition in net zero transformation (lowering barriers stifling brining low and zero-emissions technology products to market, ensuring businesses do not face excessive compliance costs to participate in the low carbon economy and ensuring long-term competitiveness in markets when delivering net-zero initiatives);
- Lowering barriers to labour mobility;
- Better harnessing choice, competition and contestability in human services; and
- Leveraging the economic opportunities of data and digital technology.
Under each heading, the Review team sets out examples and recommendations from past reviews, inquiries, or initiatives that it is considering, such as the 2024 Fels Price Gouging and Unfair Pricing Practices inquiry, or the 2023 Productivity Commission’s Productivity Inquiry report.
Institutions and Governance
The final element of the proposed revitalisation is centred on the institution of the NCP itself and its governance. While the Review team acknowledges the NCP’s success, past inquiries (2000 Senate Select Committee on the socio-economic consequences of the NCP; 1999 PC Report on the Impact of Competition Policy Reforms on Rural and Regional Australia) have raised concerns about the NCP’s dual role as ‘assessor’ and ‘advisor’ as well as its unilateral separation from government.
The Review team is therefore considering whether to establish an institution that plays a “leadership role” in advocating for competition policy. The new institution would recommend policy changes, provide advice, and educate the wider public with specific market studies.
[1] Australian Treasury, ‘Competition Review’ (Website) <https://treasury.gov.au/review/competition-review-2023>.
[2] Australian Treasury, ‘Revitalising National Competition Policy’ (Consultation Paper, August 2024) 6 (‘Consultation Paper’).
