The Competition Policy Review led by emeritus professor Ian Harper has recommended reviews of product standards, planning and taxi regulations, and a user-pays approach to road funding in its final report released this week. It also proposes the formation of a new independent body, the Australian Council for Competition Policy, to oversee the application of legislation and policies to ensure a fair marketplace that puts the public interest ahead of private interests.

In recommending a comprehensive review of regulations across multiple sectors, the review stressed that complete deregulation was not the goal.

It specifically recommended a “rigorous, transparent and independent assessment of whether regulations are in the public interest, with the onus of proof on the party wishing to retain anti-competitive regulation”.

It said it was important to ensure “regulations serve the long-term interests of consumers”.

“In that vein, the Panel acknowledges submissions expressing concern about excessive deregulation, and accepts that many regulations are essential for other policy reasons. We need better regulation rather than no regulation at all.”

Regarding retail trading hours, it recommended that any restriction on trading be confined to Christmas day, Good Friday and the morning of ANZAC Day, with the exception of limitations on trade in relation to alcohol and gambling, where restrictions have a public interest goal of harm minimisation.

In reactions to the review published in The Conversation, the proposals to deregulate retail trading hours, remove barriers to competition in the pharmacy sector and extending competition principles to human services provisions including social services, health and education were welcomed by a number of leading academics.

Graham Samuel, vice-chancellor’s professorial fellow at Monash University stressed that the review’s recommendations made a clear case for the government to put the public interest ahead of private vested interests.

  • Read the full expert reaction piece here

Land use planning and zoning review

The review said that even small policy improvements in the area of land planning and zoning could yield large benefits to the economy. It recommended planning regulations be subject to a public interest test, and that reviews of regulations be carried out with the involvement of the proposed ACCP body.

“Planning systems by their nature create barriers to entry, diversification or expansion, including through limiting the number, size, operating model and mix of businesses. This can reduce the responsiveness of suppliers to the needs of consumers,” the review said.

“Planning regulations should work in the long-term interests of consumers. They should not restrict competition unless the benefits of the restriction to the community as a whole outweigh the costs, and the objectives of the regulations can only be achieved by restricting competition. Subjecting planning regulations to the public interest test will ensure they do not inappropriately limit entry to markets.”

The review recognised that reviews of “poorly designed” planning and zoning systems are currently underway or recently completed in a number of state and local government jurisdictions.

“An opportunity exists to ensure that, when undertaking these reviews or implementing their findings, enhanced competition is a central objective. That a number of reviews are already underway also provides the opportunity to compare across jurisdictions to determine best practice as a basis for updating and improving current requirements,” it said.

It recommended that the proposed ACCP work with the state and territory governments to oversee the incorporation of competition policy principles in planning and zoning rules, and that the ACCP should also report on progress in their implementation.

The review outlined specific examples of how the principles would apply:

  • arrangements that explicitly or implicitly favour particular operators are anti-competitive
  • competition between individual businesses is not in itself a relevant planning consideration
  • restrictions on the number of a particular type of retail store contained in any local area is not a relevant planning consideration
  • the impact on the viability of existing businesses is not a relevant planning consideration
  • proximity restrictions on particular types of retail stores are not a relevant planning consideration
  • business zones should be as broad as possible
  • development permit processes should be simplified
  • planning systems should be consistent and transparent to avoid creating incentives for gaming appeals

IP reform welcomed by REIA

The Real Estate Institute of Australia said it welcomed the Harper Review’s suggested IP reforms, calling on the government to address concerns of the small business sector in relation to the market power of large corporations.

REIA cited the example of REA Group’s attempt to trademark the term “real estate” in addition to its domain name of realestate.com.au as an example of IP being used to strangle competition. It is a move REIA is vigorously opposing due to concerns it may jeopardise the use of the generic term by other businesses, web portals and professional bodies.

“The recommendation [for IP reform] follows REIA’s strong support in our response to the draft report in which we highlighted how intellectual property can be dominated by large corporations in a bid to stifle competition and specifically website domain names,” REIA president, Neville Sanders said.

“The experience of REIA is that big business trademark grabs not only have a major adverse impact on competition, particularly for small business but they are deliberately used to reduce competition.

“The review should be all encompassing to include all forms of intellectual property under changing technologies.”

The Harper Review on road transport

The review found that the model of delivering road transport infrastructure had not changed for 20 years, and suggests opening the market up further to private sector providers. Many submissions to the draft report expressed concerns around the imposition of tolls, and this is reflected in the final report. It recommends a reduction in vehicle registration fees and fuel excise – which have traditionally been nominally linked to the funding of road projects – to compensate for user-pays road charges, and compensation from the federal government to the states for any lost revenue from registrations.

“The advent of new technology presents opportunities to improve the efficiency of road transport in ways that were unattainable two decades ago. Road user charges linked to road construction, maintenance and safety should make road investment decisions more responsive to the needs and preferences of road users. As in other network sectors, where pricing is introduced, it should be overseen by an independent regulator,” the review states.

“A critical concern of stakeholders, shared by the Panel, is that road pricing should not be an additional impost on road users. To ensure any reform is revenue-neutral, indirect taxes and charges, such as fuel excise and registration fees, should be reduced as road pricing is introduced. This would make the road sector more like other infrastructure sectors, since road authorities would charge directly and transparently for road use, and allocate the revenue raised to the network’s construction and operating costs. Cost-reflective pricing should lead to better road investment decisions, which will make the community and road users better off.”

Green groups spared from inclusion in secondary boycott sanctions

Despite intense lobbying for increased scope of secondary boycott laws by industry players that have been experiencing consumer boycott campaigns, the review recommends the activities of animal rights, human rights and environmental groups do not incur such sanctions, as they still leave consumers free to “make up their own minds”.

Instead, it said the strengthening of sanctions in regards to secondary boycotts should remain in place in relation to actions involving industrial relations.

Taxis and ride sharing

The review found that reform of taxi regulation in most jurisdictions was long overdue, and that regulation limiting the number of taxi licences and preventing other services from competing with taxis had raised costs for consumers and hindered the emergence of innovative services.

“Regulation of taxi and hire car services should be focused on ensuring minimum standards for the benefit of consumers rather than on restricting competition or supporting a particular business model. An independent body should oversee the regulations,” the review stated.

“Taxi regulation should be reviewed taking competition into account. Those jurisdictions that have undertaken or are undertaking reviews should implement the reforms.”

Product standards

“Given that product standards (requirements that goods have certain characteristics) can raise barriers to entry, especially where they are referenced in law (either directly or indirectly) and mandate particular technologies or systems rather than performance outcomes, it is appropriate that they be subject to review. Standards that are not mandated by government should also be reviewed periodically to ensure they do not restrict competition unnecessarily. For example, an Australian Standard that differs unnecessarily from an international standard could limit import competition,” the review said.

Energy and gas

“The Panel acknowledges significant progress in the reform of Australia’s electricity and gas sectors. However, reforms have not been finalised and the benefits are yet to be fully realised. Competition reforms in energy have been a success but have slowed.

“In Victoria and Queensland, the National Energy Retail Law has yet to be applied without major derogations, undermining the benefits of a national law. Continuing regulation of retail energy prices by jurisdictions other than South Australia, Victoria and New South Wales (though it continues to regulate retail gas prices) perpetuates the distortion of price signals and compromises timely investment in energy infrastructure. The Panel notes that the Queensland Parliament recently legislated to deregulate electricity prices in South East Queensland from 1 July 2015.

“The Panel strongly supports moves towards including the Northern Territory and Western Australia into the National Electricity Market, noting that no physical connection is required to do so. The Panel also supports a detailed review of competition in the gas sector, echoing the proposal within the Eastern Australian Domestic Gas Study, and encourages the Australian Government to commit to undertake such a review through the Energy White Paper.”

The government response

Despite acknowledging over 1000 industry, consumer group and individual submissions were received during the review process, the federal government has responded to the report with a call for further consultation. Small business minister Bruce Bilson said the government did however support the “broad direction” of the final report.

“Before any decisions are taken on implementation, our government intends to consult with industry and consumers. I will not rush into making changes before I have considered the implications and a range of implementation options. The reform process must be staged, consultative and collaborative and deliver real improvements to our competition framework for the benefit of Australians,” Mr Bilson said.

“Some of the most important and overdue reform recommendations are for states and territories to consider. The Panel has set a direction for all governments to remove regulatory restrictions to competition unless they are in the public interest. For instance, planning and zoning rules need to work in the longterm interests of consumers and not create unnecessary barriers to productivity and suppliers entering and meeting the needs of consumers.”

Submissions are being taken until 26 May 2015. Information on how to lodge can be found at the Treasury website.