National Competition Policy (Australia) - Origins

Origins

In 1992, an independent committee of inquiry, the National Competition Policy Review Committee, was established by Prime Minister Keating to inquire into and advise on appropriate changes to legislation and other measures in relation to the scope of the Trade Practices Act 1974 and the application of the principles of competition policy. The Committee was chaired by Professor Fred Hilmer and also comprised Mr Geoffrey Tapperall and Mr Mark Rayner.

The report was commissioned against a backdrop of major microeconomic reforms led by the Keating Government, but slow progress on areas of the economy sheltered from competition as a result of constitutional limits on the application of the Federal Trade Practices Act or of other actions by Federal or state governments. The report thus had important implications for state-owned enterprises, many of which had begun entering into commercial activities; the professions, which were excluded from the application of Federal law; certain agricultural marketing entities granted monopoly rights; and certain infrastructure entities.

The report was prepared through a consultation process that included public solicitation of submissions, public meetings, and extensive discussions with State governments. The Committee presented its report, commonly referred to as the 'Hilmer Report', in 1993. The principal recommendations were:

– to bring all commercial activity in Australia within the purview of the Trade Practices Act, regardless of legal form or ownership of the enterprise, thus putting to an end anomalies arising from the division of constitutional authority between Federal and State Governments;

– to establish a new regulatory regime to prevent enterprises that controlled an "essential facility" with natural monopoly characteristics from abusing their market power. The new "access regime" was to be part of an expanded Trade Practices Act.

– to establish a set of principles which all Australian Governments should adopt, the most important of which were: (a)legislative or regulatory impediments to competition should be subject to review to ensure the costs associated with reduced competition were exceeded by public benefits; (b) before engaging in commercial activity, state-owned entities should be subject to "competitive neutrality" requirements to address distortions to competition arising from their various policy privileges.

– to reform the organisational arrangements competition policy in Australia, by expanding the role of the Trade Practices Commission (to be renamed Australian Competition and Consumer Commission) establish a Competition Policy Council to advise on issues arising the inter-governmental arrangements.

The report was hailed as a major breakthrough in microeconomic reform, and its recommendations were endorsed in their entirety by Federal and State governments. The recommended changes to the Trade Practice Act were implemented quickly, and the report was also used as the basis of the Competition Principles Agreement reached at the 1995 meeting of the Council of Australian Governments (COAG). The term 'Hilmer reforms' is now used to refer to processes arising from the intergovernmental Competition Principles Agreement and the associated Competition Policy Reform Act 1995 (Cwlth).