Legal Insights

ACCC set to target anti-competitive conduct by government

By Timothy Atkin

• 18 November 2015 • 4 min read
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Under the Competition and Consumer Act 2010 (CCA), the prohibitions against anti-competitive conduct currently only apply to governments (including authorities, statutory corporations and government-owned corporations) in so far as they 'carry on a business'.

This limited application to government means that at present, governments are generally immune from competition law regarding very significant trading and commercial activities such as procurement of goods and services from the private sector, privatisation of government assets and participation in PPPs.

Paradoxically, the private parties on the other side of such transactions are subject to competition law in the same transaction even though the government is not.

What did the Harper Review recommend?

The recent Harper Competition Policy Review came to the view that government activities such as PPPs, procurement and privatisation ought no longer be immune from competition law. It recommended extending the application of competition law to include any government activity in all trade or commerce, not just where governments carry on a business.

What is the Turnbull Government likely to do?

The new Turnbull Government recently announced that it intends to release the Federal Government’s 'enthusiastic response' to the Harper recommendations before Christmas.

All indications are that the recommendation to extend the reach of competition law to government activity in trade or commerce will be accepted and implemented by the Government.

Among other things, this would potentially have an effect on the way requests for tenders, the tenders themselves and subsequent agreements are designed, assessed and implemented by governments.

What is the ACCC’s view?

In an ominous indication of what the change will mean for all governments, in a recent speech to the Annual Competition Law & Economics Workshop on 23 October 2015, the Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims said in discussing the Harper recommendations that:

'Another important recommendation, that does not get enough attention, is to ensure the CCA’s treatment of commercial activities by governments is consistent with those of private sector players.'

This indicates to us that, should the competition law be extended to cover their conduct in trade and commerce, then governments can expect the ACCC immediately and specifically to target government PPPs, procurement and privatisation practices in its enforcement activities.

The usual model of the ACCC will likely see that, after an initial period of soft enforcement activities focussing on education, the ACCC is then likely to vigorously pursue a high profile example with enforcement proceedings with an associated media campaign.

What legal and practical consequences will this have for government?

Increased time and cost.

The difficulty that governments will face in this context is that the competition law does not, and will not under the Harper proposal, provide any specific exemptions regarding the policy functions of government or other situations where competition law might constrain governments from seeking to achieve the greatest public benefit.

Instead, governments who may otherwise be in breach of competition laws in trade or commerce, as a consequence of policy decisions or in making decisions giving rise to a greater public benefit if not subject to competition laws, will need to seek preauthorisation from the ACCC to be excused from the application of competition laws regarding the conduct proposed.

The upshot of these reforms is that all governments including departments, agencies and statutory corporations will need to seek early legal advice on any potentially significant procurement, privatisation or PPP transaction.

If ACCC authorisation is required, then not only will this increase the cost and complexity of some government transactions, but it will extend the lead time for the issuing of requests for tender by some months while the ACCC authorisation is obtained.

Due to the narrow basis upon which any authorisation will be issued, there will be limited scope and flexibility to deviate from the proposed course of action as a project evolves from a requirements analysis to project execution without seeking further authorisation from the ACCC.

What happens next?

Look out for the Federal Government’s announcement on implementation of Harper recommendations in the coming weeks. If the recommendation to extend competition laws to government is accepted by the Federal Government, then it can be expected to be contained in a suite of amendments to the CCA next year.

By Timothy Atkin

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