Minister announces competition policy review

DR ELIZABETH GIBSON, General Manager reports on the CMPA’s submission to the Federal Governments Competition Policy Review.

The Federal Minister Billson announced the Competition Policy review in March 2014. the overarching objective of this review is to identify competition-enhancing microeconomic reforms to drive ongoing productivity growth and improvements in the living standards of all Australians. Under the terms of reference, the key areas of focus for the review include: identifying regulations and other impediments to competition across the economy; examining the competition provisions
of the Competition and Consumer Act 2010 (CCA) and the special protections for small business in the CCA; considering whether the structure and powers of the competition institutions remain appropriate; and reviewing government involvement in markets. Below is a summary of CMPA’s submission which was developed in conjunction with Peter Day (Peter Day Consulting).

The CMPA has provided numerous submissions to a multitude of reviews of regulatory instruments over its 14 year life – the underlying plea in all submissions has been for more balanced regulation. Without question Australia and Victoria have developed an increasing range of business regulation over these years all of which adds costs in compliance. Compliance costs imposed on businesses impact at various levels on competition. Even if all the regulatory compliance costs are the same across the industry and the industry comprises similarly sized businesses they may not necessarily impact competition within the sector as all businesses may be equally affected.

There are few businesses however that do not have substitute products and any costs even though they are evenly spread may force customers to utilize substitutes to the detriment of the regulated sector. Moreover, regulatory costs add to the costs of entry to the industry and therefore act as a potential barrier to entry. this impedes competition and acts to stifle innovation.

All these negative impacts arising from regulatory costs are relevant in the extractive industry. However, due to the structure of the industry in Victoria where small businesses dominate the number of extractive business regulatory costs impact in another, equally ominous fashion – by fostering anti-competitive behaviour. For small businesses the regulatory costs impose a disproportionately greater impact on their businesses than for larger businesses. That is, the regulation takes no account of the size of the business (and therefore its impact).

To compound this, generally speaking, a large business will impact on the environment and local community to a proportionately larger extent than a small business. Therefore the poorly designed regulation acts in an anti-competitive manner by imposing a disproportionately greater level of costs on small businesses, so the anti-competitive issue is about the poorly-designed (one-size-fits-all) nature of the regulation.

Thus, the cost of regulation on the extractive industry in Victoria acts as an impediment to competition within the industry and for new entrants to the industry. this is directly relevant to the review of Competition Policy and the questions raised in the Issues Paper, primarily section 2, restrictions on land use. The submission will identify the primary regulatory costs that
impact directly on competition in relation to the extractive industry. These costs arise from:

• Excessive native vegetation and cultural heritage controls; and
• Excessive controls contained in the industry-specific regulation of the extractive industry in Victoria including in costs of the approvals process, appeals process, the anti-competitive nature of entry provisions and the unjustified rehabilitation bond system.

The draft paper is expected to be released in September 2014.

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