In April 1995 the Commonwealth, State and Territory governments signed an agreement to implement the National Competition Policy (NCP) reform package, comprising the Conduct Code Agreement; and the Agreement to implement National Competition Policy and Related Reforms. The Office of Local Government has sought the assistance of consultants to prepare these guidelines to assist councils in the review of existing local laws in Victoria by June 1999. On first glance the Guidelines appear daunting, filled with economic terms, which are unfamiliar to most, and which may require a lengthy and potentially costly process to apply to the task of review. This is not so . The Guidelines set out nine logical steps. Questions are posed to help councils in determining the best course of action and to provide some helpful assistance with a method to undertake the task. It is in recognition of the divetsity of approaches of councils to regulations that no simple single formula can be applied . However, there are three key questions which need to be asked by councils: • who is the local law assisting? • is it the best method of regulation? and • can this be independently validated by ratepayers and consumers? The process is systematic and can be simple. The challenge for all is to determine the best wa y of proceeding to remove competitive restrictions and encourage growth and development in Victoria. Robert Maclellan Minister for Planning and Local Government 2 May 1998 INFRASTRUCTURE Competition Policy CP Victorian Local Government Guidelines For Review Of Local Law Restrictions On Competition ©Department of Infrastructure 1998 C opies of these guidelines may be made by councils without the consent of the Department of Infrastructure. All other copying and reproduction in any form requir es the consent of the Department of Infrastructure. 4 BACKGROUND In April 1995 the Commonwealth, state and territory governments signed an agreement to implement the National Competition Policy (N C P) reform package, comprising the Conduct Code Agreement; Competition Principles Agreement (CPA) ; and the Agreement to Implement National Competition Policy and Related Reforms. The consultancy has been supervised by a Steering Committee of: Alison Lyon, Manager, Secretariat Melbourne Ciry Council Ron Exiner, Diector, Executive Services Moreland City Council Danny Hogan, Director, Corporate Services As part of its commitment to implementing the NCr, the Victorian Government is required to review and reform legislation that restricts competition. These reviews and reforms are required to extend to council local laws under clause 7 of the CPA. The CPA places an obligation on each council to identify and, where possible, reform anti-competitive provisions in all existing and prop osed local laws. All new local laws have been required to comply with the legislative review provisions of the CPA from 1 July 1997. Existing local laws that restrict competition must be reviewed for compliance by June 1999. Councils are also required to report annually on progress made in implementing the legislative review provisions of the CPA. The Office of Local Government (OLG), in conjunction with the Department of Premier and Cabinet. is assisting local councils to undertake local law reviews by the preparation of guidelines. The consultants were Deacons Graham & james, lawyers and Tasman Asia Pacific, economic pohcy and management consultants. Key contact persons for further advice are Richard Lewis and Andrew Chalet at Deacons Graham & James and jennifer Orr at Tasman Asia Pacific. Murrindindi Shire Council Paul Myers, Senior Advisor, Economic Development Department ofPremier and Cabinet Mary Hughes, Policy Analyst Officc '!fLlCcal LJII' RelJieU' Summary Report Annual R eportin Requirements g 71 71 73 ~ ~~~ Appendix 1 Local Law R eview Summary Report Appendix 2 Summary 75 if Legisldtiotl 83 Appendix 3 Extracts from Competition PrinciplesAgreemellt betwe the en Commonwealth and tile States 87 Explanatory Boxes Box 1 Box 2 Box 3 Bllx 4 Box 5 Box 6 'Ten Steps Ti> Ref/iew Loco! LJws Definin The Relevant J~larket g Establisltitlg O~jrcti f/es II 15 I IlJ For TIre Local L 16 26 Regulating. TIle N umber ,?f Participants Itl A Market Employmenbt And Regiona! Development C<1Sts atld Ben~fits (;alwlatillg Net Present VtT/lies FM Costs And Benefit s 52 66 Figures and Tables Figllre I Table 1 Table 2 8 AIrtll,ld FM Rev;ewing Llcal LAw s Deciding 11'1/ich Rellit'w Modd Is Appropriate Framework FM Ctlllsidaitlg Alternatives 7(, Anti-Competitive Lleal LJW5 12 34 44 KEY TERMS ACCC Australian Competition and Consumer Commission Externality In some cases, parties do not bear the full costs or accrue the full benefits of their actions . These are known as situations of externality. Strictly speaking, there are both negat ive and positive ex tern alities. "Negative externality" refers to the situation where the actions of one party adversely affects others in the community, but that party doe s not compensate those adversely affected for the costs they impose. For example, a member of the public may light a fire during a period of high fire danger. placing the property of others at risk. Positive externalities occur when the actions of one party provide a benefit to the community and members of the community do not pay receive that benefit. Access regimes Process under Part IliA of the Trade Practices Act that allows th ird partie s to access certain infrastructure services such as pipelines and telecommunication networks to promote competition in upstream and/ or downstream markets. Competition The market interaction between two or more firms producing rival goods and services. to For example, an individual picks tip litter in the street but receives no payment for doing so. Cost benefit analysis A framework for COlli paring costs and benefits of Information asymmetry The situation where the partie s to a tran saction have unequal information. As a consequence, one party can exploit the other. For example. a consumer may not be able to determine whether a good they purchase is safe to consume, In the absence of government regulation, the seller of that good or service may be able to mislead the con sumer that the product is safe when in fact it is not. an activity or regulation to determine whether that activity or regulation confers a net cost or a net benefit to the community. CPA Competition Princ iples Agreement 3 Apnl 1995. between the Commonwealth, states and territories under which each level of government undert ook to apply the principles of NCP. Under clause 7 the stares and territories have agreed to apply the principles of Ncr to local government. Relevant extracts an.' indicated in Appendix 3. Market The set of all sale and purchase transactions for a particular good or service. 9 Market failure Situation where the market. if left to Public good its own A good or service in respect of which use by one person does not generally prevent or limit use by other people. which cannot be depleted by additional consumers and for which it is very difficult , if not impossible, to exclude people from consuming even if they do not wish to pay for it. For example, street lighting or local drainage. devices, will not make the best use of the community's resources. In such cases, the community may be better off if the government interferes in normal market processes. Natural monopoly Situation where a market for a particular good or service is best served by a single firm, rather than two or more firms. Introducing competition in such cases would not make society better off. An example of natural monopoly at local government level might include the local olympic swimming pool in small communities. Self regulation Occurs where businesses within an industry or geographic area reach agreement on product standards or business practices of their own volition to address concerns held by others in the community. The businesses concerned establish rules of conduct and self monitor compliance with those rules. Some may issue their own penalties for non-compliance. NCC National Competition Council Spillovers NCP Also known as externalities. National Competition Policy 10 INTRODUCTION The Victorian government has published two sets of guidelines to assist state government agencies to conduct legislative reviews. One provides guidance on how to review existing legislative restrictions on competition. The other focuses on new legislative proposals. This set of guidelines extends the Victorian government legrslative review guidelines to local laws. The guidelines are designed to assist councils to: clarify the objectives of new local laws, 'B .x l ' he t O':step ~ to rev iew-local Jaws Step 1: Step 2: Ste p Deren rnine whic h, re~cw D1od ~'l5 :!p'p'~~.iii(~ existing local laws and proposed amendments to existing local laws; analyse the effect of local laws on competition; and determine whether restrictions on competition are in the public interest. These guidelines are consistent and compatible with the Victorian government guidelines.They provide councils or their agents with a step by step method to review existing and proposed local laws.These steps are outlined in Box 1 below and are the same for existing local laws and proposed new local laws. Step 5r rcp.. Step 8: Make tccon"irilehdation 3\m~C[ clause I ';]0 (1 i&cr . P: 10: I;tlUm n;:p rung [ quiremenrs: Step Many councils have 'omnibus' T cal laws which o contain a number of requ irements relating to different subj ect matters in o ne local law. Each of these needs to be considered individua lly will need to consider administrative arrangements to achieve an efficient review process, possibly by grouping provisions dealing with similar or related matters. {Q identify the impact on competition. Councils 11 How to use these Guidelines These guidelines lead councils through the 10 steps necessary to conduct and finalise a review of local laws to satisfy councils'Tocal law review obligations under the N CP.The review process is summarised in the flow chart below. Each step in the process is explained in detail in separately tabbed sections of this document. Reviewers should begin at Step 1 and proceed to subsequent steps sequentially, ie only after completing the requirements of the preceding step. Four case study local law reviews provide examples of the type and level of analysis that is expe cted under each stl.'p. The four case study reviews relate to itinerant traders, outdoor eating, advertising signs on roads. and clothing recycling bins. The worked case studies are presented at the end of each section. It is recommended that reviewers utilise the proforma provided in Appendix 1 to fulfil their repor ting obligations. Figure 1 M ethod For Reviewing Local Laws STEP 1: CLARIFY OBJECTIVE STEP 2 : DOES LOCAL LAW RESTRICT CO M PETITIO N? DETERMINE TYPE OF REVIEW AND UNDERTAKE REVIEW NO FURTHER ASSESSMENT REQUIRED STEP 3: STEP 4 : CONSIDER ALTERNATIVES TO CURRENT RESTRICTION STEP 5: STEP 6: STEP 7 : A SSESS COSTS ASSESS BENEFITS DETERMINE WHE THER COSTS OF RESTRICTIONS OUTWEIGH BENEFITS • STEP 8 : RECOMMEND ADOPTION, WITH OR WITHOUT AMENDMENT, OR REPEAL FULFILL REPORTING REQUIREMENTS EVALUATE ALTERNATIVES : DO COSTS OF LESS RESTRICTIVE ALTERNATIVES OUTWEIGH BENEFITS? STEP 9: STEP 10: FOLLOW PROCEDURES FOR MAKING A LOCAL LAW AND IMPLEMENT 12 The NCr requires governments to adopt economic frameworks to analyse existing and proposed legislation laws and regulations. Inevitably, reviewers will be required to understand some fundamental economic concepts in o rde r to In short, local laws should not restrict competition unless there are very clear benefits from doing so and there is no alternative option to achieve the objective. If a council is not certain that these conditions apply, the onus is on councils to scrutinise the local law using the method proposed in these guidelines. Sometimes there is discretion built into local laws. Many councils have guidelines or policies for the exercise of discretion under a local law. In such cases, reviews should include the policy or guidelines in order to fully appreciate the effect of the local laws on competition. Hif/}' review local laws effectively, Th at m eans reviewers may be confronted with concepts that are unfamiliar. As far as possible, economic concepts arc explained in plain language. A list of key economic terms is provided at the front of these guidelines. In addition. examples arc used to assist noneconomists to relate economic concepts to the realm of a council. is competition important? Key principles underlying these Guidelines Before embarking on any review, it is useful for reviewers (ie review panel members and council officers) to familiarise themselves with the key The NCP does not promme competition for its own sake but because competition is a powerful mechanism for generating public benefits. Ncr recognises that regulations can often have unintended consequences. For example. they can create unwarranted barriers to entry for business, stifle innovation and /or reduce incentives for businesses consumers. In many situations it is possible [0 [0 principles underlying these guidelines. It is important that reviewers do not become lost in the technical detail of a review and lose sight of these principles. The key principles underlying these guidelines are outlined below. HI/tlt is the primtlry objective improve etficrency This can lead to higher prices and less choice for ,1loca! lau: reviews? meet community objectives without restricting When reviewing local laws. reviewers arc scrutinising new or existing local laws to ensure that anti-competitive laws arc only introduced/continued where they satisfy a twopart competition test . competition and, therefore, avoid these unintended effects. For this reason, the framework for undertaking legislative reviews is one in which open and unrestricted competition in markets generally is preferred as the most eflkient means of allocating the cornmunirys scarce resources. The competition test provides that: legislation (including local laws) should not restrict competition unless it can be demonstrated that the benefits of the restriction to the community clearly outweigh the costs; and the objectives of the legislation, (including local laws), can only be achieved by restricting competition. As a general rule. restrictions on competition should generally be confined to particular situations where it fail [0 IS recognised that markets can serve the public interest. These situations are referred to in economic literature as situations or "market failure". The concept of market failure is explained in detail under Step I. At this point though, it is important to note that even the presence of "market failure" is not sufficient alone to justify intervention which restricts competition. This is because there may not be net public benefits from such restriction. That is, the disadvantages of the restriction may be greater than the advantages. For this reason, there is a requirement under the review process to consider whether market failures may be addressed by means other than restricting competition. Alternative courses of action include less restrictive regulation. direct intervention and market-based solutions. Where OLG officers are concerned that councils are not using reviews to eliminate unnecessarily restrictive or excessively restrictive local laws, the matter will be refered to the Minister for Planning and Local Government. The governmen t has introduced legislation which will enable local laws that are considered not to comply with NCP objectives. The Local Government (Amendment) Bill 1998 is expected to be debated in the spring session of Parliament in 1998. Transparency is also promoted by a requirement Objeetil'ity and transparency The capacity of reviewers to undertake a full and proper assessment will be affected by the degree of independence of those carrying out the review from those parties affected by the outcome of the review. At all times, reviewers for councils to report annually on the outcomes of reviews undertaken over the previous year and provide details of furure reviews. All reviews should be rigorous. This need not mean that all reviews should make use of sophisticated techniques or have large budgets. It means that reviews should follow a consistent and logical approach. Where there is a quantitative assessment of costs and benefits, a standard cost-benefit analysis method should be adhered to. Assumptions should be dearly set out and open to public scrutiny. Conclusions should be fully based on analysis and evidence presented during the review. Local law review summary reports should dearly set out the logic underlying all recommendations. Where feasible, decisions should be based on empirical analysis. The level of consultation also has a bearing on the rigour of a review. The nature and extent of consultation required will depend on the issues dealt with by a review, the degree of divergence of community attitudes and the controversy of issues raised by the review. Generally, it is important that reviewers identify a broad range of interested parties, not just those with a vested interest in the review. This can be achieved through the use of review panels which are representative of the broader community and /or consultation with a wide range of interest groups. must be impartial. Reviews must also be seen to be impartial, otherwise interested parties may be discouraged from presenting their case to reviewers. Thus, it is important that review processes are fully transparent and seen to be fully transparent. To this end the guidelines require reviewers to submit summary reports to OLG at the completion of every local law review, even minor reviews. These reports must detail: the objective of the local law; the eflect of the restriction on competition and the economy generally; the extent of community consultation; alternative, less restrictive, means for achieving the objective; the nature and, where appropriate. quantification of all costs and benefits associated with the restriction; and the reasons underlying any decision to introduce or continue a restriction . 14 5TEP 1 CLARIFY THE OBJECTIVE OF THE LOCAL LAW Reviewers mu st formulate a concise and sim ple statement of the obj ect ive or purpose of the local law.To do th is. reviewers sho uld first det ermine the risk that the community would face if the local law was no t in place. ideally using a market failure framework. Step 1.1 assists reviewers to do thi s. Once risk is established, it is useful at thi s point for reviewers to make themselves aware of any existing Commonwealth or state legislation that has the same or similar objective. This is the pur pose of Step 1.2. ·onslder mg-l he:,fo.ur diIl1Cn.~IO~ or it DQ . 2 cfiJiin g tIl tel vant, market Step 1.1 Determining the risk that the community would face if the local law was not in place Th e reviewer sho uld provide a concise and simple description of what would happen in the absence of the local law, that is if the market were left to its own device s. In the case of a new local law, or an amending loc al law, this requires a description of the current market situation. Where the review is of an existing local law, this will require an understanding of the m arket before the restrict ion was introduced (see Box 2). lTu'rker: • I (I :m~.:ma To be consistent with the objectives under the NCr, regulation should be considered as a last resort in the event that the market cannot achieve an efficient allocation of the community's resources if left to its own devices. This section provides a framework for reviewers to categorise situations where markets, if left to their own devices, can fail to deliver outcomes that are in the public interest. Reviewers should specify the objective of the relevant local law in terms of addressing one of the four situations outlined in Box 3. This will help to ensure that local laws target situations where markets can fail to achieve an efficient allocation of resources. In some cases, local laws may seek to address more than one market failure situation. 16 Step 1.2 Ensure objectives are consistent with National Competition Policy Inisome ·~tl1 ;lti If reviewers cannot link the objective of an existing or proposed local law to at least one of the four situations described in Box 2, then the objective should receive greater scru tiny. As a guide, the following local law obje ctives are generally inconsistent with NCP pr inciples and obje ctives and are likely to fail the competition test: to protect the income of local firms or individuals in the community (for example a local law that restricts or prohibits itinerant traders to protect established local firms); to prevent the reallocation of resourc es in the economy or to prevent the me of resources (for example. a prohibition on the use of council land for circuses using exotic animals preventing the use of council reserves for this activity); to prevent any loss in employment (for example, laws dealing with itinerant traders and door-to-door sellers); to encourage the location of new firms in the region even though it may be more efficient tor them to locate elsewhere (for example, by means of financial con cessions where the people who benefit do not bear the cost); and /or to prevent firms from relocating elsewhere even though it may be more dJicicnt to do so (for example, through provision of concessions or subsidies). 17 Step 1.3 Identifying any existing legislation that has the same or simi la r objective Where the Commonwealth or state governments have already introduced legislation that could apply to the area covered by a proposed or existing local law, care should be taken to avoid unnecessary duplication of legislation. Indeed, there are restrictions under the Local Government Act 1989, and in other legislation, on matters that local laws may cover. Reviewers should make themselves aware of any existing national, state or local laws that might address any of these market failures. A selection of potentially relevant state and national legislation is provided in Appendix 2. Reviewers should state in the appropriate place in the local law review summary report (Appendix 1) whether they have undertaken this step and whether they were able to identify relevant existing legislation . Further details on reporting requirements are provided in Step 9. 18 LOCAL LAW CASE STUDIES Four case study examples of local laws have been developed as part of the guidelines to assist users with the operation of the gUidelines. Each case study follows the layout of the guidelines with the relevant step included at the end of each section. The four case studies deal with different types of local laws and highlight different issues in the assessment undertaken in each step. Set out below are the details of each local law used as the basis of the case studies and the assessment under Step 1. LOCAL LAW CASE STUDY 1: ITINERANT TRADERS Background Information The local law provides: A person must not uithout a permit erect orplace on any road a vel1icle, caral'an, tmiler; table, stall orother similar structure for thepurpose or '?1feringfor sale anygoods orsetvices. ofseTling A person must not without a permit sell or<1ftr for sale allY goods Scenario: Assume that the local law is being used to restrict itinerant traders to a small number of approved locations or to prevent the operation of itinerant traders in the municipality completely. Note that the local law does not make explicit the basis on which discretion to grant or refuse to grant a permit will be exercised. It is assumed that the council has a policy or guideline which is used by local law officers in deciding permit applications. In practice, a council may use this local law to regulate itinerant traders in one of several ways. For example, a council may refuse to issue permits to any itinerant traders. Alternatively, a council may tender a restricted number ofsites and not grant any permits outside those sites. Or a council may grant permits subject to payment of a pro rata fee (based on the area of land occupied by the trader) equivalent to the municipal rates in respect of premises used for the same purpose, as a form of"rental" of public land. Otl any road orpublic place. 19 Step 1: What is the objective of the local law? 1.1 What is the risk that the community faces in the absence of the local law? The risk to the community may include: Possible externality or spillover effects: Consumer protection risks if consumers are not able to find trader again to exchange faulty goods. Pedestrian and traffic safety if itinerant traders operate in dangerous locations Health risks if traders do not comply with appropriate health requirements • Amenity impacts if traders operate adjacent to residential areas. It ouy be tempting to list loss ofincome to local traders here. However, this objective does not conform with the concept of market failure as explained in Step 1.1 of the guidelines. If the only or main objective is to protect the income oflocal traders, the local law would be in direct conflict with NCP and should be repealed. LOCAL LAW CASE STUDY 2: OUTDOOR EATING The law provides: A person must not establish an outdoor eating facility on any footpath, median strip, roundabout or garden or tree reserve without a permit. The council may grant permits for the provision of such facilities on a footpath provided that: aJ mchfacility is conducted in conjunction tuith and as an extension offood premises located immediately abutting such jadliey and the applicant for thepermit is a person conducting such food premises; b) such facility shall not be extended on to the footpath beyond two lines running at 9(Po angle .from either side ofthe applicattt's food premises; c) such food premises are registered in accordance with the FoodAct 1984,' d) where premises abut more than onestreet orlane, theftdlity shall not be located in the area footpaths which would be obscuredfrom a pedestrian approacllittg.from that other street or lane; e) tire ftdlity must be kept in a clean and tidy ofthe 1.2 Does other legislation have the same objective? Health regulations require the registration of vehicles used to transport food for human consumption. This is usually done by the council in which the vehicle is domiciled. Road Traffic regulations provide some control over vehicle parking locations. Consumer protection provisions of the Trade Practices Act makes sellers of a good or service accountable for faulty goods or poor service. condition. 'Table and chairs must be cleaned of all food scraps and spillage qfter each customer has left and at the end of each day; .f) the surrounding area must be thorougllly cleaned at the end of each day and al1 food scraps and spilfages must be removed from thefootpath or road. A per songranted a permit under this clause commits art ojJimce if the outdoor eating facilities are placed or kept contrary to sub-clause 2 orany conditions of tire permit. 20 In determining whether togr.Jnt a permit under this dause tile cOlillcilwill have regard to allY guidelines determined by council from time to time. LOCAL LAW CASE STUDY 3: CLOTHING RECYCLING BINS The law provides: Note that some councils view the local law process as a mechanism to gain income from the use of council Iand. This is not appropriate. If councils seek to raise revenue from the use of footpaths or other public land this should be done by means of a licence to occupy or other agreement. • A permit from the council is required for the placing of clothing recycling bins on any land in the municipal district. A permit is not required under this local law for the placement of a clothing recycling bin in a place to which members of the public do not and might not reasonably be expected to have access. • A person who places a clothing recycling bin on land in the municipal district contrary to this local law is guilty of an offence. In addition to any other conditions, a permit for the placing ofrecycling clothing bins may: include a requirement that a permit holder hold a current contract of public liability insurance evidence of which is available unhygienic conditions resulting from spilt food etc if the premises were not properly maintained specify the type, design, construction, colour • .inrerference with use of carparking adjacent to footpaths if tables and chairs abut the kerbline specify that the bins bear the name and phone number of the permit holder and of any organisation for which funds are being collected; specify that the bins be maintained in a good condition and that they be cleared on a regular basis; require that the area surrounding any bin be kept in a clean condition; limit the number of bins which may be placed pursuant to the permit; and or finish of any bin used foc the collection of clothing; upon request by an authorised officer of the council; Step 1: What is the objective of the local law? 1.1 What is the risk that the community faces in the absence of the local law? Possible externality spillover effects: obstruction to footpaths with possible personal injury 1.2 Does other legislation have the same objective? Local law may in part duplicate State health legislation governing cleanliness and hygiene. Conflict between the local law and the Summary Offences Act could be removed if the exercise of discretion under the local law provided that there be sufficient space for persons to move along the footpath . 21 restrict the location or locations in which bins may be placed. Step 1: What is the objective of the local law? • A person must not interfere with, deposit rubbish in or remove the contents from a clothing recycling bin. (This clause does not apply to the person on whose behalf the bin was placed or an employee or agent of the person who placed the bin or any authorised officer.) Possible information asymmetry. council has decided to administer this law to exclude non-charitable organisations because it was considered that people depositing clothing to bins had an expectation that clothing would go to the needy (without profit) and not be used for some other purpose. Possible externality or spillover effects: the placement of clothing bins in locations which are a hazard to vehicles or pedestrians bins being placed in locations which could cause a nuisance to occupiers of nearby premises bins may become unsightly and a health hazard. 1.1 What is the risk that the community faces in the absence of the local law? In administering this local law, assume that council has decided to restrict the granting of permits to bona fide charitable organisations that recycle clothing. This excludes noncharitable businesses who would provide the service for profit by selling recycled clothing or by converting deposited clothing to rags which are subsequently sold. 1.2 Does other legislation have the same objective? None identified. Insofar as this local Jaw regulates the location of clothing bins on private land. for example, at service stations or similar places having public access but under the responsibility of a private owner, there is a duplication ...vith other law which places obligations on the owner to properly maintain the premises. This might include, in different situations, town planning controls under the relevant planning scheme and public nuisance and health requirements under the Health Act. 22 LOCAL LAW CASE STUDY 4: ROADSIDE ADVERTISING SIG N5 Step 1: What is the objective of the local law? The local law provides: No person may without a permit erect or place an advertising sign on any road or reservation. or cause or authorise another person to do so. 1.1 What is the risk that the community faces in the absence of the local law? Externality: inappropriate location of advertising signs The policy or conditions for the grant of a permit under this local law indicate that the council must take into account the following: the need for footpath advertising having regard to other advertising signs and any determination of council relative to signs; the design, construction, width and height of the sign; the placement of any sign so as not to obstruct pedestrians or vehicles; whether the construction will create a hazard to pedestrians; and provision of public liability insurance; and whether the appropriate fee has been paid. Note chat the reference to "any determination of council relative to signs" indicates material extraneous to the local law which would need to be reviewed as part of the assessment of this local law. leading to pedestrian injury or traffic hazards visual clutter inappropriate signage (eg defamatory or obscene material) 1.2 Does other legislation have the same objective? There are national laws governing defamatory or obscene material which address this issue. There are national laws on public liability that may provide redress for injury, however, it is recognised that the prevention of accidents is an appropriate objective. Query whether advertising controls under the planning scheme might apply. The planning scheme would need to be checked to ensure that no controls applied on roads or to the size of signs regulated under the local law. 23 24 LOCAL LAW CASE STUDY 1 ITINERANT Background Information The local law provides: TRADERS • A person must not without a permit erect or place 0/1 allY road a vehicle, cara van, trailer, table , stall or other similar structurefor the purpose of selliHX or offering f or sale any goods or servic es. • A person must 1I0t without a permit sell or rjJerfo r sale any goods on any road or public place. Scenario : • Assume that t h e loca l law is be ing used to restrict iti ne ran t trad ers to a sma ll n umber of approved locations or to preven t the operation of itinera n t trad ers in th e municipality completely. • Note that the local law does not make explicit the basis on which discretion to grant or refuse to grant a permit will be exercised. It is assumed that the council has a policy or guideline which is used by local law officers in deciding permit applicati ons. In practice, a co un cil may use this lo cal law to regu late itineran t traders in one of several ways . For example, a coun cil may refuse to issue per m its to any itinerant traders. Alte rna tively, a c ou ncil may tender a restr icted number of sites and no t gra nt any permits outside those sites. Or a cou ncil m ay grant permits subject to paymen t of a pro rata fec (based on the area of lan d occupied by th e trader) equivale n t to th e m unicipal rates in respect of premises used fo r the same purpose, as a for m of"rt'n tal" of p ub lic lan d. LOCAL LAW CASE STUDY 2 OUTDOOR The law provides: EATING A person must not establisli an outdooreating.facility on any footpath, median strip, roundabout or garden or tree reserve without a permit. The council maygram permitsfor tile provision ofsuchfacilities on a[ootpath provided that: f a)suchfacility is conducted in conjunction with and as an extension ofood premises located immediately abutting suckfacility and the applicant for the permit is a persOll conducting such food premises; b)suchfacility shall tlot be extended on to thefo otpath beyond two lines running at 9rY' mlglefrom either side of the applican t's [cod premises; c) suchfood premises are rexistered in acco rdance with the Food A ct 1984; d)where premises abw more than one street or lane, thefacility shall not be located in the area of tile footpaths which would be obscu redfrom a pedestrian appro achingfrom that other street or lane; e) the facility must be kept in a clean and rid)' co ndition, Table and chairs must be cleaned of all food scraps and spillaxe after each customer has l~ft and at the end oj each day; j) the surrounding area must be thoroughly cleaned at the end oj each day and allfood scraps and spillages must be removed from tilef ootpath or road. A person granted a permit under this clause commits an offence if the outdooreatingfa cilities are placed or kept contrary to sub-clause 2 or any conditions of the permit. In determining whether t() gra nt a permit under this clause the coundl will have regard to any guidelines determine d by co t/II cilfrom time to time. Note that some co u ncils view the lo cal law p ro cess as a m echanism to gain inco me from the use of council land. Th is is not appropriate. If co un cils see k to raise revenue from the use of footpa ths or ot her publi c land this sho uld be done by m eans of a licence to occupy or other agreement. LOCAL LAW CASE STUDY 3 CLOTHING The law provides: RECYCLING BINS A permitfrom the council is requiredfor the placillg ~f clothing recyclitlg bins on any land in the municipal district. • A permit is not required under this local lawfor the placement lif a clothing recydlllg bill ill a place to which members of the public do not and might not reasona bly be expected 10 liavc (/((CSS, o A person who places a clothitlg recycling bin 011 land in the municipal district contrary to this local law isgllilty ofan ~ffence , o In addition to auy other conditions, a permit for the placing of recycling clothing bins may: o include a requirement that a permit holderhold a curretU contract o]public liability insurance evidence oflI·hich is available upon request by an authorised officer tifthe council; • spccify tlte type, design , construction, colour orfinish of any bin usedfor the collection (ifclothing; • specify that the bins bear the name and phone number tifthe permit holderand of any organisation f or whichfunds are bein1? collected; . • specify that the bins be maintained in a good condition and that they be cleared on a rcglilar bam; o require that the area surroundino /lil Y bill be k{'pt ill a clean condition; • limit the number !ifbins ivhicli may l)e placed pursuant to the permit; and • restrict the location C'I' locations ill which bins may be placed , o A person must not intctfcre with, deposi t rubbish in tJr remove the contents from II clothing recycling bin. (This clause dol'S not apply to the pcrson on whose behalf the bill was placed or all employee 01' agent o the perS(111 who placed the bin 0 1' allY authorised rdficer.) f In administerin g th is local law, assum e that co unc il has d ecided to restrict the g ranting of permi ts to bona fide ch aritabl e organ isatio ns that recycl e clothing. This exclu des nonch aritable busin esses w ho would provid e th e ser vice for profit by sellin g re cycl ed clothing or by converting deposited clothing to rags w hic h are su bsequen tly sold. LOCAL LAW CASE STUDY 4 ROADSIDE The local law provides: o ADVERTISING SIGNS No person may without a permit erect or place all advertising sign 0/1 any road or reservation, or cause or authorise anotherperson to do so. The polic y or co nditions for th e gra nt of a p ermit und er this local law indicate that the council must tak e into account th e followin g: o the needfor foo tpath advertisino havilJg regard to other advertising signs and any determination of {(l U IlClI relative to signs; • the design, construction, width and !It'igh t o the sigll; f o the placement oj any »s» so as not to obstruct pedestrians or vehicles; • whether till' cons truction ivil! create a haz -ard to pedes trians; and • provision o public liability insurance; and f o ilJh ether the appropriatefee lias been paid. Note that the re feren ce to "any determination of cou ncil relative to signs" indicates material extraneous to th e local law which wo uld need to be reviewed as part o f the assessment of this local law. 51 E P 2 IDENTIFY WHETHER RESTRICTS THE LOCAL LAW COMPETITION Not all local laws restrict competition. Those that do include laws relating to traffic regulation and parking, retail trad ing hours, itinerant traders, trading outside licensed premises (use of footpaths) and local laws made subsequent to state government deregulation that are not consistent with deregulation. Reviewers can determine whether the local law restricts competition by considering the following questions: Does/will the local law deter new entrants into a market? Does/will the local law prevent or discourage exit from a market? Does/will the local law discriminate between businesses or between consumers? Does/will the local law constrain the behaviour of consumers? Does /will the local law constrain the behaviour of businesses? If any of these is answered in the affirruative, then the proposed or existing law is deemed to restrict competition and this fact should be noted in the Local law review summary report. If reviewers find that there are no restrictions, then the review concludes at this point and reviewers should go straight to Step 8 to finalise the review. A local law is said to directly restrict competition where it provides for: only one person to supply the good or service (ie statutory monopoly); only one person to purchase a good or service (ie a monopsony); a mandatory reduction in the number of participants in the market (see Box 4 on the next page); or limits on the number of persons authorised to engage in a business, activity or occupation. Step 2.1 Determining whether a local law will deter new entrants into a market Local laws can deter new entrants into a market by raising barriers to entry, increasing the costs of entry, or making it more difficult for firms to secure a viable market .To test whether a local law restricts entry, reviewers should ask: Docs/will the local law restrict competition by requiring that an activity be licensed or by imposing standards? Does /will the local law limit who may own a business? Does/will the local law limit or decrease the Situations where the local law directly restricts competition are of particular concern. number of firms that may participate in the market? Does/will the local law impose significant compliance costs on businesses or individuals? Example: An outdoor eating local law imposes standards for food preparation and consumption that exceed the requirements under state health laws, Compliance with these additional standards is costly. This may deter businesses from offering outdoor eating services. 25 Step 2.2 egw.lrlng the number ' 0 Determining whether a local law will prevent or discourage exit out of a market Restrictions that discourage exit can discourage entry into a market , and thereby limit competition. To test whether a local law restricts exit , reviewers should consider: Does/will the local law impo se a financial penalty on businesses or individuals simply because they are exiting the market? Doe s/will the local law affect the manner in whi ch a business or individual may exit the market? Does /will the local law restrict re-entry of a business or individual upon exit from the market ? Example: A local law requires a business to make an upfront payment for a good or service provided by Council. A business seeks to exit the market part-way through the year. If council will not refund the business (on a pro-rata basis) an amount equivalent to good s or services not received, this may deter or delay a business from exiting the market. p artici pan in_n llulr e t 26 Step 2.3 Example: A local law discriminates between Determining whether a local law will discriminate between businesses or between consumers Sometimes a local law can restrict competition by discriminating against some businesses or some consumers on the basis of, for example, their size, location. production method or product. To test whether a local law is discriminatory, reviewers should ask: Does/will the local law provide advantages (eg market power) to some businesses at the expense of others? Docs/will the local law affect the size of firm s in the market? For example. some local laws may favour larger firm s over smaller firms, or vice versa, to influence the degree of market concentration. Does/will the lo cal law benefit one group of consumers to the detriment of others? Does/will the local law restrict the free flow of goods or services from other parts of Australia? Does/will the local law discriminate between bu sinesses or consumers on the basis of location? Docs/will the local law create an advan tage or disadvantage to public sector businesses over their private secto r competitors or potential competitors (ie competitive neutrality) ? Does/will the local law offer commercial incentives to different groups in the municipality or different parts of the municipality in relation to the sale or consumption of alcohol in public places, or in the use of parks and reserves for various social or sporting events, thereby providing advantages to some parties and disadvantages to others. Ste p 2.4 Determining wheth er a local law wi ll constrain t he behaviour of consumers Local laws that con strain the behaviour of con sumers can limit the level of competition in a market. To test whether a local law will have this effect, reviewers should consider: Does/will the lo cal law restrict consumer choice of supplier or products? Does/will the local law restrict consumer access to sup pliers or produces? Does/will the local law req uire consumers to purchase a good or servi ce from a third party as a condition of supply of the good or servi ce (ie third line forcing)? Examples: A local law which requires households to purchase a "wheelie bin" from a particular manufacturer. A local law which limits the number of itinerant traders or mobile vendors. some businesses but not others? Docs/will the local law impose admmistrative costs in a discriminatory manner? Does/will the local law grant some firms access to resources or infrastructure but not others? 27 Step 2.5 Determining whether a local law will constrain the behaviour of businesses Local laws can also restrict competition by constraining the behaviour of firms. To test whether a local law does this, reviewers should ask: Does /will the local law control prices or the level of production? Does/will the local law constrain the firm's choice in Its hours of operation? Does /will the local law restrict the price of inputs used in production or the types or share of inputs used in production? Does /will the local law restrict quality, level or location of goods and services? Does /will the local law limit the ability of firms to be innovative, ie adopt new technologies and products or differentiate between existing products? Does/will the local law restrict advertising and promotional activities? Does /will the local law restrict the ability of an employer to employ workers of its own choosing? Does/will the local law require businesses to purchase a good or service from a third pany as a condition of supply of goods or services (ie third line forcing)? Examples: A local law restricts the use of advertising signs to premises which directly front the road on which the sign is to be located, preventing use of signs by nearby premises in arcades or upper levels of buildings. A local law that imposes different noise limits and permitted hours of activity for building work s undertaken by commercial operators relative to hou seholds. A local law that prescribes how a business offering outdoor eating facilities can configure tables and chairs on a footpath. 28 CASE STUDY 1: 2.4 Constrain behaviour of consumers ITINERANT TRADERS The law restricts consumer choice. Potential consumers are forced to seek an alternative source of supply. To the extent that the law may not allow certain types of traders or the operation of traders within particular areas or otherwise constrain traders this will restrict consumer behaviour. How does the local law restrict com petition? 2.1 Market entrants The law does explicitly regulate market entry. It potentially prohibits or restricts any entry to the market supplied by itinerant traders. Council guidelines (which it is noted are not part oflocallaw) may impose further restrictions or requirements which may create significant barriers to market entry. 2.2 Exit from market As itinerant traders often operate outside normal retail hours this may represent a significant loss of choice. 2.5 Constrain behaviour of businesses The law itself does not appear to constrain the behaviour of businesses. However, council guidelines may contain material which does and this should be noted. For example, if the law restricts hours of operation, types of food or location of operation, then the law will constrain the behaviour of the business. The law may prevent entry to the itinerant trader market. Even if, in practice, the law is not enforced, it can add to uncertainty There is no constraint on market exit. 2.3 Discrimination between businesses or consumers The law discriminates between itinerant traders and other food vendors. It also discriminates against consumers who are not able to easily access food vendors operating from permanent facilities. and therefore the business risk faced by potential itinerant traders. It also may constrain the choices of existing traders with permanent facilities in the local area who would like to offer a mobile service. 29 CASE STUDY 2: (a) such facility is conducted in conjunction with and as an extension of food premises located immediately abutting such facility and the applicant for the permit is a person conducting such food premises. Clause (a) may be interpreted to discriminate against stand alone kiosk operators. Clause (a) requires that the applicant for the permit must be the person(s) conducting the food premises. It is not clear why this level of prescriptiveness is needed. OUTDOOR EATING How does the local law restrict competition? 2.1 Market entrants To the extent that council denies a permit to any applicant, the law deters market entry. As long as no business that meets the requirements is refused a permit however, it is unlikely that the local law will deter entry. The requirements for siting and cleanliness are consistent with public safety and general health regulation. It is noted that there may be guidelines determined by council which would need to be reviewed in conjunction with the local law; and any additional requirements or restrictions taken into account. 2.4 Constrain behaviour of consumers To the extent that the law creates a framework for the use of council footpaths for outdoor eating, it can be viewed as enhancing consumer choice by facilitating the use of outdoor eating areas. However, if. in practice, the number ofpermits granted under this local law was limited, then this may constrain the behaviour of consumers by restricting the availability of outdoor eating establishments. 2.2 Exit from market It does not appear that the local law imposes constraints on market exit. 2.3 Discrimination between businesses or consumers Provided any business that met the requirements was granted a permit (ie there are no limits on the number of permits that may be granted), the local law does not appear to discriminate between businesses or consumers. Clause (a) of the local law provides chat: The council may grant permits for the provision of such facilities on a footpath provided that: 2.5 Constrain behaviour of businesses The law does constrain the behaviour of businesses seeking to utilise footpaths for tables and chairs, however, the constraints do not appear to be significant. They are consistent with, and no more onerous than general state health regulatio ns. 2.6 Direct restriction on competition Clause 2(a) restricts the lise of these facilities to persons conducting food premises which abut the footpath area. This may prevent the operation of"stand alone" kiosk type food facilities. 30 CASE STUDY 3: RECYCLING BINS 2.3 Discrimination between businesses or consumers CLOTHING How does the local law restrict competition? 2.1 Market entrants The application of the law directly discriminates between charitable and noncharitable businesses who would or could provide the service. Aspects of the local law restricting placement of bins may affect accessibility and hence discriminate between depositors or potential depositors on the basis oflocation. 2.4 Constrain behaviour of consumers The law directly restricts market entry to charitable organisations only. The requirement for a contract of public liability insurance is a significant requirement and may deter new entrants even if they qualified as bona fide charitable organisations. Other aspects of the local law require the provision of information and impose operational obligations which do not impose a significant entry requirement. Note that the requirement to specify the type, design and other details of any bin used may provide council with an opportunity to discriminate between types of bins and require the use of particular types. 2.2 Exit from market If. in practice, the exercise of discretion meant that the number or location of bins across the municipality was restricted. the implied reduction in accessibility may influence a person's decision to deposit clothing or dispose ofit in another way (eg with general household refuse). 2.5 Constrain behaviour of businesses The law constrains the behaviour of businesses in two ways. First. and most significantly. as administered it prevents non-charitable businesses from participating in the market. Second. it may reduce the freedom of businesses who are participating in the market to locate bins where they wish. and to design and construct bins according to their preference. There is no constraint on market exit. 31 CASE ROADS STUDY 4: SIGNS ON The signage law might discriminate between potential sign suppliers if compliance required use of particular technology. ADVERTISING 2.1 Market entrants It is unlikely that local law would discriminate between consumers, except perhaps on the basis of language, 2.4 Constrain behaviour of consumers restricts competition by imposing standards for approval compliance costs associated with design, construction and size requirements are relatively minor given that the sign would have to be designed in any event compliance also requires public liability insurance when the business may not otherwise have purchased such cover permit fee is an extra cost. but is likely to be relatively minor and therefore unlikely to constitute a barrier to entry 2.2 Exit from market To the extent that it restricts the flow of information to consumers, this law may restrict consumer knowledge and, hence, choice of goods or services. 2.5 Constrain behaviour of businesses The local law constrains the behaviour of businesses to the extent that they do not have complete freedom to make advertising strategy choices. 2.6 Direct restriction on competition Local law does not affect free exit of a business from the market. The only deterrent to cessation of use of an advertising sign is non-refundability of permit fee. This is unlikely to be significant. 2.3 Discrimination between businesses or consumers Where the local law is used to ban signage on footpaths absolutely, even if only in some locations, it directly restricts the ability of businesses to compete with other businesses. In most cases, the law is administered in a way such that signage is not prohibited absolutely. All businesses are eligible to apply for signs and are granted a permit provided they meet the compliance requirements. The local law may discriminate between businesses on the basis oflocation or premises. For example, it may discriminate on the basis oflocation if it applies to businesses located in one area (eg main street) but not others. It may discriminate on the basis of premises if it allows signs for shops fronting a main road but does not allow signs for shops which do not abut the road frontage (eg upstairs or in an arcade). 32 STEP 3 DETERMINE REVIEW PROCESS The next step is to undertake a review which allows interested parties to have input and allows co u ncil co gain the benefit of independent Once reviewers have selected the appropriate review model, there are a number of other decisions that must be made concerning the nature of the review. Reviewers must con sider: the priority of the local law review; the resource requirements of the review; consultation requ irements; the degree of independence required for the advic e on the costs and ben efits of the loc al law. Many local laws contain a large number of separate controls which mu st be reviewed. Councils should consider carefully wh ich parts oflocallaws can be reviewed tog ether to achieve an efficient review proc ess. Step 3.1 Review Model At this point , reviewers can use the information from the first two stages co determine wh ich of the two review models - the public review model or the in-house reform model - best suits the local law under review. The public review model is more onerous and administratively more costly than the in- house review model. It is appropriate where council consider s there is a ne ed for extensive community consultation using more formalised proc esses.The in-house review model still requires commulllty con sultation and som e formalised processes. However, it is far less resource-intensive and adminis tratively costly than the public review model. The table below (Table 1) is intended to help councils to ident ify the type o f review required in different circumstances. review ; whether costs and benefits should be qu antified; and the timeframe for the review. The following sections assist reviewers to make decisions on each of these matters. Step 3.2 Assigning priority to a review Reviewers should determine whether the review of a local law should be given high , medium or low priori ty. Local laws iden tified as high or medium priority sho uld be reviewed before those identified as low priority. The level of priority that is appropriate will depend upon the likely significance of the benefit s to the eco no my from reformi ng ant icompetitive restriction s. To determine priority, reviewers should have regard to: the extent to which the local law affects competition and the economy gen erally; and the potential benefits to the community in reforming the local law. Reviewers need only make a judgeme nt abo ut potential benefits . It is not necessary to quantify them at this stage. 33 TABLE 1 DECIDING WHICH REVIEW MODEL IS APPROPRIATE When to use Consultation and administrative pr-ocesses Appoint review panel. Prepare an issues paper which is available to all interested parties. Issue public notice of review and call for submissions. Participants should be given a minimum of 30 days to register their interest and/or prepare and lodge their submission. Submissions should be made available to the public. Council has the option of conducting a public forum (public meeting, round table or hearings) to discuss relevant issues. Review panel prepares draft report following the 9 step method of these Guidelines. Council calls for public comment on draft report (optional). Review panel prepares final report. Where Council considers: the net benefits of revoking or disallowing a restriction are potentially large; or the costs and benefits of revoking or disallowing a restriction are not confined to one council jurisdiction; or there is a large disparity in the views of different interest groups. Where council considers: the potential net benef ts of revoking or disallowing a restriction are not large; and the costs and benefits of revoking or disallowing a restriction are confined (0 Appoint review panel. Reviewers should identify and approach key stakeholders. Prepare an issues paper which is available to key stakeholders. Issue public notification and call for submissions. Preparation of final report. one council jurisdiction; or there is widespread agreement amongst different interest groups. 34 Step 3.3 Determining the resource requirements of a review Reviewers must dec ide on th e type an d level of resources required to undertake the review, including the size of the review panel, administrative suppo rt and the need technical exp ertise. Generally, reviews that are conducted under the public review model may require a larger review panel and more administrative support resources than in-house reviews. An in-house review m ay have a review panel ofjust one or two persons , one of whom acts as chair (see Step 3.5). For public reviews, three or more panel members may be appropriate, depending on the expected workload of the panel based on the degree of community interest. It is advisable to to Regardless of which review model is used, revie wers begin by identifying the key stakeholders likely, or potentially likely, to be affected by: the introduction! continuance of the local law; the repeal of an existing loc al law; the rejection of a proposed local law; and ! or the introduction of any alternative means of achieving the objective (see Step 4). Stakeholders include any individual, group or organisation that has a personal concern, professional interest or involvement in the affected market. It is difficult to be prescriptive about the number of stakeholders that sh oul d be consulted by reviewers or their agen ts under each review include a technical expert on model. This is because the extent of consultation that is appropriate will vary, depending upon the issues under review, the extent of public interest in those issues and the divergence of the public's views on those issues. Nevertheless, it is essential that reviewers do not just consult with parties that have a direct vested interest in the local Jaw subject to review. bring in the review panel wherever a decision on whether to remove legislated restrictions on competition requires an understanding of complex technical o r public interest issues and/ o r wider industry reform considerations (eg multi-regional, state or national considerations). Step 3.4 Determining the level of consultation that is appropriate Consultation heIps to Frequently microeconomic reforms deliver marginal benefits to a large proportion of th e community at the expense of a small section of the community who may lose substantially if ensure that reviewers reforms are implemented. It is the latter group that often is the most vocal in speaking out against reforms. Reviewers must en sure that their net is cast wide enou gh to include the more silent majority so that they are not dominated by the views of a vocal minority. identity all key interest parties and are adequa tely informed on issues relevant to the review. Consultation is also important as a me ans for council to provide information on their positions and policies to interested parties. 35 Preparation of an initial issues paper is advisable under either review model. This will allow reviewers to check that the consultation net is cast wide enough and that key interest groups arc included in the process . The issues paper should provide background information on the local law which is being reviewed, identify likely interested parties, set out key issues relevant to the review and solicit views on those issues. In some cases, it may be highly desirable that the chair is also independent of council, for example if all councillors have revealed partiality or interest. Even where a councillor is not aligned to any stakeholder or view, it still may not be appropriate for that person to chair the panel on thc grounds that the public is not likely to perceive that person as independent. For public reviews, it is advisable that the chair The number of stakeholders to be consulted is best left to the judgement of reviewers . However, reviewers should bear in mind that they must detail their consultation processes and the stakeholders consulted in the summary report that is lodged with OLC. If the Minister considers that consultation was insufficient, there is a risk that the Minister may revoke the local law. Consultation undertaken for public reviews is expected to be more extensive and more formal than for in-house reviews. Under either review model, submissions should be made in writing. However, for public reviews there is an additional opportunity for public comment provided by the issue of a draft report. Under the public model, there is also the option for the review panel to conduct public hearings or some other public forum to obtain information relevant to the review. of the review panel has a good understanding of :\ICP principles and obj ectives and /or an expertise in public policy. Step 3.6 Determining whether to quantify costs and benefits Reviewers should attempt to quantify all costs and benefits in situations where initial qualitative assessment suggests that a situation of net cost cannot clearly be established. For low priority reviews, quantification may be at the discretion of reviewers. This is in recognition that quantification can add considerably to the resource requirements, and hence costs, of a review. However, it is advisable that reviewers attempt to quantify at least the key costs and benefits even in low priority reviews. Step 3.7 Step 3.5 Determining the degree of independence required Regardless of review model, the chair of a review panel must be independent and regarded by people in the community as independent and impartial. That is, the chair should not be aligned to any parties or interests covered by the review. Under no circumstances should a person identified as a stakeholder be a member of a review panel. Determining the timing of a review Reviewers should determine the start date for a review after considering priority. There is an obligation for review and reform oflocal laws to be completed by end June 1999. Reviews scheduled dose to this time must take account of the time required to implement recommendations to meet this commitment. 36 CASE STUDY 1: Stakeholders might include: • existing traders • potential itinerant traders • trader organisations ITINERANT TRADERS What are the review's resource requirements? 3.1 Determine review model It is considered that a period of28 days This review would be a public review as the net benefits for the community of removing the restriction could be large and there is likely to be a large disparity in the views of different interest groups. 3.2 Priority of review would be sufficient for the calling of submissions. Information should be available at the council offices regarding the nature and purpose of the review and the issues to be addressed in submissions. 3.5 Determine degree of necessary independence High priority. Priority is determined with regard to the potential benefits of removing the restriction on competition. Since the local law directly imposes a restriction in the market for the services or goods substantial in some areas. Priority is also determined by the level of community interest in the subject. There is likely to be substantial community interest in relation to this local law. OIl There should be an independent chair of the review panel with a good understanding of competition policy objectives or microeconomic reform. Other members of the review panel should also be independent of council and not associated with any of the interest groups. Given the potential for political pressure from local traders, it will be important that council receives independent advice. 3.6 Quantification of costs and benefits sale. the impact on competition may be Quantification of costs and benefits should 3.3 What resource requirements will be needed? be undertaken where possible. Data available may include any cost differences between the product sold by the itinerant traders and that of other suppliers and information from food vendors about sales volumes (if available). Costs and benefits not able to be quantified should be described and level of significance identified. 3.7 Determine timing of review A two or three person panel would be appointed with one person having relevant economic expertise. Council would allocate a staff member with secretarial support to be the administrative officer to assist the review panel. 3.4 Determine extent of consultation Prepare an issues paper and make available to all interested parties. Public notification and call for submissions together with direct mail to existing operators and known stakeholder groups. Tinting of review will be dependent on the priority against other local law reviews undertaken by the municipality. 37 CASE STUDY 2: EATING • local or regional tourism organisations • disability groups It is considered that a period of 28 days OUTDOOR What are the review's resource requirements? 3.1 Determine review model This review would be either a public review or in-house review depending on the extent of outdoor eating provided within the municipality and the significance to the local economy. In municipalities with a major tourist area or significant restaurant/cafe precinct a public review would be justified. If there are only a small number of opportunities for thisactivity and little or no controversy regarding this matter an in-house review would suffice. would be sufficient for the calling of submissions, Information should be available at the council offices regarding the nature and purpose of the review and the issues to be addressed in submissions. 3.5 Determine degree of independence necessary There should be an independent chair of the review pan el with a good understanding of NCP objectives. It would also be useful if a member of the panel had some food retailing experience. 3.6 Quantification of costs and benefits Quantifica tion of costs and bene fits sho uld be undertaken where possible. Data available, or which may be provided in submissions, may include additional turnover value for restaurants and cafes in having tables and chairs on footpaths, compliance costs. administrative costs and enforcement costs. Costs and benefits not able to be quantified should be described and the level of significant identified. 3.2 Priority of review Medium priority. Priority should be determined after considering the size of the relevant market ie the market for outdoor eating services. This is likely to be substantial in tourist areas or business centres with significant pedestrian/patron numbers. 3.3 What resource requirements will be needed? The review panel should include a person with some ex-pertise in financial or business matters. Council should provide suitable administrative support. 3.7 Determine timing of review The timing of the review will be dependent on the pri ority against other local law reviews undertaken by the municipality However, initial analysis suggests that a review of this local law be given a low priority since it does not appear to restrict competition, except to the extent that it may restrict the behaviour ofstand alone kiosk operators. However, if the council guidelines for outdoor eating led to the possibility of discrimination betwee n businessesin the granting ofpermits. the review should receive higher priority. 3.4 Determine extent of consultation Prepare an issues paper and make available to all interested parties. Public notification and call for submissions together with direct mail to existing operators and known stakeholder groups. Stakeholders might include: • existing restaurant operators • catering and restaurateur trade organisations CASE STUDY 3: RECYCLING BINS It is considered that a period of28 days would be sufficient for the calling of submissions. Information should be available at the council offices regarding the nature and purpose of the review and the issues to be addressed in submissions. 3.5 Determine degree of independence necessary CLOTHING What are the review's resource requirements? 3.1 Determine review model This review would be an in-house review as the net benefits of removing the restriction are not considered to be significant. 3.2 Priority of review Reviewers may be internal to council. Alternatively, council may choose to use external persons within the local community to provide a measure of independence from council. 3.6 Quantification of costs and benefits Medium. Since the local law directly deems a restriction in application, it deserves at least medium priority. The initial analysis indicates that the law could have a significant effect on competition in the market for recycled clothing. 3.3 Resource requirements Not necessary in this case. Qualitative analysis would be sufficient identifying the general costs and benefits to the community. 3.7 Determine timing of review This review can be conducted utilising council in-house resources only. Medium priority as against other local law 3.4 Determine extent of consultation reviews. Prepare an issues paper and make available to all interested parties. Call for written submissions from key operators and any known stakeholder groups. Consult with non-charitable service providers that may be operating in other jurisdictions. Review existing pattern of bin use and operation. Possibly consider writing to businesses or residents located around existing bins, particularly where operational problems are known to have arisen. 39 CASE ROADS STUDY 4: SIGNS ON 3.4 Determine extent of consultation Prepare an issues paper and make available to all interested parties. Stakeholders are likely to include: • commercial operators, shopkeepers and ADVERTISING What are the review's resource requirements? 3.1 Determine review model This review would be a public review as the net benefits are potentially large. small business operators • traders groups • VicRoads This local law is likely to have an impact within all commercial areas within the municipali ty. The risk ofloss of visual amenity in the absence of regulation may be a significant one. It is unlikely that the risk to pedestrian traffic would be significant, although this would need careful assessment. To some extent this risk may be met by public liability insurance. Many businesses may consider that the law unreasonably restricts advertising opportunities. It should be noted that advertising reaches not only potential local customers, but can be significant in capturing passing trade which would otherwise not be alerted to the availability of goods and services. This may be significant in tourist and rural areas. It is considered that a period of28 days would be sufficient for the calling of submissions. Information should be available at the council offices regarding the nature and purpose of the review and the issues to be addressed in submissions. • health and public safety organisations/interest groups Appropriate consultation may involve local advertising and press coverage using local media , direct mail to interested organisations or individuals affected including current permit holders. Other potentially interested community groups such as local police. traffic organisations. RACV and service organisations may also be approached. 3.5 Determine degree of independence necessary An independent chair should be appointed to undertake the review. The panel could possibly also comprise somebody with business experience and someone with urban design or public safety/engineering expertise. These persons might include, for example, ex-councillors, members of local community organisations or may draw on internal council resources. 3.2 Priority of review Medium. 3.3 Resource requirements The review panel should include at least two people. Administrative support would be required as necessary dependent on the number of submissions and issues raised in consultation. 40 It is important for public confidence in the review process that the review is seen use of council staff in relation to controversial issues particularly within a small rural community would need to be carefully considered. 3.6 Quantification of costs and benefits to be independent of council. Consequently, the Quantification of costs and benefits may be possibile. Where not, some general description of the order of magnitude of these should be provided. For example, within a rural or tourist area the role of advertising in attracting passing trade may be able to be estimated by relating it to known spending patterns. Similarly. evidence may be available from research findings elsewhere on the impact of advertising signs on footpaths and roadways in contributing to pedestrian injury or accident rates. In many cases, however, it may only be possible to describe the nature of the costs and benefits, without quantifying them. 3.7 Determine timing of review Timing of the review should be judged in the context of the review of all local laws. 41 - 42 STEP 4 DEMONSTRATE NECESSARY TO THAT THE RESTRICTION THE IS ACHIEVE OBJECTIVE The N CP places an onu s on reviewers to demonstrate that there is no less restr ictive means of ac hievi ng the objective of the local law, Thi s section provides a two step framework tor reviewers to establish whether it is necessary to restrict com petition to achieve a particular obje ctive. R eviewers should already have linked the objective of the local law to the prop osed restrict ion under Step 1 and described how the local law will either remove or ameliorate the market failure situatio n. Based on this assessm ent, reviewers should: consider a list of alternative means of achieving the obj ective: and ident ify the least restrictive means of achieving the objective. Reviewers should begin by identifying where in the hiera rchy the existing or prop osed local law restriction is lo cated. Next, reviewers should systematically consider whether op tions that are ranked higher in the hierarchy of alternatives in Table 2 could meet the obj ective of the local law, as described in Step I. To do this, reviewers might consider the following types of que stions: If the restriction calls for mandatory compliance. could compliance be voluntary? Generally. voluntary schemes are less restrictive and give consumers greater choice - some consumers prefer the option of a lower quality and lower priced good or service, while others may prefer higher quality at a higher price. Volun tary schemes can allow consumers to exercise their cho ice. If the restriction specifics how a product should be produced. or a service or activity carried out, is a less restrictive alternative possible - for examp le. by spec ifying a performance objective? For examp le. rather than stipulate how a business sho uld configure and clean tables and chairs to obtain an ou tdoo r eating per mit. a local law could just specify that businesses arc obliged to leave sufficient room for pedestrian movement and to keep the area neat and tidy. If the restriction restricts the number and /or qualification of persoIlS providing a good or service, could the objective be achieved by industry codes of practice (ie self regulation) ? Could the objective be met by providing information rather than setting product standards? Could council act as facilitator rather than regulator to achieve the objective? Where health and safety issues are relevant. doe s the alternative allow standards to be maintained? What are the resource and administrative requirements nece ssary to implem ent and maintain the alternative arrangement? Step 4.1 Consider a list of alternative means of achieving the objective Frequently there will be more than one option to address the objecrivejs) identified in step 1. At this point . reviewers should consi der alternative means of ach ieving the local law's objective. Table 2 presents a list of suggested alternatives for each type of market failure situation discussed in Step 1. Th is list is int ended a, a starti ng po int for reviewers and is no t ex haustive. R eviewers should identify wh ich of these alterna tives could potentially deliver a similar or supc rror outcome relative to the restriction under review. The alternati ves in Table 2 are present ed as a hierarchy. R eviewer s are asked to co nsider op tions that. as a ru le. .1T<~ likely to he most efficient first and on ly proceed to less cflicienr Options if the most efficient options are con sidered unsuitabl e or inappropriate. H owever. reviewers should bear in 1l1111d that the list is not inten ded to prescribe what is best in term, of local laws. This is because the particu lar characteristics of issues dealt WIth by a local law might mean that what as a general rule is efficient may not be possible or effic ien t in a particul ar situation . 43 TABLE 2 FRAMEWORK FOR CONSIDERING ALTERNATIVES TO ANTI -COM PE TI TIVE LOCAL LAWS Possible alternative response Council could facilitate negotiations between parties to persuade parties that impose costs on others to take responsibility for their actions . Reallocate property rights so that parties bear the full cost of their actions. Taxes and charges levied on parties w ho do not bear the costs of their actions Prescribe performance obje ctives. leaving partie s free to determine how best to meet the objective Prescribe minimum standards (eg environmental standards) Statutory limits 011 resource use Statutory proh ibition/approval process Provision of information by local businesses or con sumer groups by their own volition Development of secondary markets in information eg utilising agents. insurers, consumer associations late laws governing misleading adverti sing Ut ilise Commonwealth and S Product labelling Occupation al and trade licensing Prescribed minimum product standards Statutory prohibition /approval process Creation and allocation of property righ ts to encou rage pr ivate provision D irect government provision Self-regulation through voluntary codes of practice U tilise Commonwealth and state third party Access regimes (eg for water and other significan t infrastructure) Utili se Commonwealth and state product liability/ co nsumer protection laws U tilise Commonwealth and state laws that prohibit anti-co mpetitive conduct Utilise Commonwealth and state laws that prevent anti-competitive mergers Utilise Commonwealth and state laws govern ing misleading adverti sing Appl y to state governmen t for price controls 44 Step 4.2 Identifying the least restrictive means of achieving the objective As noted in Step 4.1 . som e alterna tives ma y be less restrictive th an others. For example, general COIlSUl1l t."r protection 1.1WS m .1Y be less restrictive than laws to lnnit the use of inputs or method of production. Generally. the alternatives identifi ed 111Table Whether or not reviewers identify a less restrictive alternative' means of achieving the objective affects how the review progresses from this point. In particular: If reviewers identify a less restrictive means of achieving a sim ilar or superior outcome. then the review should amend the local law to incorporate the least restrictive alternative, Reviewers should then proceed to Step 5 to consider the costs and benefits of that alternative instead of the costs and benefits of the original restriction. If reviewers identify a less restrictive alternative but consider that the outcome under that alternative is likely to be inferior to the outcome under the initial restriction, 2 arc ranked from least restrictive (usually market-based mechanisms) to most restrictive (more he avy-handed regulation). Where there is more than one alternative, preference should be given to a market-based mechanism where it produces similar benefits to the restrictions but cost s the sallie or less to implement. For eX3111pk to address information asymnlt'try problems information standards generally are less restri ctive than prescriptive product standards. To address externality situ ations prescribed product or service outcomes (eg impacts on other persons from an activity) (eg area should be kept clean and tidy) arc generally less rcstncrive than controls over the good or service (eg specifying minimum dimensions or frequency of cleaning) , then the reviewer should outline the reasons for this judgement in the summary review report. The review should then proceed from the next stage to consider both the costs and benefits of the inferrer alternative and the costs and benefits of the original restriction. If reviewers cannot identify a less restrictive alternative then the review should proceed from the next stagl' to consider the costs and benefits of the Original restriction. -15 CASE STUDY 1: 4.2 Identify least restrictive means to achieve objective ITINERANT TRADERS Is this restriction necessary to achieve the objective? 4.1 Consider alternative means to achieve objective The least restrictive means to achieve the objective would be to require that the locations used by itinerant traders meet performance standards and, in the case of food sellers, that the vehicles be appropriately licensed or approved for the purposes of preparing or carrying food. The objective of protecting local traders is explicitly anti-competitive. Iflocal traders wish to enter the market they may adopt the same practices as existing operators . (Assume that tire local law is used to restrict the number qf sites 10 a small number eg 3 or 4 sites in tile municipality} The law does address the objectives identified. Rank the law in terms ofTable 4.1. • Statutory prohibition/approval process (externality) Alternative means for achieving the objective might include: • designating a large number of areas approved by council for use by itinerant traders. • specifying minimum performance standards or requirements to meet traffic and pedestrian safety. • requiring that persons must not prepare and sell food for human consumption without an appropriate health approval; and • requiring the registration of the vehicle used by itinerant food traders as a vehicle approved for the transport of food. It is recognised that the last two points relate to food traders only and involve some potential duplication of state health legislation. CASE STUDY 2: 4.2 Identify least restrictive means to achieve objective It does not appear necessary to require that OUTDOOR EATING Is this restriction necessary to achieve the objective? 4.1 Consider alternative means to achieve objective The law addresses the market failure relating to health and cleanliness. It addresses the potential externality of untidiness by requiring that tables and chairs do not extend beyond the width of the premises and that the facility be kept the applicant for the permit is a person conducting the food premises. Otherwise the existing local law appears to be a model for the least restrictive means to achieve the objective. Alternatives such as requirements that a minimum width of footpath be left dear for pedestrian movement, that tables and chairs not be closer than a specified distance to the kerbline , etc would be more restrictive than a general requirement to keep the area tidy and not impede pedestrian movement on the footpath. in a tidy condition. This is the least restrictive option. No information is available about the use of council's discretionary powers under its guidelines (referred to in the lase paragraph of the local law). The manner in which discretion is exercised would need to be reviewed as part of the review of the local law in order to identify whether in practice the use of the local law is achieving the objective. Rank the law in terms ofTable 4.1 • performance objectives with permit requirement (externality) To the extent that the health and cleanliness requirements under the local law mirror state government health legislation. they are redundant in local law. It would be possible to dispense with the permit requirement and simply specify a suitable standard of operation which allows tables and chairs provided that the proper operation of footpaths is not blocked. This would complement the provisions of the Summary Offences Act. CASE STUDY 3: RECYCLING BINS is legally responsible for the management of that land including any health or other risks associated with the operation of clothing bins. Council could identify locations within CLOTHING Is this restriction necessary to achieve the objective? 4.1 Consider alternative means to achieve objective the municipality where placement of bins on public land is acceptable or unacceptable. This would give service providers greater freedom to place bins where they wished. This approach could be coupled with a requirement for appropriate maintenance generally as presently specified in the local law but without the need for a permit. 4.2 Identify least restrictive means to achieve objective While the local law does address the market failure and objectives described in Step 1.1, the administration of the law is restrictive and goes beyond meeting these objectives. Rank the law in terms ofTable 4.1 • Prohibition/approval process (information asymmetry) • Prohibition/approval process (externality) There are less restrictive ways of dealing with information asymmetry concerns set out in Step 1. For example, council could require service providers to advertise on the bin whether they are a charitable or non-charitable organisation and/or whether deposited clothing is to be recycled or processed as rags. Indeed , it may not be necessary for council to regulate this through local laws because the traditional charity service providers themselves will have an incentive to reveal this information. If a charitable service provider believes donors prefer to donate to charity and have their clothes recycled rather than converted to rags. they have an incenti ve to advertise this information in a bid to attract donations away from potential and actual competitors. Externality concerns can also be treated in a less restrictive way. For example, council could allow recycling bins to be located on private land without a permit as the owner The least restrictive means to achieve the objectives would be to allow any business (charitable or otherwise) to provide the service. Council could nominate locations on public land where the location of bins is not acceptable and specify any siting constraints necessary to achieve amenity and safety outcomes. There is no need for council to regulate the number, design or construction of bins. In relation to provision of information about the use of donations to different charities (information asymmetry) the least restrictive alternative is to allow businesses to provide information; however they may not do this without some requirement being placed. A permit might not be required at all for the placing of clothing recycling bins on private land. for example, at service stations or other premises where persons other than the council are legally responsible for the maintenance of those premises. This is a matter for private negotiation between relevant parties. 48 CASE ROADS STUDY 4: SIGNS ON 4.2 Identify least restrictive means to achieve objective ADVERTISING The risk of pedestrian injury is partly met at the sign operator's expense through the provision of public liability insurance. However, this does not meet the full "cost" of an accident. Defamatory and obscene material on signs Is this restriction necessary to achieve the objective? 4.1 Consider alternative means to achieve objective The local law addresses the three forms of externality outlined in step 1.1. It is noted though, that in practice there is likely to be substantial discretion exercised in the administratio n of this local law. is addressed by defamation and obscenity laws at a state or commonwealth level, so this aspect (sign content) does not need to be regulated. The only remaining impact (externality) Rank the law in terms of table 4.1 that may require intervention relates to visual pollution . The least restrictive means to address this externality would be to specify an operating envelope defining the minimum distance from the kerb and shop frontage and maximum signage size allowed. This would allow the business operator considerable (but not complete) freedom to determine the size and location of advertising. It is important that any standards specified are not overly prescriptive. Permit applications would only be required for signs outside the specifications. • statutory prohibition/approval process (externality) An alternative would be to require a permit only in circumstances where the sign did not meet some very general criteria (performance objective) that are less restrictive than current requirements. A number of existing local laws contain standards or guidelines tor the location and size of signs which are deemed to comply and therefore not to require a permit. 49 50 ST E P 5 ASSESS THE COSTS TO THE COMMUNITY OF THE RESTRICTION This section provides reviewers with a framework to identify the costs that a local law restricting competition can impose on the community and the parties th at bear those costs. It also assists reviewers to determine whether quanrification of costs is nece ssary. Efficiency costs. There arc two aspects to efficiency costs. One is efficiency losses due to increased unit cost of production eg because a business is not able to use least cost combinations of inputs. The second is efficiency losses because a business is not able to produce as much of a good or service as it Step 5.1 Identifying costs categories Reviewers are asked potential costs to to would like. Where a local law restric tion increa ses uncertainty and risk, it can impact on both aspects of efficiency. Efficiency costs are likely to be greatest for more restrictive regulatory options. ie those listed towards the bottom of the hierarchy of options to address each form of market failure in Table 2 under Step 4. Social costs. These include environmental damage. health and safety costs and other costs that frequentl y arc referred to as "public bads" (eg increased crime) . Social costs can also include costs associated with reduced employment and regional development (see Box 5. over). Costs borne by consumers. This includes increases in real price to consumers and costs associated with a reduced choice of product/quality/ supplier/price combinations. All of these costs can reduce the ability of firms to compete in the relevant market and thereby lessen competition. describe actual or the community that are brought about by the restriction. This section identifies different categories of costs to assist reviewers to adopt the broadest po ssible interpretation of costs. Generally. restrictions on competition give rise to four type s of economic costs relevant to local law review s: Administrative, enforcement, monitoring and compliance costs. These costs generally are shared between businesses and council and other administrative authorities. Administrative. enforcement and monitoring costs include filing. record keeping and stafr costs that are attributable to the local law in question . Compliance costs are the costs borne by businesses to comply with the local law that are over and above what they would incur if the local law didn't exist. C o mpliance costs include permit costs and other charges and fees borne by businesses. Generally. administrative. enforcement and compliance costs will be higher for more restrictive regulatory options ie those listed towards the bottom of the hierarchy of options to add ress each form of market failure in Table 2 under Step 4. 51 Eql/ity considerations Usually with any microeconornic reform there are winners and losers. Often the introduction of a local law will cause a transfer of benefits from one group in the community to another. Strictly speaking, transfers are not costs. However, it is useful to think of negative transfers at the same time as you consider costs. Transfers may be deliberate. For example Community Service Obligations (CSOs) often explicitly transfer the cost of an activity away from those who benefit but may not be able to alford the good or service (eg cross-subsidies). Transfers may also be unintentional. For example, a restriction may unintentionally transfer income from the poor to the wealthy. In some cases a restriction on competition which favours some members of the public at the expense of others may be considered unfair. This may be a ground for the removal of the restriction. However, there may be situations where the community does not want to remove restrictions on competition because it would further disadvantage a group in the community that is already considered disadvantaged. Reviewers should be mindful that even if a group already considered disadvantaged is made worse ofr in the absence of the restriction, there may be other less restrictive means of dealing with this problem. 52 Step 5.2 Step 5.3 Identifying those who bear the costs of the restriction or less restrictive alternative It is im po r tan t that reviewers have a dear idea of which persons, groups or organisati ons bear each of the co sts identifi ed 111 Quantifying the costs of a restriction or less restrict ive alternative Once reviewers have identified the costs of a restriction and who bears them , the y should proceed to quant ify th ose cos ts. Quanti ficati on o f com sho u ld be attem p ted under all review models, particularly when: co u ncil expects that a situation of net cost or net benefit WIll Step 5 .1. These persons, groups or o rga nisations then become key stakeholders in the review. Parties who bear the co sts of a resrriction generally will come from one of four community groups: 1. parties who are d irectly affected by the local law, for example local bus inesses and residents: 2, parties who directly compete with those identified in I, for example other businesses an d other residents; be difficult to establish wi thout em pir ical eviden ce. Quantificatio n is also highl y de sirable where cou nci l expects that the restriction is likely to yield net benefits to the community. This is desirable because, under the Ncr. there is a presumption against restrict ions on competition . A council seeking to recommend that a restriction be continued or introduced sho uld therefore be in a position to reassure the" public that then: is an empirical basis to its con clu sion. The difficulry of quantifying the costs of a 3 , parties who are dependent on those identified in I. for example employees. suppliers and consumers; and 4. part ies repre sen t ing wider community interests. Fo r ex am ple, environmental concern s, health and safety concerns and parties affected in other area s. Reviewers sh ould check that co sts arc attributed to restriction may require professional advice for major loc al law reviews. Even with outside expertise, though, it may not be feasible to qu an tify all costs in som e situations. For ex am p le". bec ause the co sts asso ciated with the estimation process may exceed the potential benefits from reforming the loc al law, or it may be too difficult to obtain information necessary to quantify costs. Where it is not feasible to quantify cost s, reviewers must at least ind icate the value that the community places on the cost . Where th is can no t be qu antified. reviewers should make a judgment on their magnitude by rating each cos t as insign ificant. m inor, m od erate o r SIgnificant . They must also explain the logi c th e"Y have used to arrive at this judgment. T his explan ation sho uld be m ore detailed for key co sts .lllecting whether the restriction provides a net public benefit to the commu nity. Where quantification of costs is feasible. reviewers should provide suppo rti ng mfor man on de taili ng key assu m pno ns and calculations pertinent to the estimates, one or more individuals or businesses in each category.This list of affected par ties can ab o act as a checklist to ensure tha t all relevant economic, soc ial an d econ omic co sts an.' captured in Step 5.1. 53 CASE STUDY 1: CASE STUDY 2: EATING ITINERANT TRADERS OUTDOOR Submissions from interested parties would be taken into account in identifying any costs of the restriction. The likely costs of the restriction to the community include: Submissions from interested parties would be taken into account in identifying any costs of the restriction . The potential costs to the community include: Administration, enforcement, monitoring and Administrative. enforcement, monitoring and compliance costs: compliance monitoring and enforcement costs cost of use of public land to the business (if fee charged) Efficiency Costs: profit foregone by potential itinerant traders loss in productive or technical efficiency (ie if itinerant traders could provide a service at lower unit cost than existing suppliers but are prevented from doing so) Costs borne by consumers: reduction in consumer choice time spent by consumers to travel to nearest alternative service provider increased prices to consumers for goods or services as a result of restriction reduction in the quantity of food available compliance costs: cost of permit to the business seeking to place tables and chairs on footpath. monitoring and enforcement costs. These may be borne by councilor other enforcement agencies (eg local police). Efficiency Costs: costs borne by the applicant to comply with table and chair design/construction and layout requirements. profit foregone by the business seeking to place tables and chairs on footpath. These costs will be low if consumer demand for this service is low. Costs borne by consumers: reduced consumer choice. This cost, implied by restricting options to consumers, will be low if consumers already face a significant number of alternative dining services. Social Costs: Social Costs: employment foregone due to restriction. employment of itinerant traders 5-1 CASE STUDY 3: CASE STUDY 4: CLOTHING RECYCLING BINS ADVERTISING ROADS SIGNS ON Submissions from interested panies would be taken into account in identifying any costs of the restriction. The likely costs of the current restriction to the community include: Administrative, enforcement, monitoring and compliance costs: council costs of enforcement, dealing with enquiries from organisations etc compliance costs for charitable organisations (meeting permit requirements) Efficiency Costs: reduction in productive efficiency if newcomer could process clothes more efficiently than incumbent profits foregone by businesses who would otherwise use donated clothing Costs borne by consumers: fewer bins in the community (can lead to greater distance to travel to make donation) reduction in donor's choice of service provider Social Costs: employment foregone in businesses who would otherwise use donated clothing. Cost to the applicant of public indenmity insurance, provided that insurance would not be obtained except for council's requirement under this local law. Monitoring and enforcement costs. These may be borne by local councilor other enforcement agencies (eg local police). Efficiency Costs: Profit foregone by the business refused signage as a result of the restriction . These Costs borne by the applicant to comply with design, construction, width and height requirements. This is not the total cost of the sign; rather it relates to the additional costs incurred above what the business seeking signage would otherwise incur (ie in the absence of the restriction). Submissions from interested parties would be taken into account in identifying any costs of the restriction. The likely costs of the current restriction to the community include : Administrative, enforcement, monitoring and compliance costs: cost of permit to the businessseeking signage. will be low if the business can easily substitute street signage with other forms of signage and advertising. Costs borne by consumers: reduced information to consumers. This cost will be low if consumers are able to receive the information via altern:ltAignage and advertising. 55 56 ST EP 6 ASSESS THE THE BENEFITS TO THE COMMUNITY OF RESTRICTION This Section provides reviewers with a Iramework to identify the benefits that a local law restricting competition can provide to the community and the parties who receive those benefits. It also assists reviewers to determine whether quantification of benefits is necessary. Efficiency benefits. There are two categories to efficiency benefits. One relates to efficiency gains due to a reduction in unit cost of production; eg because a business is able to use least cost combinations of inputs with the restriction in place but was not able to in the "no restriction" situation. The second relates to efficiency gains because a business is able to produce as much of a good or service as it would like with the restriction in place, but could nor in the "no restriction" case. Efficiency benefits are likely to be greatest for least restrictive regulatory options ie those listed towards the top of the hierarchy of options to address each form of market failure in Table 2 under Step 4. Social benefits such as increased environmental amenity (eg when: a restriction conserves an environment or wildlife species, the community rna}' derive a benefit from seeing that environment/ wildlife. or from knowing that it is there), health and safety benefits (eg people may be able to live longer and lead better quality lives as a result of the restriction); and other benefits that frequently are referred to as "public desirables" (eg restrictions may promote law and order or certain kinds of behaviour or certain activities that arc considered highly desirable by the community). Social benefits can also include consideration of the benefits associated with increased employment and regional development, although extreme caution is required when doing so (see Box 4). Benefits enjoyed by consumers. These include reductions in (real) prices to consumers and benefits associated with an increased choice of product/ quality / supplier/ price combinations due to the local law restriction. Step 6.1 Identify benefit categories Reviewers arc asked to describe actual or potential benefits to the community as a whole that are brought about by the restriction. This section identifies different categories of benefits to assist reviewers to adopt the broadest possible interpretation of benefits. Just as restrictions on competition give rise to four types of economic costs, they also give rise to four types of benefits: Administrative, enforcement and monitoring benefits .These benefits generally arc shared between businesses and council and other administrative authorities. Administrative, enforcement and monitoring benefits include savings on filing, record keeping and staffing costs. They also include the revenues council and ether authorities obtain through permits and other charges as a result of the local law restriction. Generally, administrative, enforcement and monitoring benefits will be higher for less restrictive regulatory options ie those listed towards the top of the hierarchy of options to address each form of market failure in Table 2 under Step 4. 57 Reviewers should not presume that the restriction will automatically provide benefits . There is an onus of proof on reviewers to show that estimated benefits of a resrrrction result from it and would not have resulted without it. To obtain this evidence for proposed new local laws. reviewers can look to other areas where the same resrricnon is already in place and compare that with the situation before the restriction was introduced. A before and after comparison can also be found when: a council has removed a restriction. Where it is not possible to do before and after comparisons for the same municipality, reviewers may look to compare the benefits experienced by a municipality with /without a restriction against the benefits experienced under their own without/with restriction situation. 2. parties who directly compete with those Identified ill 1. for example other businesses and other residents: 3. parties who are dependent on those identified in 1. for example employees. suppliers. and consumers; and 4. parties representing wider community interests . for example environmental concerns. health and safety concerns and parties aflected in other areas. Reviewers should check that benefits Me attributed to one or more individuals or businesses in each category.This list of afi~cted parties can also act as a checklist to ensure that all relevant economic. social and economic benefits arc captured in Step 6.1. Equity considerations The transfers that can result from the introduction/continuance of a restriction may be considered as positive by the community. For example, it may transfer income from the wealthy to the poor or it may ensure that those who benefit from an acriviry and Com JlTord to pay for that benefit incur the cost of that activity. As in Step 5.3. reviewers should attempt to quantify the benefits of a restriction under all review models. particularly in situations where net cost or net benefit IS likely to be difficult to Step 6.3 Quantifying the benefits of a restriction or less restrictive alternative Step 6.2 Identifying those who benefit from the restriction or less restrictive alternative establish without empirical evidence or where a council expects that a restriction will provide a net benefit to the comrnumry Where it is genuinely not feasible to quantify all It is important that reviewers haw a dear Idea of which persons, groups or organisations enjoy each of the benefits identified ill Step 6.1. These perso ns. groups or organisations then become key stakeholders in the review. Parties who enjoy the benefits a restricrion may come from one of four community groups: 1. parties who arc directly affected by the local law, tor example local businesses and residents: benefits. reviewers are obliged to indicate the value.' that the community places on the benefit. If this is not possible, reviewers sh ould rate the benefit as insignificant . m inor, moderate or significant. They must also briefly explain the logic that they have applied to come to this judgement. Where a quantitative assessment of benefits is made. reviewers should provide supporting information detailing key assumptions and calculations pertinent to the estimates. .'iN CASE STUDY 1: ITINERANT TRADERS Any benefits identified in submissions would be taken into account. The likely benefits of the restriction to the community include: Administrative, enforcement and monitoring benefits: any income gained from the use of public land by itinerant traders Efficiency benefits: the additional profit earned by existing local businesses as a result of the restriction. This is the result of spin off trade to local businesses from customers who would otherwise have purchased goods from itinerant traders Social benefits: protection ofjobs in existing local businesses protected by the restriction CASE ST UDY 3: CLOTHIN G RECYCLING B INS Any benefits identified in submissions would be taken into account. The likely benefits of the restriction to the community include: Efficiency benefit: additional profit or charitable purpose achieved by monopoly incumbent Social benefit: protection of employment in incumbent businesses prevention of health and amenity impacts certainty that clothes that are donated are used for a particular purpose (eg improved information availability) Any benefits identified in submissions would also be taken into account. CASE STUDY 2: OUTDOOR EATING Any benefits identified in submissions would be taken into account. The likely benefits to the community of restricting the placement of tables and chairs on a footpath include: Administrative, enforcement and monitoring benefits: permit revenue to the community Social benefits: reduced risk to public health and safety additional employment to alternative service providers (eg takeaways, other dining) CASE STUDY 4: ADVERTISING SIGNS ON ROADS Any benefits identified in submissions would be taken into account. The likely benefits of the restriction to the community include: increased environmental amenity due to deterrence of visual pollution. This benefit may be greater if there already is "visual congestion" in the area Reduced risk to public health and safety the value placed by the community of public indemnity insurance. This is not the same as the nominal coverage of such insurance. It is equivalent to the probability that a claim will be made against such a policy multiplied by the average value of that claim permit revenue to the community Any benefits identified in submissions would be taken into account. 59 60 ST E P 7 ASSESS WHETHER BENEFITS OUTWEIGH COSTS Weighing up benefits and cost s is, in many respects, the most important stage of any local law review. However, it can also be the most Reviewers should check that there is no overlap between categories of benefit or cost that would make it inappropriate to simply sum all individual costs/benefits to arrive at a total cost / total benefit figure. This is to avoid double counting. Once reviewers are satisfied that individual costs and benefits have been identified and quantified, where possible reviewers can begin to determine the overall effect of a restriction on competition. This can be done by weighing up the costs associated with the restriction agamsr the benefits associated with that restriction. challenging stage of a review. This section guides reviewers through the steps involved in determining whether the benefits of a restriction on competition outweigh the costs. A hyp othetical example is provided using the advertising sign case study outlined in previ o us sections of these guidelines (ie steps 1 to 7). It is recognised that for many local laws a fully quantified cost-benefit analysis will not be justified as the benefits may be minor relative to the cost of collecting and analysing data or there may be significant difficulty in quantifying some costs and benefits. However in cases of major public reviews and for local laws where there arc quantifiable costs and benefits, quantification using the following method should be followed. Step 7.4 deals specifically with unquantified costs an d benefits. Step 7.2 Weighing up quantified costs and benefits Reviewers should begin by considering the costs and benefits for which current dollar values have been attributed under Steps 5 and 6. Essentially, there are three key steps to compare quantified costs and benefits: Step 7.1 1. take the list of quantified costs and calculate Re-check costs and benefits identified under Steps 5 and 6 At tim stage of the review, it is important for reviewers to check that they have identified all the costs that accompany benefits (and all the benefits that accompany costs) under Steps 5 and 6. For example. improved environmental quality may come at the expense of increased administrative and production costs. The protection of profits for local traders may come at the expense of increased prices to consumers, increased time spent by consumers to obtain a good or service, a reduction in the amount of the good or service produced and compliance monitoring and enforcement costs. the net present value of costs (see Box 6, on page 66); 2. rake the list of quantified benefits and calculate the net pre sent value of benefits (see Box 6); and 3. subtract the net present value of costs from the net present value of benefits to obtain a final result. If the final result is negative - that is. a situation of net cost is established - the community will be worse off as a result of the restriction. If the final result is positive - that is, a situation of net benefit - the community will be better otTas a result of the restriction. 61 Hypothetical example using advertising sign case study This hypothetical example is intended to show reviewers the pro cess by wh ich they can determine whether the benefits of a restri ction outweigh costs. A cost benefit analysis is performed for two scenarios. The first analyst's the situation where a local law prohibits the use of A-Irame advertising signs Oll estimating total costs there is a line which places a dollar value on the net present value (N PV) of costs. Also, below the line estimating total benefits there 011 IS a line which places a dollar value the NPV of benefits. This step is important in any cost benefit analysis. It is the step where all current and future costs and benefits are discounted so that they can be considered in terms of pre sent day dollar s. The method lor calculating the net present value of costs and benefits is provided in box pavements altogether. The second analyses the less restrictive situation where a local law allows the use of A-frame signs on pavements, subj ect to var io us conditions. n. However, there arc m,my software packages that are able to make N PV calculations automatically. As shown in the hypothetical example on the List of costs and benefits for scenario 1 Under this scenario a local law effectively prohibits the use of A-Irame advertising signs on pavements absolutely. The numbers presented in the table below are hypothetical. In practice they can be determined by consulting and surveying affected bu sinesses, consumers and other interested parties. Adv ice on how reviewers can collect particular costs and benefits is provided in the notes below the table. The table presents identified costs and estimated dollar value of costs then presents identified benefits and estimated dollar value of bendits. Reviewers will note that below the line next page, the net present value of costs associated with .1 total han on advertising sign s on pavements is assumed to be S1.1 million . The net present value of benefits under the same scenario is assumed to be approximately S60J,()()(). The next step involves J comparison of the NPV of costs and benefits. This is achieved by subtracting costs from benefits. A negative value indicates that, on balance , the restriction imposes greater cost than benefit on the community. In the hypothetical example, it is estimated that the community would be approximately S5(lll,O()O worse off if the.' blanket ban on pavement advertising signs were introduced. 62 ( (1St Estimated / bemfrt pcr crfiln. / year p Cllstomer number (if firms/ Cl/stomers Estimated (lISt /bcnefit ill a year Costs Profits foregone by business due to change in consumer behaviour" Additional cost to utilise other forms of advertising'' Monitoring & enforcement costs' Reduced information '! s 1000 150 na 40 40 na 20000 s 40.000 6,000 6,000 100,000 5 Total costs NPV of costs (for calculation, see Box 6) Benefits Increased environmental amenity-relative to no local laws Reduced risk to public health and safety! Total benefits 152,000 1,132,104 80,500 SOD 81,000 NPV of benefits (for calculation, see Box 6) NPV of benefits minus NPV of costs 603,292 - 528,812 Notes a In practice it can be estimated by surveying affected businesses. b In practice reviewers can estimate this cost by considering the cost of advertising in local newspapers etc that would not have been incurred in the absence of the local law less the amortised cost of the sign that would haw substituted for the advertising. c In practice, reviewers can estimated this cost by considering the staffing (administrative staff and compliance inspectors), record d In practice, it could be estimated by surveying existing and potential customers (including locals and visitors to town) about the value they place on information contained on A-frame signs and the extent to which they think they can obtain that information elsewhere. e In practice it could be estimated by surveying constituents and visitors to ascertain the value they place on the increased environmental amenity caused by the local law. keeping and penalty collection costs born by council as a direct result of the local law. f In practice. it could be estimated as the difference between the probability of an injury in the absence of the local law and the probability of an insurance claim with the local law in place multiplied by the average value of a claim against that insurance policy. 63 List of costs and benefits for scenario 2 Under this scenario a local law allows the use of advertising signs on pavements. subject to a requirement that businesses must take out public liability insurance and various other limitations concerning the dimensions of the sign. placement of the sign and hours for which the sign may be left ou t. This is a less restrictive alternative to the scenario described previously. As for scenario 1. the numbers presented in the table below are hypothetical. In practice they can be determined by consulting and surveying alrectcd businesses. consumers and other interested parties. Advice on how reviewers can collect particular costs and benefits is provided in the notes below the table. The table on the next page presents identified costs and estimated dollar value of costs then presents identified benefits and estimated dollar value of benefits. The net present value of all costs is calculated in the same manner as it was in scenario 1. The method is derailed in box 3 . As shown below. the net present value of costs associated with the less restrictive option (ie allowing advertising sibms on pavements. subject to various conditions) is assumed to be approximately S uo.n(}ll. The net present value of benefits under the same scenario is assumed to be approximately S83,(}()(). The next step involves a comparison of the NPV of costs and benefits. This is achieved by subtracting costs (rom benefits. A negative value indicates that. on balance. the: restriction Imposes greater cost than benefit on the community. In the hypothetical example below. it is estimated that the commumry would be approximately SSIl.()ll{) worse off if the blanket ban on pavement advertising signs were introduced, Reviewers will note that the net cost to the community under scenario 2 is tar less than under scenario 1. Nevertheless. on the assumptions used for this case study the local I.1\V restriction should NOT be introduced in either c ase, because: it fails the two part competition .. test (see "Key principles underlying these guidelines" in the Introduction) - that IS. the benefits of the restriction to the community do not clearly outweigh the costs . 64 Estimated cost/ bem:}i per t yt'ar perfilm I customer Costs Profit forg on e by busine ss due to chang e in business behaviour' number (1 firms/ customer s Estimated cost/benefit ill a year $ s 150 a 40 20 na 40 o 6,000 1i,000 7,000 2,000 Additional cost of constructing sign'' Cost of publi c indemnity insurances Administration monitoring & enforcement costsPermit fee borne by businesses" Reduced information! Total costs 200 na 50 0 o 23,000 NPV of costs (see Box 6) Benefits Increased environmental amen ity -r elative to no local law}: Reduced risk to publ ic health and safetyh Benefit of public indemnity insurance to community Permit revenue' Total benefits $ 132.291 5,500 3,50 0 150 2,000 11,150 NPV of benefits (see Box 4) NPV of benefits minus NPV of costs 83.046 - 49,245 N otes J. It is assumed that the less restrictive version of the local law doe s not affect the number or purchasing behav iour of customers. e In practice. reviewers can use the financial cost of a permit to busine sses. It is assumed th at the less restrictive version of the local law do es not redu ce the information available to consumers at all, bec ause A-frame signs arc allowed . f b In practice, this figure should reflect th e once off cost to con struct the sign to co m ply wi th the local law less the am oun t the business would otherwise have paid to construct the sign (ie in the absence of the local law). In practice, this cost is not nece ssarily equ ivalent to the total cost of all aflecred businesses of pu rchasing publi c liability insurance. It sho uld reflect th e additional cost incurred as a result of the local law. For example, if 50 per cent of businesses would have taken out public hability insurance even in the absence of the local law the relevant figure is the cost borne by the rem aining 50 per cen t of bu sinesses that would not otherwise have taken out such insurance. In pract ice, it should include the staff and record keeping cost of processing penn its, the administrative staff and inspecto rs to monitor and enforce the local law, and the cost of deb t collecting services for unp aid pe naltie s. g c In practice, it could be estimated by surveying constitue nts and visitors to ascertain [he value they place on the increased env ironmen tal ame n ity caused by the local law. In practice, this can be estimated as being equ al to the difference between the probab ility of an inj ur y in th e absence of the local law and the proba bility of an insurance claim with the local law in pace multiplied by the average value of a claim against the public indemnity insurance. In practice, it should be equivalent to the permit fee cost paid by businesses. The cost associated with collecting the fee will be included under adm inistration, monitoring and enforcement costs. h d 65 Box 6 Calculating net present values for costs and benefits There are three pr eliminary ste ps to calculate th e ne t present valu e of a stream of cos ts o r benefits: Firs t. reviewers should decide o n th e Dumber of years the analys is should co ver. As a rule of thumb, the number of years sho uld refle ct the: number o f yea rs that th e lo cal law restri ction is exp ected to appl y. Second reviewers shou ld deci de o n rill' rate at whi ch futu re cos ts and benefits sho u ld be: disc o un te d to be expressed in cu rren t dollar terms. Reviewers looking fo r a rul e o f thumb sh o uld consider usrng the long rcrrn bond rate (5.75 per cent as at 23 April 1998) . Th ird, rC\' ICW 'f)"s! o uld sum rh c total expect ed ben efits o r COSts for eac h yt"ar. T hese 3 -stim: te ' re required to ut ilise the net present value (N PV) fo rmula shown be low : w he re n Ct = = number of yea rs; . P I' = (=./ . L (I+r et . 11 . ,I e xpecte d be nefit o r cos t in each year: and d l~i:pu nr r A~ ume u III . 1Jaw 1~ '''"p r c;tc d ~ m : ;Ipply o r t - rate . y'<:" i'~ rid th r; 1 ,1 1 (,cnp b,oml ral~' i.~ 5,75 p'~ r cent. ill the a \.'erU~IIJ ~ e xam ple scenart I I. w her e: exp ect ed cos ts are estim ated to be S152 000 each year. h 1 ' PV,O cos . \yill be g ive n by: i' 'fl Y' c sts + 152 000 (1.0575)2 + - - - - ......+ ( 1.05 75)3 152 000 152000 (1 .05) 1 0 = 1 1:12 104 ie N PV o f co sts is estima te d to b e $1 132 104 The sam e calcu latio n shou ld be m ad e to deter m ine th e NPV of be nefits, In the ad ve rtising ex am ple, w h ere exp ected ben efits are estima ted to be S8 1 000 each yea r, the NPV o f benefi ts w ill b e g iven by: NPV be n efits = 81 000 1.05 + 81 000 (1.05)2 8 + -1000 ....... + -_ 81 (lOU (LOW (1.05) If) W3292 it' NPV of ben efit s is esti mated to be: S603 ,292 61; Step 7.3 Undertake sensitivity testing where necessary Where there is some uncertainty about a particular cost or benefit which can potentially affect the outcome of the cost-benefit assessment, it is advisable to undertake sensitivity analysis. For example, consider the worked exam ple in Box 6 above. It is estimated that a total ban on A-frame signs would yield a net present value of negative $10 0,0 00 - that is, the community is $10 0,000 worse off with the restriction than without it. Outsiders may be scept ical that profit foregone by local traders is as high as $2,000 each per annum. Reviewers may then set out to Step 7.4 Consideration of unquantified costs and benefits Sometimes reviewers will face the situation where they mu st con sider unquanrified costs and benefits. There are three reasons why reviewers may not quantify costs and benefits. First, in some cases it may be difficult to express a cost or benefit (eg; a social or environmental value) in dollar terms. Second, in some cases quantified assessment of costs and benefits will be extremely difficult cg because necessary information is not available. And third, in some cases the costs of empirical assessment would exceed the potential benefits from reforming a restriction and so reviewers judge that its quantification is inappropriate. In these situa tions. reviewers should at a minimum develop a list of likely qu alitative benefits and costs and assign an order of magn itude wherever po ssible. This type of assessment of costs and benefits will involve more judgment than empirical analysis. Reviewers shou ld bear in mind three principles when making such j udg m ents: • judgments should follow logi cally from the evidence presented in the final report, including public submissions and consultations: judgm ents should be seen to follow logically from the evidence presented in the report; and judgments should be clearly set out in the Local Law Review Summary Report and marked as judgments rather than estimates. establish upper and lower bounds to the S2,000 estimate. That is, they Illay decide that the actual amount will be at least S1,000 but not mo re than 52,SOO. Co sts and benefits can be weighted again first using the conservative S1,000 figu re and later using the $2,500 figure . This will produce a range rather than a point final estimate. As long as the range is within the bounds of neg ative numbers, the community will be worse off with the restriction. 67 In relation to environmental or social costs and benefits which art' not directly quantifiable, one way of estimating the order of magnitude of these items is to ask the question "what would the community be prepared to pay to achieve or maintain the benefit or avoid the cost?" Alternatively it may be possible to establish an order of magnitude impact of the cost if a restriction is removed. For exam ple, if without the tree clearing controls. vegetation was lost witlun an urban area, the impact on property values could be- estnnarcd by comparing with areas without similar tree cover, ~!'7I,1I to do uhcn there is II mix '?Fqll'lllt[!ll'd and unquantificd dl;'w For most 10c.11 law reviews. the weighing up of costs and benefits will comprise a mix of quantitative and qualitative results . In this circumstance. the net result should first becalculated usmg quantified information. This result should then be: considered against the qualitative results. For example, a comparison of quantified costs and benefits nl.lY reveal that there is a net pre-sent value of retaining a restriction of negative S!OO uno. That is, in present dollar tams, the restriction will cost the community S lOll ano. However, an unquantitied benefit might include substantially re-duced environmental damage to a much-enjoyed environment or watercourse, I n this siru.rrion. to come to a conclusion that the local law resrnction should be retained, the reviewers must rn.ike a judgme-nt that the disadvantage of increased environmental damage outweighs thequantified benefits associate-d with the without restriction situation. The reviewer should then explain the- basis on which they have formed this judgment. Ideally judgments of this kind should be based on independent evidence of the value- the community places on the particular environment or watercourse. 68 STEP 8 MAKE A RECOMMENDATION AND SUNSET CLAUSE INSERT A Once they have weighed costs and benefits, reviewer s should come to a decision as to whether the restriction should be retained or introduced. This Section guides reviewers through th e steps of mak ing a final recommendation and, where approp riate, setting a sunset clause on the restriction in the local law. Step 8.2 Deciding whether to introduce/continue a restriction Where reviewers find in Step 7 that a restriction produces net benefits to the community, there arc two possible recommendations available to council: Step 8.1 Deciding whether to repeal, reject or amend a restriction Where reviewers find in Step 7 that a restriction produ ces negative net benefits (ie net costs) to the community, there are four possible recommendations available to council: the local law should be repealed in whole; the local law should be repealed in part; the local law should be repealed subject to intermediate or transitional arr angements (eg m ove to the restriction should continue/be introduced unchanged; or the restriction is justified but local laws should be amended to reduce costs. If one of these recommendations is cho sen, reviewers should insert a sunset clause in the local law setting the timeframe for whi ch the restrict ion is valid before it mu st be reviewed again. Generally, sunset clauses should range from 1 to 4 years depending on: the sensitivity of the Issue to the community; and the pro spect of a change in market conditions (eg rapid grow th due to techn ologic al change , substant ial change in the number of sellers/ buyers. etc). fully deregulate but in stages rather than in on e step); o r the local law should be repealed bur replaced with less restrictive arrangeme nts that achieve the sam e objective. If one of these options is chosen, reviewers should proceed to Step 9 of this guide. 69 7/1 ST EP 9 FULFIL REPORTING REQUIREMENTS Once the recommendations of a review have been determined, the reviewers must fulfil two reporting requirements. They must: prepare a local law review summary report; prepare material to meet statutory annual reporting obligations. 4. Council contact: A person, usually the officer assisting the review panel, should be designated as the contact person. 5. Rcvicw Panel: The reviewer should list the name and occupation of each member of the review panel. This list should indicate the role of panel members, for example Chairperson, secretary etc. If any panel member has a direct interest in the outcome of the review this should be declared. If a panel member has technical expertise relevant to the review, this should also be noted. If insufficient space information should be attached to summary report form. Step 9,1 Preparation of a local law review summary report A summary report must be completed for all local law reviews. This report must be forwarded to the Oflice of Local Government. The Minister for Planning and Local Government is responsible for providing reports to the Premier on progress in implementing the review and reform of local laws which restrict competition. The Premier compiles a report for Victoria. including local govermnenr, to meet the legislative review requirements of the Competition Principles Agreemenr (CPA). A summary report form is provided in Appendix 1 which can be copied. This section provides explanatory notes to assist reviewers to complete this form. The numbers at left correspond with the headings all the pro forma in Appendix 1. 1. Council: State the name of the council 6. Usc l1consultants: If council has let the review, or part of the review, to external consultants, the name and contact details of the consultant should be listed and a brief description provided of services provided by the: consultant. If insufficient space information should be attached to summary report form. 7. Rel'icu': The reviewer should indicate the review model selected and the priority assigned to the review in Step 3 of these guidelines. 8. Timc framc ,1 repit'w: The reviewer should note the date that the local law review commenced and the date when it was completed. undertaking the review, 2. Name d the local law:The reviewer should t}. specify the name of the local law that is the subject of a review. Level ,~r consultation: The reviewer should list all individuals, groups and organisations consulted during the review and provide a brief description of key stakeholders ' views. The reviewer should also provide a list of all parties lodging formal submissions. 3. /V ,IIlITC (~r tlll' local lau: review: The reviewer should note whether the local law review concerns a proposed local law or an existing local law. Since it is anticipated that councils will undertake several reviews each year, it also is useful if a reference number is assigned to each review, for example. number 7 of 1998. 10. Cost l~r review: If possible, the reviewer should provide an estimate of the cost of the local law review. This should include stafl' costs, consultation costs and consultancy fees. 71 11 . Acti/Jity covered by the local lau-: The reviewer should note the activity or activities which 15. Summar)' (~r ((lSls /disadl'llIIt'(l!t'S associatrd with tilt' restriction 0/1 competition: The reviewer the local law covers eg parking, animal behaviour. itinerant traders, trading hours etc. should complete the cost summary in the pro forma. The reviewer should consider for 12. OI~;{'(til'C <1the local 1,,11': The reviewer should each cost: • the nature of the cost and cost category (eg reduced efficiency - economic cost): • how the cost arises; • who bears the cost: briefly describe the objectivets) of the local law, having due regard to information contained in Step 1.1 of these guidelines. The reviewer should provide a brief description of how the local law removes or ameliorates one or more of the market failures identified in Step \.\ The reviewer should abo note any consideration given to existing Commonwealth, state or local laws which nught potentially duplicate the objective of the IOCII law restriction under review. • quantum of cost; • information source: and • when the cost will be incurred (eg immediately, followmg repeal of other loral laws. ere), 13. Nature d the restriction ,1/1 competition: The 16.SIIlIll/ltiTY (~r bnr~fits /(Idvmlt'l.l!('" t1sJllcf.ltcd witli reviewer should record whether the review panel considers that the local law restricts competition or docs not restrict competition. Where the local law is considered to restrict compention, the reviewer should describe how it docs this. having due regard to information contained in Step 2 of these guidelines. Reviewers should make special note of any local law which directly mandates a restriction on competition. tht' restriction (III competition: The reviewer -hould complete the benefit sllllllllary in the pro forma. The reviewer should consider lor each benefit: • the nature of the benefit and benefit category (cg improve environmental amenity- social benefit): • how the bene/it arises: • who enjoys the benefit: 14. Consideration ,~( altematiiv, It-.'s restrictive, ,m..lIls quantum of benefit: brief [or ,,(hi{'l'il~1! tire obieaivc: Reviewers should list all alternatives considered and provide .1 • information source; and • when the benefit will be incurred (eg comment on the suitability of those alternanves (eg would result in similar/superior/uiferior outcome, less costly/more costly to administer etc). having due regard to material presented in Step 4 of these guidelines, immediately, following repeal of ocher local laws, etc). 17. m'(l!hill,1? Ill' (,lSC.' and bt'IU:/ics: Provide details of calculations. assumptions and judgments nude to assess costs and benefits, Indicate the type of cost benefit analysis undertaken (ie tull formal. parnal formal, informal) as described in Step 7 of the guidelines. 72 18. Recommendation: The reviewer should indicate which of the recommendation options identified in Step 8 of these guidelines applies. That is. where it is assessed that a restriction produces negative net benefits to the community, does the review panel recommend that: Step 9.2: Annual reporting requirements Councils also have specific annual reporting obligarions. They must include in their annual report: a statement of which local laws have been • the local law be repealed in whole? • the local law be repealed in part? • the local law be repealed subject to intermediate or transitional arrangements? or • the local law be repealed but replaced with less restrictive arrangements that achieve the same objective? 19. Where it is assessed that a restriction produces a positive net benefit to the community. does the review panel recommend that: • the restriction should continue/be introduced unchanged or • the restriction is justified by the local law but should be amended to reduce Costs. 20. Implementation: The reviewer should comment on how the recommendation is tu be implemented and the time frame for implementation. reviewed. the outcome of those reviews and an implementation schedule; a timetable for reviewing local laws still to be reviewed: a statement that they have complied with NCP principles and objectives in making any new local laws; and /or a statement detailing any new local laws that restrict competition. 73 i4 LOCAL LAW REVIEW SUMMARY REPORT PA G E 1 Council: Name of the local law: Nature of local law review: D Proposed Local Law D Existing Local Law Council contact details of responsible officer Name :............................................................... ........................ Telepho ne: Review Panel .. .. . Number of panel members: Name(s): Qua lification(s): .. Expertise: . Use of consultants Firm: Conta ct Name:............... ............ ............ ............................. ...... Telephone: Address:................... ..... ............ ................................................................................................. ............ Brief: . .. .. . 1 Review Model:.............................. Priority: D High D Medium 0 Low Date review commenced:............................... Date review completed: .. Consultation and Submissions (attach list of submittors and summary of submissions) 75 76 LOCAL LAW REVIEW SUMMARY REPORT PAG E 2 Cost of Review: External costs (consultants, advertising, panel fees etc) $ . Administrative costs (and other internal costs) $ . Total costs Activity covered by local law: $ \ Objective(s) of the local law: Dupl icate legislation identified: Nature of the restriction on competition: Consideration of alternative, less restrictive, means for achieving the objective Were less restrictive means of achieving the same objective identified? Descri be alternatives that were considered: . .. 77 - 7J? LOCAL LAW REVIEW SUMMARY REPORT PAG E 3 Summary of costs/disadvantages associated with the restriction on competition Types of costs: Administ rative, enfor cement and compliance: .. Efficiency costs: .. Social and Environmenta l costs: . Costs bo rne by consumers: . Summary of benefits/adva nt a g es associated with the restriction on competition Types of benefits: Administrative, enforce men t and compliance: _ . • •• • • • •• • •• • • •• • ••••• • •••• •• • • • • • • • • • 0 • • • • • •• • • • • •• 0 '0 •••• • • • ••• • • •• • • •• • • ' -• • • • •• •• • • • Efficiency costs: , .. Social and Environmental costs: . Costs borne by co nsumers: .. 79 - 8U LOCAL LAW REVIEW SUMMARY REPORT PAG E 4 Weigh ing up of costs and benefits (Brief descript ion of th e manner in which the assessment of costs and benefits has been carried out and t he 'key considerations ) ..... .................................... ......... ......... ........ ............. ......... .......................~ '. .'., ; '., - - '.' Conclusion/recommendation I ...................................................... ....... ....... .............. ................................................., [ I . . ... ... . . ... .. .. . ..... .. . . .. .. . ..... .. . . .. .. . . . . . . . . .. . . .. . . . .. . . .. . . .. . . .. . .. . . . .. . . .. . . . .. . . . . . . .. . . . . . .. . . · · _· _· · · · · · · · · _· _· · .. · · · · · · ·····_··_·· · · · · .. · _· ··· · ·····.. 1 : • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • ••• • • • • • • •• • •• • • • •• • •• • • •• • •• • • •• • • •• • •• • • • • • • • •• • • • • • • • • • • • • • • • •• • •• • • • • • • • • • • • • • • • • • • • • • • • __ • • • • • • • • • •• • • • • • • • • • •• • - _ • • ·• • • 1 I Sunset clause: Exp iry:: [, / 20 . . f------- Local law to be reviewed before : - - - - - - - --- - - - -[ List of attachments Indicate which of the followin g att achment s are completed and attached : Comp leted Attached I 1 2. Issues Paper Review Pa nel Assessment Report Council Report and Resolut ion D D 3. D D D D X1 82 SUMMARY OF LEGISLATION This pan of the Gu idelines Identities C o mm o nwealth and State legislation which control or regul ate various activities which Counci ls JIlay also seek to regulate through the use of Local Laws. It is not intended to be an exhaustive list, but rather provides an indication of som e of the Iegislation which may need to be considered in relat ion to local laws. C o uncils should ensure that there is no duplication of co nt rol and that any local law is consistent with the relevant Stare or Com mo nwealth legislation . Commonwealth Legislation Agricultural and Veterinary Chemicals Act 1994 Regulates the use of prescribed chem icals. Agricultural and Veterinary Chemicals Code Act 1994 Allow s for the evaluation , approval and control of the su pply of active constituents for proposed or existing agricultural and veterinary chemicals. Citizenship Act 1948 Regulates the requirements for persons to be citizens of Australia and the hold ing of citizenship ceremonies, Delivered Meals Subsidy Act 1970 Provides for Commonwealth assistance towards the delivery of meals to aged and invalid persons by an "eligible organisation" ego a religions organisation; a local governing body. Disability Discrimination Act 1992 This Act aims to eliminate discrimination against people with disabilities, as far as possible, in areas such as work; education: the prov ision of goods and services; existing laws; administration of Commonwealth laws and programs. Fur thermore, it seeks to en sure that people with disabilities have the sam e rights to equality before the law as other members of the community, and to promote the recognition and acceptance within communities that people with disabilities haw the same fundamental rights as the rest of the community. 83 Endangered Species Protection Act 1992 Promotes the recovery of species and ecological communities that are endangered or vulnerable, as well as endeavouring to prevent any danger to other species. It seeks to do this by promoting public understanding and public involvement ill the conservation of species. The Act lists endangered flora and fauna, and provides for the preparation and implementation of recovery plans (which are the responsibihry of the Commonwealth) and threat abatement plans . National Food Authority Act 1991 Establishes Food Advisor y Conuuittee and Food Standards Code. National Measurement Act 1960 Establishes a national system of units and standards of measurements of physical quantities. and provides lor the uniform use of those units throughout Australia Protection of Moveable Cultural Heritage Act 1986 Hazardous Waste (Regulation of Imports and Exports) Act 1989 Regulates the import and export of hazardous waste [0 Seeks to protect Australia 's movable cultural heritage (referred to in s7 as objects that are important to Australia for ethnological. archaeological, historical. literary. artistic, SCIentific or technological reasons) . Also supports the protection by foreign countries of their heritage of movable cultural objects. sl S establishes a National Cultural Heritage ensure that it is disposed of safely so that people and the environment, both within and outside Australia. arc protected from the harmful effects of waste. 5S12 and 13 state that in order to Import or export hazardous waste, a permit needs to he obtained from the Minister. Committee. Industrial Chemicals (Notification and Assessment) Act 1989 Provides for a national system of nonficarion and assessment of industrial chemicals tor the purposes of protecting the Austra lian people and environment from the potential risks to public health and safety associated with the importation, manufacture or use of chemicals, Public Order (Protection of Persons and Property) Act 1971 Regulates the conduct of people taking part in an "assembly" on Commonwealth sites. Under the Act, it is an oflence to cause actual bodily harm or damage to property in respect of Commonwealth premises. and the premises and personnel of Dipl omatic and Spe cial Mi ssions, Consular Posts and International Organisations. Interstate Road Transport Act 1985 Governs registration of motor vehicles and trailers. Section 25 of the Act states that a person shall not carry on long distance interstate road tr.lI1sport unless she or he hulds a federal operator's licence or a state operator's licence. There is also provision under s44 for police officers and inspectors to have the power to stop and search motor vehicles if they believe, on reasonable grounds. that the vehicle has been involved in a contravention of the Act or of a federal road safety standard. X4 Telecommunications Act 1997 Telecommunications (Environmental Impact Information) Regulations 1997 Regulations specify the information that must be set out in a statement under subclause 55(4) of Schedule 3 to VICTORIAN LEGISLATION Domestic (Feral and Nuisance) Animals Act 1994 s42 of this Act deals WIth the power of councils to make local laws with respect to the Act (which relates to the the number of installation of any part of a telecommunications network proposed before 1 January 1999 and not authorised by Div 3 of Part 1 of the Schd) about the environmental impact of the facility. Statements must include details of any local government reqmremenrs that need to be satisfied. in addition to a description of the facility and location: an environmental impact assessment of the facility and the measures being taken to dogs and cats that may be kept on premises situated within the municipal district of the council. The local law may prohibit or regulate the keeping of dogs and cats in areas where threatened native fauna are at risk of attack. Council may also make laws to require dog owners to clean up their animal's faeces in public places. If the council has made a local law prohibiting the keeping of dogs or cats in a specified area, an officer of the council may destroy any prohibited animal found at large in the area. Environment Protection Act 1970 This Act deals with water, atmosphere and land pollution. Part VIII is concerned with the control of noise. s48A refer ring specifically to unreasonable noise from residential premises. Such noise is an offence under the Act. Fair Trading Act 1985 Deals with unfair or undesirable trade practices in an effort to protect consumers. Prohibits misleading, deceptive and unconscionable conduct. Food Act 1984 All food vehicles. not operated by or on behalf of the Crown. must be registered with the council. In order to protect the environment. Trade Practices Act 1974 This Act aims to protect the welfare of Australians by promoting competition and fair trading, and providing for consumer protection. s52 prohibits a corporation, in trade or commerce, from engaging III misle-ading or deceptive conduct. s53 prohibits false or misleading representation in connection with the supp ly of goods or services. Part IV deals with restrictive trade practices, and renders contracts, arrangements or understandings that restrict dealings or affert competition, unenforceable. be registered, the vehicle must first be inspected, and a Food Safety Programme needs to have been devised. 85 Health Act 1958 The fimcnon of every council under this Act is to seek to prevent diseases, prolong life and Local Government Act 1989 Part 5 of this Act is concerned with local laws. sill (4) states that: if a planning scheme is in force in the municipal district of a council, the council must not make a local law which duplicates or is inconsistent with the planning scheme. promote public health through organised programmes, (s2lJ) Every 3 years , a Municipal Public Health Plan must be prepared by the council , According to the Act. a council must remedy as far as possible all nuisances in its municipal district. For the purposes of the Act nuisance can amount to refuse. noise. and emissions. There are regulations under the Act tor protecting waterways, and councils may be directed by the Chief General Manager to clean up offensive waterways. (s6lJ) Road Safety Act 1986 Provides for sate. etficient and equitable road use. Under the Act , a person cannot park a car in a council controlled area contrary to the inscription on any sign associated with the area or part. (sl)()E) Summary Offences Act 1966 The main purpose of this Act is to Litter Act 1987 Prohibits and regulates the deposit of litter in the maintain public peace and order. Offences included under the Act are obstruction of footpaths (55): public drunkenness (ss13- 16); wilful destruction and damage of property (sY): lighting of fires m the open air (s11): obscene. threatening, insulting and abusive behaviour in public (s17). environment ofVictoria. s5 of the Act sets our a basic prohibition on littering. Note that the Act does not apply to the deposit of any litter that would constitute an offence under the Environment Protection Act. (s-l) xr, EXTRACTS FROM COMPETITION PR INCIPLES AGREEMENT BETWEEN THE COMMONWEALTH AND THE STATES Legislation Review 5. (1) (7) Where a review issue has a national dimension or effect on competition (or both), the Party responsible for the review will consider whether the review should be a national review. If the Party determines a national review is appropriate, before determining the terms of reference for, and the appropriate body to conduct the national review, it wiII consult Parties that may have an interest III The guiding principle is that legislation (including Acts, enactmen ts, Ordinan ces or regulations) should not restrict competition unless it can be demonstrated that: (a) the benefits of the restriction to the community as a whole outweigh the costs; and (b) the objectives of the legislation can those matters. (H) only be achieved by restricting competition. (2) Where a Party determines a review should be a national review, the Party may request the Council to undertake the review. The Council may undertake the review in accordance with the Council's work program. Subject to subclause (3), each Party is free to determine its own agenda for the reform of legislation that restricts competition. (3) Subject to subclause (4) each Party will develop a timetable by June 1996 for the review, and were appropriate, reform of all existing legislation that restricts competition by the year 200n . (4) Where a State or Territory becomes a Party at a date later than December 1995, that Party will develop its timetable within six months of becoming a Party. (5) (9) W ithout limiting the terms of reference of a review, a review should: (a) clarify the objectives of the legislation; (b) identify the nature of the restriction on competition; (c) analyse the likely effect of the restriction on competition and on the economy gt'uerally; (d) assess and balance the costs and benefits of the restriction; and (e) consider alternative means for achieving the same result including non-lcgrslative approaches. Each Party will require proposals for new legislation that restricts competition to be accompanied by evidence that the legislation is consistent with the principle set out (6) III subclause (1) Once a Party has reviewed legislation that restricts competition under the principles set out in sub clauses (3) and (5), the Party will systematically review the legislation at least once every ten years. (10) Each Party will public an annual report on its progress towards achieving the objective set out in subclause (3). The Council will publish an annual report consolidating the reports of each Party. 87 Application of the Principles to Local Government 7. (I) The principles set out in this Agreement will apply to local government, eve though local governments are not Parties to this Agreement. Each State and Territory Party is responsible for applying those principles to local government. (2) Subject to subclause (3), where clauses 3, -+ and 5 pernut each Party to determine its own agenda for the implementation of the principles set out in those clauses, each State and Terrrtory Party will publish a statement by June 1996: (a) which is prepared in consultation with local government; and (b) which specifies the application of the principles to particular local government activities and functions, (3) Where a State or Territory becomes a Party at a date later chan December 11)95. that Party will publish its statement within six months of becoming a Party. 88