W~mAnstra\la

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LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

APPliCATION OF THE COMPETITION PRINCIPLES AGREEMENT TO LOCAL GOVERNMENT ACTIVITIES AND

FUNCTIONS UNDER THE NATIONAL COMPETITION POLICY PACKAGE

WESTERN AUSTRAUAN
MUNICIPAL ASSOCIATION

JUNE 1996

GOVERNMENT OF WESTERN AUSTRALIA

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LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

APPLICATION OF THE COMPETITION PRINCIPLES AGREEMENT TO lOCAL GOVERNMENT ACTIVITIES AND

FUNCTIONS UNDER THE NATIONAL COMPETITION POLICY PACKAGE

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DIiPAIlTMIiHT Of LOCAL OOVEANWENT

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INTRODUCTION

This publication contains the local Government Clause 7 Competition Policy Statementllocal Government Statement) applying specific 'Competition Principles' to the activities and functions

of local of

government pursuant to the

National Competition Policy pockage. It also contains brief overviews of the National Competition Policy package and which complement competition reform s. The local Government Statement must local government activi ties

be

published and provided to the

Notional Competition Council by 30 June 1996 to comply with Western Australia 's obligations under the National Competition Policy package lPackage). Throughout this document a reference to "local government" includes local government operating collectively or individually. The local Government Statement has been prepared by the local Government Competition Policy Committee ICommittee). The Committee is a ioint state and local government working party, comprising representatives from the Western Australian Municipal Association IWAMA), the Institute of Municipal Management (lMM), the Deportment Ministry

of

local Government, the

of

Fair Troding and the State's Competition Policy UnitITreasury).

The origins

of the

local Government Statement can be found in clouse 7 of

the Competition Principles AgreementlCPA), wh ich is part of the Package. Clouse 7 of the CPA obliges the State, in consultation with local government, to apply, and publish the application

of,

the follOWing "Competition

Principles' to local government activities and functions : • • • competitive neutrality; structural reform

of

public monopolies; and

legislation review.

Whilst the local Government Statement only imposes obligations under the Notional Competi tion Policy agreements, it is also complementary to recommendations

of

the Structural Reform Advisory Committee and ather

reform agenda that are being addressed through other state and local government reform programs.

This document is separated inta three parts:
• Par!

A:

an overview of the Package;

• Part B: an overview of micro-economic activities which are complementary to the philosophy • Part

of

the Package; and

C:

the local Government Clause 7 Competition Policy Statement.

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CIAIJ S E 7 COMPETITION POLICY STATEMENT

OVERVIEW OF THE NATIONAL COMPETITION POLICY PACKAGE
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lOCA L GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

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PART A OVERVIEW OF THE NATIONAL COMPETITION POLICY PACKAGE

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Council of Australian Governments
Since the early 1990s State, Territory and Commonwealth Heads

of

Government through the Council of Australian Governments ICOAG) have been committed to achieving a nationally consistent approach to competition policy in Australia . In 1991 all Heads in Table 1.

of Government agreed that a national approach to

competition policy should give effect to the four fundamental principles set out

Table 1: Fundamental Competition Principles
• No porticipont in the market should conduct against the public interes!. • As far as possible, universal and uniformly applied rule's cf Il)qrnet conduct should apply to all market participants regardless of Ihefr torm of business ownership. •
4

be able to

engage In CIIlti-compelilive

Conduct with onti-competilive poteoliol scid to be in the-public ihter~st should be assessed

by an apprapriale transparent assessment procedure,

with provision for review, to demonstrate the nature and tncidence of the public casts and benefits claimed. • Any chonges in the coverage or nalure of campetition policy s~ould consistent With, and suppart, the general thrust of reforms: II) to develop an open, integrated domestic market for goods and services by removing unnecesscry borriers to trade and cpmpelltlon; and III) in recognition of the increasingly nalianal operation reduce complexity and odministrolive duplication.

be

01 mOlkel5, 19

In 1992 Heads of Government commissioned the Independent Committee Inquiry into 0 National Competition Policy, chaired by Professcr Frederick Hilmer. IHilmer Inquiry) to review the application of the Trade Practices Act 1974 and to advise on:

of

10) whether the scope of the Trade Practices Act 1974 should be expanded
to deaf effectively with anti-competitive conduci in areas

01 business currently oulside

of persons Ihe scope of the Acl;

ar enlerprises

Ibl alternalive means for addressing market behaviour and slructures currently oUlside the scope of the Trade Practices Act 1974 ; and Ic) ather matters directly related 10 the application of Ihe fundamental principles in Table 1.

lOCAL GOVERNMENT ClAUSE 7 COMPETtTION POltCY STATEMENT

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lOCAl
GOvERNlv'IfN T ClAUSE 7
COMPE TITION

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POliCY STATEME M

The Hilmer Inquiry identified five specific elements namely, policies that: • • • • limit the anti-campetitive conduct of firms;

of competition

policy in

Austrolia that required a notional approach to enhancing competition ,

reform regulations which unjustifiably restrict compelitian; reform the slruclure of public monopolies to facilitate compelifio n. provide third party access to cerlain facilities that are essential for competition; and

•

foster compefilive neulrality between government ond private busin'lS!;6S when they compete.

in 1993 the Hilmer inquiry reported to COAG which then established a Micro-Economic Reform Working Group to develop the recommendations the Hilmer Report into the Package. The Package was accepted and endorsed by COAG at its April 1995 meeting. The Package comprises of the folloWing : 1. Competition Policy Reform Act (Clthl 1995 (CPR Actj;

of

2. Conduct Code Agreement (CCAI; 3. Competition Principles Agreement ICPAI;
5

4. Agreement to implement Competition Policy and Related Reforms
IFinoncial Agreement); and 5. Competition Policy Reform Act IWAI 1996 [to be enacted by 21 July 1996. The Package provides uniform protection of consumer and business rights and increases competition in many sectors of the economy previously protected from a consistent and coherent approach to competition principles and regulation. in agreeing to the Package, Heads of Government occepted that a notionally integrated approach to the promotion of campetilion and business regulation is crucial to Australia 's future economic prosperity. Consumers ore expected to benefit from lower prices for goods and services, while businesses will benefit from a more 'level playing field' between the public and the private sector in markets in which they compete. The Package embodies the common sense philosophy that businesses, public or private, should not be permitted to engage in anti-competitive conduct unless that conduct is justifiable against a transparent public benefit analysis.

As stated in the second reading speech to the Competition Policy Reform Act
IClthl 1995:

"it is not a radicol notion that consumers generally benefit fram greater competition and that, where possible, greater competition should be encouraged. "

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLIC Y STATEMENf

lOCAl

GOVfRNoVf NT ClAUSE 7
COMPETITION POLICy

StAIEMENT

Specik a lly, the Package implements the competition policy reform strategies outlined in Table 2. 1

Table 2: Campetitian Reforms under the National Competition Policy Package

Policy Element

Purpose
To limit Ihe anli-campatmlie conduct 01 persons corrying on a buslnes, including local government. regafdle!,S of their ownership

Example
- Coverage of Port IV of the Trade Pradic~ Act is extended to Ihe unincorporated leCtor Ilncludlng the professions) and 10 government - WA Competition Policy Reform Act 1996 puts beyond doubt the application of po i t IV 6f rhe Trade Practices Act to local g overnment, It Is carrying on a business

1. Extension 0 1 the coverage of the Trade Praciices Act

where.

2. Third party

access

To provide access to 0 third por ty. a t fa ir prices and cond itions, 10 facil ilies essential for competi tion lie someone ofher tha n the owner/supplier of the facility - eg a potenlial new user or existing user) To prevenl lhe misuse of monopoly pow ers of government business activilies To reform the structure of governmenklwned monopoly businesses where il is proposed 10 inlroduce competition To remove benefits land costs) which accrue 10 government business acHvilies as a result oflheir public ownership

- Access by a third porty to laeihties· such os telecommunication cables, gas/waler pipelines and railway tracks or other loe1111ies Ihal ore notionally significant - Commercial negotiations in Ihe fllst tfl£lhrtce failing which binding orbilra tion

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3. Prices oversighl

- Consideration of the inlroductian of independent prices oversight mechanisms to oversIght priel~g policies

4. Siruciural reform

- Restructure of the mono poly or near monopolies into seporate enlities, aClually or norninolly, 10 increase the potential for compelition in h ose markets.

5. Competilive
neulrality

- Requiremenl for significant governm ent busfn= activities to pay taxes (or tax equivalent) - Removal of regulations w hich provide specIa l advantages for government business <lctMlles when competing with the private sector -Review of all legislation and reg ulations (lndU~l ng By lows and local lows) that restrict I:otnpeijllan - Ensuring that new legislative proposals ore considered with respect to their elfect on competition

6. leg islati on review

To review governmen t regulation which re:strid s competition

7. Reform packages for Individual mdr elS

To further reform key sectors of the economy already subject to COAG reforms

- Restructuring and/or introducing fur ther competition into the electricity, g as, road and water industries

I Adapred from Table 2 National Compelition Policy 01 a Glance: Qld Government Issues Paper No 2. 1996

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GOVIICNMENT ClAUSE 7 COMPETITION POlO

SIAfEMENT

2. Application of the Package to Local Government functions and activities
While local government is not a party to the Package, representatives from the Australian Local Government Association IALGA) w ere Involved in the COAG process leading to the development of the Package. ALGA w as also a member of the Micro·Ecanomic Reform Working Group . Under clause 7 of the CPA, Heads

of Government agreed

to publish this

statement, by June 1996, specifying the application of the structural reform , legislotion review and competitive neutrolity Competition Principles to local government activities and functions .

3. What does National Competition Policy oblige Local Government to do?
For immediate purposes, local government should moke sure that it is familiar with the Package and understand some of the changes that will apply to it from as early as July this year. While this document only covers the application

of

the three Competition

Principles Isee Intraductian), there are ather important chonges that will affect the way that local government carries aut its business functions and activities Those aspects

of

thE' Package will also need to be understood and

appropriate aelian taken. Far example, histarically there has been confusion regarding the application of the Trade Practices Act to local government business activities. From 21 July 1996 that confusion will be put to rest, by virtue

of

the Western

Australian Competition Policy Reform Act 1996, which will extend coverage

of

Part IV of the Trade Practices Act 1974 Ithe 'competitive conduct rules) to

all "persons' that are "carrying on a business" in Western Australia . This will include local government business activities. Although the Local Government Stotement does not cover the extended application of the Trade Practices Act to local government activities, local government must take steps to comply with the competitive conduct rules and avoid any possible breaches Act. In addition to the extension at sections 1, 2, 3 and 7

of

the

01

Part IV 2.

of

the Trade Practices Act, local

government should be aware of other significont reforms w hich are detoiled

of Table

Badies such as WAMA's Competition Policy Reference Group, the IMM, the Deportment

of

Local Government, the Ministry of Fair Trading and the State's

Competition Policy Unit w ill

be

undertoking various educotory roles to ensure

thot local government is aware

of the

implications of the Package on its

activities . Further infarmation, in the first instance, can be sought from either WAMA or the Department of Local Government.

4. Compliance with the Local Government Statement

It is primarily the responsibility of local government to ensure that it complies
w ith the Locol Government Statement. Provided that the principles are embraced a nd implemented in a consistent manner, it w ill

be

le~ to local

LO C A L GO V ERN M EN T CL A USE 7 CO M PETITION POLIC Y STATEMENT

lOCAl
GOVf~Nfv'lEN T

CLAUSE 7 COMPE TITION

POliCY
SIAI EMENI

government to determine its own priorities and policies for implementation of the obligations. To ensure that the Competition Principles ore being implemented. local government will be required in their annual reports to verify compliance with this statement. This process is consistent with the new reporting requirements under the Locol Government Act (19951. The annual reports must include suffiCient information to allow interested porties to ascertain whether or not the principles have been complied with. This will include a requirement that local government also indicate areas where it does not intend to implement the Competition Principles, accompanied by evidence of a transparent and open analysis supporting that conclusion.

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lOCAL GO VERNMENT C LAUSE 7 COMPETt TtON POl t CY STATEMENT

LOCAL GOVERNMENT ACTIVITIES WHICH COMPLEMENT THE COMPETITION REFORMS

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PART B LOCAL GOVERNMENT ACTIVITIES WHICH COMPLEMENT THE COMPETITION REFORMS

1. Local Government Commitment to Micro-Economic Reform
Local government in Western Australia employs around 10,000 people, which is approximately 7% of the public sector work force in the State. This is a significant area of public activity that is pursuing management best practice and other innovative approaches to beNer service delivery in order to increase efficiency and achieve lower prices in the delivery of services to
its constituents.

Individually, and collectively through organisations such os WAN\A and the IMM, local government embraces the philosophy underpinning the Package and is commiNed to the added impetus that the package places on further
micro-economic reform.

Local government commitment to micro-economic refarm and beller service delivery con be seen in a variety of for reaching reform programs. Ii is the development

of such refarm programs that will naturally complement the of local

national competition principles embocied in the Package. Implementation of the Package in Western Australia is therefare a natural extension government commitment to further micro-econamic reform.
10

Section 2

of

Part B sets out a variety

of

refarms already under way in

Western Australia that demonstrate the strong commitment of local
government 10 micro-economic reforms .

2. Local Government Achievements and Policies in Micro-Economic Reform
The implementation of the Competition Principles is not a distinctly new and different requirement far local government. A number of the principles have been adopted in other reform processes currently occurring in local government. These refarm processes are considered in more detail below. In summary they include: • enoctment

of the new Local Government Act 11995) giving local

government more scope to undertake activities for the goad of the district and requiring greater transparency and accountability in their operations; • the development

of

reform programs such as Local Government

Competition Policy Reference Group established through WAN\A; • the ongoing production of detailed statisticol profiles far local government which will be used as a basis for benchmarking; • changes to the financial operating system of local government including the introduction • the release

of MS27;

of

the Contemporary Issues in Local Government document,

draWing local government allentian to contemporary management and
organisational issues;

•

the establishment of the Structural Refarm Advisory Committee (SRAC) to promote greater efficiencies in local government operations; and

LOCAL GOVERNMENT CLAUSE 7 COMPETtTtON POLtCY STATEMENT

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lCX:A!
GOVfRNM[NT

CLAUSE 7
COMPETIT ION POliCY

STATEMENT

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studies to identify the possible allocation of administration costs to specific local government program areas .

(A) The Local Government Act (1995)
The local Government Act 1995 IAct) is enacted on the principle of increased accountability to local people and transporency in local government operations. While the Act ollows locol government 10 undertake activities "far the gooc of the district", with a generol increase in their legislotive outonomy, their operotions and actions must be open to public scrutiny at all appropriate times. In a range of activities local government is required to consult and obtain feedback from the community, including in Ihe development of local lows, principol activity plans and differential rating proposals. The Act, and ossocioled regulations, require detailed disclosure notes associated with budget and annual financial reports 10 enable the commun ity to mare readily assess the financial position of local government. In a range of activities, the public will now have the opportunity to become involved in local government activities, including compulsory public question time at council and committee meetings; and improved objection and appeal rights against local government deCisions. In porticular the Act gives local government the scope to undertake land development and trading undertakings as commercial activities. This w ill allow local government to become a competitor in certain commercial aclivities. The regulatory requirements will explicitly require thai those commercial activities be budgeted and accounted far seporately, which is on important step in ensuring transporency. This will allow Ihe community to accurately judge the perfarmance of local government in such undertakings.
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(B) WAMA's Local Government Reference Group On Competition Policy
WNM supports systemic and durable change in local government management and supports the seporate identification of local government activities, including the profit and non-profit elements and monopoly characterislics wilhin them. Implementation of the local Government Statement w ill require local government to operate on the some basis as private prOViders, which will assist local government in adopting quality cost management practices . A number of reform strategies are being pursued to support local government in understanding and implementing the changes that w ill occur as a result of the Package. WNM strongly supports the principles in Ihe local Government Statement and is keen 10 ensure thai all spheres of government w ark togelher in a coordinated commitment to implementing the obligations. In doing so, WNM w ill use Ihe Integrated local Area Planning II LAP) principles of leadership and the introduction of notional competition policy to encourage local government to evaluate Ihe benefits of corporatising their business units and making their activities competitive ond Iransporent .

t nCAI GOVERNM ENT CLAUSE 7 COMPETtTtON POLIC Y STATE M ENT

lOCAL

GOvERNMENT
ClAUSE 1 COMPETITION
f'OL K:Y

,

STA E T MENT

In January 1996 WANA established the local Government Reference Group on Competition Policy (Reference Group) to provide input into the implementation 01 competition policy in Western Ausirolio . The Reference Group comprises 01 18 elected representatives and senior ollicers from a diverse range of local governments throughout the State. The principal objectives 01 the Reference Group are: • to coordinate local government's commitment to implementation 01 the Clause 7 Statement; • to educate and coordinate a consistent approach to complionce with Part

IV of the Trade Practices Act;
• to assist in the management and promotion 01 systemic chonge resulting from the Package; • to assist in the establishment 01 principles to determine the merits and means of seporoting competitive elements of local government operations; • to assist local government in implementing "business principles" 01 performance measurement in service delivery as 0 precursor to benchmarking efficient operations, •
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to establish principles to delermine appropriate price and service regula lions;

•

to provide appropriate training and development 01 local government
51011; and

•

to coordinate implementotion Ihe of Package, generally.

In odd ilion 10 the Reference Group, Ihrough funding provided under the auspices of the Federal Governmenl

Local Government Development Program

(Development Programl, WANA is furlher supporting local government commitment to the Package. Through Ihe Developmenl Program, WANA is pursuing a number 01 micrcreconomic reform aims and initiatives on behalf of locol government, namely: • assisting local government to maximise efficiency Ihrough competitive business slructures and monagemenl lechniques; • assisting non·prolit local government services to become more ellicient and business·like; • creating on information bose for local government business activity likely
10

be ollected

by compelilian policy to provide advice an relevonl issues;

and • fostering a business-like attitude of Ironsparency and accountability far funding and the meeting 01 community needs throughout all activities 01 local government.

WANA has identified a series of prajecled oulcomes thai will resull from its commitments 1 the Reference Group and Development Program , including : 0 • developing an underslonding of how and when local governmenl will be affected by competition poficy;

lOCAl GOVERNMENT ClAUSE 7 COMP ETITION POltCY S TATFMFNT

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• developing
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GOVERNMENT OAUSE 7 CO\II.PE 1IT10N POL ICY

ST MENT ATE

more informed understanding across all spheres of

government regarding the costs and benefits of the implementation specific reforms; •

of

developing a mare informed understanding across local government of how to structure business units ond account for community service obligations;

•

identifying options for local government to achieve competition policy objectives which enhance competition and comply with the Trade Practices Act;

•

facilitating the education and training of senior local government stoff, not only to comply with the new regime, but more importantly to improve the delivery of goods and services, particularly in any monopoly or neor monopoly oreo where commercial revenue is received;

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•

improving the performance of "non commercial " activities such as human service delivery and strategic planning;

•

reducing the regulatory regime that customers of local government ore confronted with; and

•

generally supporting systemic change in local government activities and functions .

(e) Local Government Summary Stati.tic.
For several yeors the Department

of

Local Government, in conjunction with

WNM and the IAIWI, has produced

Local Government Summary Statistics

covering populotion choracteristics, revenue and expenditure data in respect of local government functions and other relevant economic performance indicotors. The latest edition, in 1995, identified 175 statistics for each local government in Western Australia. These statistics ore presented on both a regional average and State average bosis to assist indiVidual, regional and state wide camporison about performance to be mode.

It is antiCipated that in the 1996 edition, selective key performance indicotars
will be highlighted to enable comparisons between local governments on porticular issues considered to be highly important from a benchmarking perspective. In terms

of comporotive

finanCial performance, five key

performance indicators have been identified by local government for inclusion in regulations associated with the Act. Those five key indicators ore: • • • • a current assets and liabilities ratio; a debt ratio; a debt service ratio; a rate coverage ratio to assess the degree of dependence upan revenue from rates; and • on outsfanding roles rolio.

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,IAW;F 7 rOMPFTITtON POltCY STATEM E NT

lOCAl GOVERNMENT CLAUSE 7 COMPE TlTION
POliCY

STATEMENT

These indicotors will provide useful comporative dota for assessing the financial performance of local governrnent individually and collectively.

(D) Changes to the Financial Operating Systems

In 1990, the Australian Accounting Reseorch Foundation released Exposure Draft 50 which dealt with financial reporting by local governrnent. The Exposure Dra8 identified concerns about the adequacy and comporability financial reports prepored by Iocol governments in Australia. Western Australia adopted the recommendations, and in 1994 local governments were required to adopt full accrual accounting under MS27. The introduction of MS27 has resulted in a more transporent and simplified reporting structure. The changes have required local government to include depreciation in their end of year accounts and to value infrastructure assets. This ensures that local government accounts for the full cost

of

of

their operations

which enhances transparency and comparability with the private sector.

(E) Contemporary Issues in Local Government

In 1994, the Department
14

of

loco I Government produced the Contemporary

Issues in local Government document, presenting the results of a survey which identified the extent to which modern management and organisation principles where being implemented by local government. The survey and subsequent report considered issues such as: • • • • • • • competitive tendering; contracting out; approaches to asset management; the use

of

performance contracts and performance appraisal;

the use of forward plans; the extent of resource sharing; and the prevalence

of

regional cooperation.

A follow up survey will be issued in the ensuing months with the assistance the Australian Bureau of Statistics. Following the survey, 0 second

of

Contemporary Issues in Locol Government report will assess local government
progress in adopting various modern management principles.

(F) Structural Reform Advisory Committee

The Structural Reform Advisory Commillee ISRACI was formed in late 1994 to consider the extent to which local governments are able to provide for a community of interest and deliver efficient and effective services to the community, with respect to the requirements and implications of the new Act. SRAC recently reported to the Minister for local Government, following broad analysis of the local government system in Western Australia. SRAC noted

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that significant and positive management initiatives have been implemented by local government in recent years, but stressed the need for continued commitment to embrace further micro-economic refarm. SRAC noted that a significont shih is required in the way that local government traditionally provides services. While the new Act will assist in this regard, SRAC noted that local government must embrace further structural reform and question the best way for it to organise its physicol, financial and human resources to achieve a more competitive and productive organisation that meets the needs and desires of the community it serves. Implementation this statement will further those obiectives. The SRAC recommendations address the managemenl options and strategies available 10 local government, including : • • • • • • • unification and boundary change; benchmarking and performance measurement; competition in service delivery; resource sharing; regional cooperation; customer service policies; and community participalion mechanisms.

lOCAl GOVERNMEN T
CLAUSE 7 COMPETIT ION POliCY

STAT EMENT

of

the principles in

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SRAC noted Ihe substantial oppartunity 10 obtain be~er value for money for constituents through a consi stenl commitment to competilion and an increased adoplion of contracting out and competitive tendering, in areas where it is feasible to do so.

(G) Costing of Local Government Functions
In 1995 SRAC commissioned consultants to examine the means by which local government attributes costs 10 its activities. The consultant's proiect considered the currenl situation with regards to the treatment of costs, and the practicality of allocating administration and other costs to the oclivities of local government. The consultant will now develop methods and guidelines to assist local government to fully cost its activities. The proiect is expected to be completed by the end of June 1996. Phase 1

of

the proiect revealed a diversity

of

current practices allocating

costs, amongst a general recognition by local government that it is necessary to improve cost allocation methods in order to facilitate comparability of financial information between local governments and establish the true costs of providing services. The review highlighted the impartance of allocating direct costs w herever possible and the need to allocate indirect casts an an accurate basis. The consultants have recommended that: • allocation

of direct costs

should continue, with improvements to

procedures to maximise accurate allocation;

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COMPETtTION POliCY STATEMENT

lOCAL GOVE RNMENT ClAUSE 7

COMPE T ITION
POlICY STATE MENT

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allocation of indirect costs to other functions as for as possible, through activily based cosling and other methods;

•

expenses incurred in raising general purpose income )such as rates and charges) should be shown separalely ond charged against those
revenues;

• •

governance costs should be shown separately; administration costs, other than expenses charged against income and governance, should be allocated to other functions; and

•

prescription of the allocation guidance manuals.

of administration

costs in the Accounting

Directions, w ith more detailed guidance on allocation methods in

The study, once completed, w ill lead to greater consistency in cost allocation and will assist the reform initiatives contained in the new local Government Act by facilitating the compilation of more consistent data for performance comparison and the development of benchmarking standards.

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LOCAL GOVERNMENT CLAUSE 7 COMPETIIION POLICY SIAIEMENI
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Application Structural

of

Competitive Neutrality, and Legislation

Reform

Review principles to local governmen t activities and functions in Western Australia

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PART C LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT
Application of Competitive Neutrality, Structural Reform and Legislation Review

I!rinciples to local government activities and functions in Western Australia

The following lext is Ihe local Governmenl Sialement. It is separaled inlo 4
sections:

• • • •

General. Compelilive Neutrality. Siruciural Refarm of Pubhc Monopolies. legislation Review.

Each sec lion commences with the Principle as set out in the Competition Principles Agreement. This section appears in bold and in a box. This is followed by a section enlitled Application which is text elaborating on the principle and explaining its meaning and relevance to local government. local government must comply wi th each PrinCiple. The PrinCiples are numbered consecutively in accordance wilh Ihe
18

Compelilion Principles (as set out in Ihe Competition Principles Agreemenll to which Ihey relale (eg Competitive Neutrality Principle number I is numbered CN . I etcl. The same numbering is used for the Application seelion. The PrinCiples reproduce the relevant texi allhe Competition PrinCiples Agreement, in an ada pled form, 10 be applicable 10 the functions and aclivihes allocal government. After each PrinCiple. Ihe relevant text Competilion Principles Agreemenl is ciled . A copy of Ihe Competilion Principles Agreement is set oul at Auachment 1.

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lOC A l GO V ERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

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GENERAL

PRINCIPLE G.l
Without limiting the maHers that may be token into account, where thrs statement calls: 101 for the benefits of a particular palicy of course of odic" to against the costs of Ihe palicy or the course of aelian; or for the merits or appropriateness action to be determined; Of lei for an assessment of the mast effective means of achieving a policy abjeelive; the following maHers sholl, where relevant, be token into accoont: Idl government legislalion and policies rela ling to ecologically wsltlinoble development; lei social welfare and eqully considerations, including cornmunl ty seI'Vics obligations; IfI government legislation and policies relating to maHers ouch as occupational heahh and sofety, industrial relations equity; Igi economic and regional development, including emplcrymeol and investment growth; the interests of consumers generally or a closs of consumers; the competitiveness of Auslralian businesses; and the efficient allocalion of resources.

be bolonced

Ibl

of a

particular pol icy 01 course of

and acc~ss ong
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Ih) Ii) Iii

[Adapted from CPA Clouse 113)]

Where the local Government Statement requires local government to implement one or any of the Competition Principles such as competitive neutrality, legislation review and structural relorm on open and rigorous analysis.

of

public manopalies, local

government will ensure that the factors in G. 1 are taken into account through

lOCAl GOVERNMENT ClAUSE 7 COMPETITtON POltCY STATEMENT

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COMPETITIVE NEUTRALITY
The principle of competitive neutrality is an integral component of the Competition Principles Agreement. The objective of competitive neutrality involves the introouction of measures effectively to remove any result of local government ownership

net competitive advantages arising simply as a of business entity.

What is net competitive advantage?
local government businesses face a range of patentiol advantages and disadvontages when judged against the private sector. However, not all competitive advantages or disadvantages should be removed. They should be balanced against one another. For exarnple, if a local government business is mare efficient than its private sector cornpetitor, then it should nat be prevented from exploiting that advantage. Only advantages and disadvantages which orise from government measures which discriminate between local government and private businesses, should be neutralised. The objective of competitive neutrality has its roots in the Hilmer report which recommended that a mechanism to deal with competitive neutrality between government businesses and ather businesses farm port competition policy for the following reasons: 1. concerns that it is not foir that government businesses should enjoy artificially induced competitive advantages when competing with private firms; and 2. it may be a misallocation

of a national

of funds to subsidise by ortificially conferring a

net competitive advantage for provision of government services by the public sector, if to do so limits or prevents the opportunities for more efficient provision of those services

by the

private sector.

local government functions and activities have the potential to individually and collectively impact on the Australian economy at all levels . local , state and national. In assessing net competitive advantage local government must determine not only what its core services ore, but examine all activities to determine whether their service delivery costs are transporen t to the wider community. The wider community is then in a position to determine whether the function and/or activities should be subsidised if, for example, it is a monopoly business, or, where there is competition in the market place, whether the service prOVided by local government is competi tively neutrol in its scope and operation. Within this context, true costs need to be shown to indicate that the principle of competitive neutrolity has been applied and to demonstrote that any monopoly business is within the wide community interest. The Department of local Government is keen to ensure that all funclions ore adequately assessed and that any business monopolies are justified by transparent occountable deciSions of local government. Other means such as

LOCAL GOVERNMENT CLAUSE 7 COMPE llT tON POLICY STATEMENT

5_'-, ), ,>
Ihe comparison of apprapriale benchmarks can be deve[aped 10 enable [oca[ governmenl to lest ils annual performance. local gavernmenl can provide a range of business activilies. [n recognilian of Ihe capocity

lOCAl GOVERNMENT ClAUSE 7 COMPETITION
POLICY

STAIEMENT

of

markels to change rapidly, [ocal govern men I, as pori

of

ils

annual budgeting and reporling process must review ils funclians 10 ascerlain if Ihe "market" is besl served by Ihose Ioca[ government activities. The reporling requiremenls sel oul in this slalemenl supporl Ihal process.

PRINCIPLE CN.l

The ob;ective of competitive neutralily is the eliminotion of resource allocation distortions arising out of local government oWner.wl;;of, significant business activities [Adopted from CPA Clause 3(1 JJ

Application CN.l
The need for imp[emenlation

of competilive

neulra[ity arises from inefficiencies

which are crealed when Ihe markel is distarled by regu[atary and opera ling procedures which apply 10 some businesses bUI nal to others who are compeling in Ihe some markel. The Hi[mer reparl noted that Ihis disparity is most apparent between the public and privale seclar. Campelitive neutrality principles only apply 10 Ihe business aclivilies of local government enlilies, and not 10 the non-business aclivilies of Ihose enlilies. This principle is exponded in Ihe following pages. In implementing Ihe compelilive neulra[ity principles in Ihis slalemenl , [oca[ governmenl wi ll adhere to Ihe objective in Principle CN . 1
21

PRINCIPLE CN.2

Local government business enterprises should not enioy any nel competitive advantage arising simply as a result af /heir public ownership. [Adapted from CPA Clouse 3(1 JJ

Application CN.2
Tradiliana[[y, [oca[ gavernmenl business enlerprises have enjoyed advanlages which potentially make it easier far businesses to opera Ie and be successful. By the some token Ihey have a[sa hod imposed on Ihem ab[igations which the privale seclar does nol have, Iherefare polenlially making iI mare difficult far businesses 10 opera Ie and be successful. Examp[es

of

polenlia[ compelitive advantages Ihol may be enjoyed by [oca[

governmenl business enterprises include : • exemptions and concessions from taxes and charges;

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

lOCAl

GOVERNMENT ClAUSE 7 CO\o\PETITION POliCY

SlATEME NT

• • • • • •

access to cancessianal interest rates an government procured borrowings; effective immunity from bankruptcy; exemptions from Corporations low reporting requirements; explicit or implicit government guarantees on debts; access to central purchasing schemes; and benefits gained through dual regulator·provider responsibilities.

Examples 01 potential campetilive d isadvanlages Ihal may be faced gavernmenl business enlerprises include: • • compliance wilh vorying levels of Minislerial discretion;

by local

compliance with emplaymentlerms and conditions greater than those applying to the private seclor;

•

compliance wilh restrictions on the class of consumers wilh which Ihey may deal;

• •

expectations from local businesses for preferred supplier slatus, increased reporting, accountability and Iransporency requirements above those applied to Ihe private sector;

•
22

social equity considerations; and local governmenl reparling requiremenls.

•

Net competilive advantage is assessed by balanCing the advantages against Ihe disadvanlages. Compelitive neutrality should be implemented 10 the extent Ihat the benefils to be realised from implemenlation oulweigh Ihe costs . II is expecled that competilive neutrality will apply as a mailer of course where a local governmenl business faces actual or palential competition with Ihe private seclor. Net competitive advantage can be removed through : • • commercialisalion or corporalisalion of Ihe agency; reform of specific advanlages and/or disadvanlages affecting the agency; or • requiring Ihe agency 10 adopl commercial principles in Ihe pricing of ils goocs or services. The approach will depend on Ihe nalure of Ihe agency. In implemenling compelilive neulrality principles sel oul in Ihis stalemenl, local governmenl musl adhere 10 Ihe abjeclives in Principle CN.2 .

PRINCIPLE CN.3

Local Government should determine its own priorities and policies for the implementation of the competitive neutrality principles subject to principles. [Adapted from CPA Clause 3(2)]

LOCA L G OVERNME N T C LA USE 7 COM PF TtTtON p O Jl rv STATFMF NT

l<X'Al GOVE RNIv'EN f

ClAuSE 7
COMPE T ITION PQlrey

STATEMENT

Applicatian CN.3
Subject to the requirements imposed by the Competition Principles Agreement and reproduced in this statement, such as cost·benefit assessments and annual reporting, local government should determine how to best implement the campetilive neutrality obligations .

PRINCIPLE CN.4

For significant local government business enterprises which are classiFied as "Public Financial Enterprises' and Hpublic Trading Enterprises' under· the Government Financial Statistics ClassiFication local goY",rnment will, where appropriate,: (a) adopt a corporatisation model For those local governrn...nl buSiness enterprises; and (b) will impose on signiFicant business enterprises: (i) full Commonwealth, State and Territory taxes or tax equivalent
systems;

(ii) debt guarantee Fees directed towards offsetting the ,ompelitive advantages provided by government guarantees; and (iii) those regulations to which private sector bu.sinesses qre normally subject, such as those relating to the protection of !he environment and planning and approval processes, on an equivalent basis to private sector competitors. [Adapted from CPA Clause 3(4)]
23

Application CN.4
local government must apply Principle CN.4 to any local government business enterprise classified as a Public Trading Enterprises (PTEs) or Public Financial Enterprises IPFEs) under the Government Financial Statistics Classifications . At present, the Australian Bureau of Statistics indicates that no local government business entity in Western Australia is categorised as either a PTE or a PFE . If at a later stage, a local government business enterprise falls within the definilion

of a

PTE or PFE local government must then apply principle CN4 to

that business enterprises. At that stage if local government determines that a corporotised model for such business enterprise is appropriate, it should consider the corporatisation model developed by the Intergovernmental Commillee Responsible for Government Trading Enterprise Notional Performance Monitoring.

Tax Equivalent Payments
Where pursuant to this statement, a local government implements a tax equivalent system, poyment mode to that local government will be retained

lOCAL GOV ERNMEN T CLAUS E 7 COM PE TITI ON PO li CY S TATE M ENT

lOCAl
GOVf~NMENT

ClAUSE 7 COMPE TlTION

STATE MENT

by that enlity, however it must nal be used to support the business aclivity which gave rise to it. The body adminislering Ihe tax equivalent poymenl will disclose the Irealment of its poyments in its annual financial reporl.

PRINCIPLE CN.S

Lacol government agrees that entities which are not PTEs or PFEs (a. defined in CN.4 above) but which undertake significanl bus/nasi aCtivilies as part of a brooder range of Functions will, In respect of Ihosa busin.9$S
activities:

(oJ implement principle CN.4 (above); or (b) ensure that the prices charged for goods and services will lalee account, where appropriate, of the items IIsleei in principle CN.4 (b) and reflect Full cast affribution for those activities. [Adapted from CPA Clausa 3(5}]

Application eN.S
Local gavernmenl must implement PrinCiple
24

eN.5 lor en lilies which undertake

"significanl business" activities as port of a broader range regardless

of funclions

of

Ihe fOCi thai they are not PTEs or PFEs. This means Ihat local

gavernmenl must impose the some lox equivalent regimes, State taxes. debt guorantee fees and regulatory arrangements as apply to commercialised GTEs .

Joint Conduct of Business Activities
The competitive neutrality principles apply to the significant bUSIness activities canducled by

lor under Ihe control all

one or more local governments

whether Ihey are operating iOintly or solely.

What are IISignificant" Activities?
It is Ihe responsibility of local governmenl to determine whelher it is engaged in "significant business activities" within the context

of

its operolions. and

therefore, whelher it is required to apply Ihe competitive neutrality principles . Local government is only required 10 implement the above principles to the extent that the benefits to be realised Irom implemenlation outweigh Ihe costs in respect

of

individual business activifles exceeding $200,000 annual

income.
For Ihe purpose categories:

of delermining

a time period within which to apply the

competitive neutrolity prinCiples, locol government is divided into two

lOCAl GO VERN M EN T ClAUSE 7 COMPETITION POliCY STATFMFNT

lOCAL GOVERNMENT

ClAUSE 7 COMPETITION

POKY
STATEMEN T

•

Category One: local governments with an annual turnover of $2 miliion or more; and

•

Category Two: local governments with an annual turnover

of

less than

$2 million.

Category One

Category one local governments must have determined whether to implement the competitive neutrality principles in this statement by I June 1997. They wi ll have until I July 1998 to fully implement the competitive neutrality principles to those activities with on annual income of over $200,000 (see CN6) A copy of the implementation agenda must be included in the 1996- 1997 annual report. along with progress reports on implementation for the 19971998 reporting period. Where a decision is made not to implement the competitive neutrality principles to those activities, the local government will implement Principle CN5(b)

Category Two

25

Category two local governments must have determined whether to implement the competitive neutrality principles in this statement by I June 1998. They will have until I July I 999 to fully implement the competitive neutrality principles to those activities with an annual income

of over

$200,000.

It is anticipoted that Category Two local governments will have fewer
"significant" business activities that require the full introduction of the competitive neutrality principles. The anus, however, is on locol government to ensure tha t a rigorous and open cost benefit analysis supports that

conclusion .
Where there is an implementation agenda this must be .ncluded in the 19971998 annual report. along with progress reports on implementation for the I 998- I 999 reporting period .

Implementation

All local governments engaging in either Category One or Category Two business activities must have fully implemented the competitive neutrality principles, where appropriate.

by

1 July 1998 and 1 July 1999 respectrvely.

Consistent with Principle CN.3, CN .5 and CN.6 it is the responsibility of locol government to determine w hat activi ties justify implementation of the principles While it is opprecioted that local government is in a significant state of change at present, implementation

of

the competitive neutrality principles will

require detailed analysis of the market within which both Category One and

lOCAL GOVERNMENT CLAUSE 7 COMPETtTION POLICY STATEMENT

L OCAl GOVERNMENT CLAUSE 7
COMPETITI()I\.J

POLICY
STATEfv'lfNT

Category Two activities are undertaken. It is imperative that alilacal governments take steps before their respective deadlines to implement the competitive neutrality principles where appropriate. To assist in this pracess, Ihe Department

of

local Government and the Cammillee will maintain an

oversight and monitoring role.

Full Cost Attribution
Where a decision is made nat to introduce the principles in CN.4la), local government will consider applying the State's Casting of Government Activities model, which are currently being adopted for local government, as a basis for ensuring that prices charged for goods and services toke into account full cost allribution lor those activities.

PRINCIPLE CN.6

Local government is not required to implement the competitive neutrality principles unless the benefits to be realised from implementation outweigh the costs. [Adopted from CPA Clouse 3(6)]

Application CN.6
local government will undertake an open and transparent cast-benefit analysis to determine whether it is appropflote to apply the competitive neutrality principles to their business activities. The cost-benefit analysis must: • identify all the quantitative and qualitative costs and benelits lincluding economic, social , environmental etc); and • evaluate whether the identified benefits outweigh the costs.

Copies 01 the cost-benefit analysis carried oul under Principle CN.6 may be requested by the State from time to lime.

PRINCIPLE CN.7

Principle CN.4{b) (iii) sholl not be interpreted to require the removal of regulations which apply to a local government business enterprise (but which do not apply to the private sector) where local govemment considers the regulation to be appropriate. [Adopted from CPA Clouse 3(7)]

Application CN.7
local government is only required to apply the same regulations to its business activities as those which apply to the private sector.

LOC A L GOVERNMEN T CLAUSE 7 COMPET tT ION POLICY STATEMEN T

L OCAL

GOVERNMENT
ClAuSE 7

COMPE TlTION
POlICY

STATEfv\ENl

PRINCIPLE CN.B

To ensure the efficient operation of this Stalement!oco!sovernm8/lt will furnish any reasonable information that may be requested by the State to enable the State to publish its annual report on the cpp/fcation of tile competitive neutrality principles in Western Australlo. [Adapted from CPA Clause 3(10))

Application CN.S
Under Clouse 3110) of the CPA, the State is obliged to publish on annual report on the implementation

of the competitive neutrality principles. The

annual reporl musl include a slolemenl on all allegalions of non compliance with Ihe principles. Although local gavernmenl is nol a party 10 Ihe Agreement, the State's obligations extend to ensuring that the principles are applied to local government ac tivities and funclions. This will require access to some information to allow local government achievements in the application of competitive neutrality to be accurately reflected annually.

PRINCIPLE CN.9

Where a private business that is in competilion {or potential competillon} with a local government entity to which the competitive neutralify principles apply, believes that the entity is not complying with thi. statement, it may make a writ/en submission to the Deportment of Local Government selling out the ollegations of non-compliance with the principles. [Adapted from CPA Clause 3(8))

Application CN.9
Only a private business entity that is in competition, or potential competition, with a locol government entity to which the competitive neutrality principles apply, may raise allegations authorised body, o n receipt

of non compliance wilh the competilive neutra lity of a complaint, will review the maMer in

principles in this statemen!. The Deportment of Local Government, or o ther consultation wi th the porlies and report to the Minister on the appropriate course of action, if any, to be token.

lOCAl GOVERNMENT ClAUSE 7 COMPETtTtON POltCY STATEMENT

lCX:Al
GOVE R NMENT

ClAuSE 1
COMPET ITION

P OI.lCy
SIATEMENT

PRINCIPLE CN.l 0

Local government will include in its annual report details of the application and implemenfction of the competitive neutrality principles to its activities and functions pursuant to this stotement. [Adopted From CPA Clouse 3(/0)]

Applicatian eN. 10
The annual report must include: • notification that a local government business enterprise has been classified by the Australian Bureau •

of Statistics

as either a PTE or PFE;

a statement of the activities to which competitive neutrality has been applied in the reporting period;

•

a statement of the activities to which the application of competitive neutrality was considered but not applied in 'he reporting period;

•

on implementation timetable complying with CN .S for activities to which the competitive neutrality principles will be applied in the next reporting period;

•

confirmation that a cost benefit analysis was undertaken as required undel CN.6;

28
•

details of any allegations

of non

compliance with the competitive

neutrality principles mode by a private entity and the action, if any, that was token to resolve the complaint ; and • any other information considered relevant with regard to the implementation

of the

competitive neutrality principles.

lOCAl GO VERNMENT ClAUSE 7 COMPETtTION POl t CY STATEMENT

\'1~'"
,

"
,

,~

" STRUCTURAL REFORM OF PUBLIC MONOPOLIES
The Hilmer Inquiry recognised that the introduction of competition into morkets thot hove traditionolly been supplied monopolies, requires more thon the introduction

by public monopoly or neor removol of regulations that restrict

the

of

competition into those markets. Structural reform of tha t

monopoly or neor monopoly is often required in conjunction with regula tory reform to ochieve the benefits

of

increosed competition.

A decision to introduce competi tion into a monopoly morket will require consideration of structural seporation issues in three main areas : • • the seporatian

of

regulatory and commerciallunctians;

the seporatian of natural monopoly and potentially ccompetihve' adivilles; and the seporatian

•

of potentially competitive octivilies. of government

The Packoge does not intend to encouroge privotisotion

monopolies. However. it does encourage the introduction of competition into traditional monopoly sectors once a careful review into the appropria te market structure has been undertaken.
29

PRINCIPLE SR.l

Local governmenl is free 10 determine ils own priorities and poliCies Po, Ihe reform of public monopolies with respect 10 the structural reFa'rm principles in this statement. [Adapted from CPA Clause 4(1)]

Application SR.'
Subject to ony notional or state process w ith respect to the reform

of

public

monopolies, and subtec t to the obligations in this statement, local government is free to determine its priorities and develop its policies wi th respect to the struc tural reform of local government public monopolies.

PRINCIPLE SR.2

Before a local government introduces competition inla a sector traditionally supplied by a public monopoly, il will seporote from the public monopoly any responsibility For industry regulation. The local government will separate induslry regulation functions so as to prevent th.e former monopolisl From en;oying a regula lory advantage oVer ils (existing and potential) rivals. [Adapted from CPA Clause 4(2)]

l O C A l GOV ER NMEN T C l AUS E 7 COMP ETtTt O N PO l tCY S TATEM EN T

lOCAL

GOVERNMEN T
ClAUSE 7
COMpt;T IJION

POliCY
SlAIEM£NT

Application SR.2
Regulatory and commercial activities must

be seporated

before introducing

competition into a sector which is a monopoly or near monopoly. While local government in Western Australia traditionally does not provide extensive goods or services in monopoly or neor monopoly morkets, to the extent that such markets do exist, local government must adhere to the structural reform principles set out in this stotement. For example sectors to which the structural reform principles may apply include: • • • • • • waste management; conslruction and maintenance activities; recreation activities; public property developments; aerodromes; ond porking .

PRINCIPLE SR.3
30

local governmenl makes a decision 10 introduce competition i,.lo a sector traditionally supplied by 0 public monopoly, and beFore that sector is corporatised or compelition is introduced, local government will undertake a review inlo
Once a

• the appropriate commercial objectives for the public monopoly; • the merils of separating any natural monopoly elements from potentially competitive elements of the public monopoly; • the merits of separating potentially competitive elements of tFie public monopoly; • the most effective means of separating regulatory functions from commercial functions of the public monopoly; • the most eFfeclive means of implementing the competitive neutrality principles set out in this statement; • the merits of any community service obligations undertaken by the public monopoly and the besl means of funding and delivering any mandated community service obligations; • the price and service regulations to be applied in the industry; and • the appropriate financial relationship between the owner of the public monopoly and itself, including the rate of return, dividends an.d capital struclure. [Adapted From CPA Clause 4(3)]

lOCAL GOVERNMENT CLAUSE 7 COMPETITION POliCY STATFMFNT

LOCAL GOyERNJV.[NJ
CLAuSf 7

C()to.o\PETlTiON
PO LK:Y

STATEMEN T

Application SR.3
local governmenl will ensure Ihol before compelilion is inlroduced inlo such a seclor a review complying wilh SR.3 is under!aken. local governmenls requiring assislance wilh delermining Ihe me!hodolagy for such a review should inilially conlacl Ihe Deparlmen! of local Gavernmen!.

PRINCIPLE SR.4

Local government will include in its annual report a stalement on tire application and implementation of the structural reform prinCiples t6 i~ activities and functions. {Adapted from CPA Clause

4J

Application SR.4
The annual reporl mus! include: • a slalemenl

of Ihe aclivities of Ihe aclivilies

10 which Ihe s!ruclural reform principles have

been applied in Ihe repor!ing period; • a slalemen!
10 which Ihe applicalion

of Ihe slruclural
31

reform principles was considered bUI nal applied; • a slalemenl confirming Iha! Ihe principles in relalion 10 slruclural reform have been complied with; and • any alher infarmalian considered relevanl wilh regard 10 Ihe implemenlalion

of

Ihe s!ruclural reform principles.

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

, '/f'"" .I I

"

I.~

LEGISLATION REVIEW

The Hilmer Report noted that:

"the greatest impediment to enhanced competition in many key sectors 01 the economy are the restrictions imposed through government regulation· whether in the lorm 01 statutes or subordinate legislation· or government ownership ... Compliance with Government regulation is not prohibited by the Trade Proctices Act, no maHer how anti-campetitive the
consequences
All parties to the Notional Competition Policy package restrict competition unless: a) the benefits of the restriction to the community as a whole outweigh the costs; and b) the objectives of the legislation can only be achieved by restricting competition . Accordingly, the Package implements a system that:

agreed that

legislation (including Acts, Enactments, Ordinances or Regulations) should not

• requires the systematic review of 01/ existing legislation to determine
32

whether there are any direct or indirect effects On ccmpetmon}: • reiarms legislation identified as having an effect on competiffon, where the costs of the restridion outweigh the benefits to the community as [) whole; and • develops a regulatory impad assessment process /bot lequlfru oil new legislative proposals to meet the above criteria, wi!/1 Q {oftAec review, every ten years.

(NB A reference in this part to Locol Low. sholl be token to include By-Lows)

PRINCIPLE LR.l

Legislation should not restrict competition unless it can be demonstrated thot: (oJ the benefits of the restriction to the community as a whole outweigh the costs; and (b) the obiectives of the Local Laws can only be a,;f,ieved by restricting competition. [Adapted from CPA Clouse 5(1}]

Application LR. I
Pursuant to the Competition Principles Agreement, the State has developed a review timetable of all legislation, including local government legislation, that has an effect on competition . State enabling legislation (establishing and governing the operation

of

local government) will be included in the review

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

lOCAl

'\

GOV ERNMENT
ClAUSE 7 COMPE !ITION POliCY

STATEMENT

timetable if it has on effect on competition as will other State legislation conferring powers on local government. local lows however will be subiect to a separate review timetable prepared by the State and local Governments. A preliminary review has been undertaken of local lows to ascertoin whether any of them may have on effect on competition. local lows may restrict competition explicitly, by the warding of the enabling provisions, or implicitly through their operation or effect. Far example, local lows may directly ar indirectly restrict competition by: • • • regulating the entry and exit of participants in various markets; controlling pricing or production levels; regulating the price processes; • • • regulating the quality, amount or location

of goods

ar services used in various production

of goods and

service delivery;

regulating advertising and promotional activities; or conferring benefits on particular closses of competitars.

Any local low that: • • • allows only one entity 10 supply a good ar service; requires producers

33

of goods

or service to sell to a single entity;

limits the number of actual ar potential producers of goods or services in a market;

• •

limits the output

of on

entity; or

limits Ihe number of persons that can be engaged in on occupation or activity;

should be presumed to have a direct or indirect effect on competition . The above restrictions may be impased directly through a prohibition in the Bylaw or locol low or through licensing procedures that creole borriers to market entry. To ensure that local government reviews, and, where appropriate, reforms all local lows that restrict competition, any review carried out under this stotemenl must be brood in scope and open to public scrullny.

PRINCIPLE LR.2

Sub;ect to the requirements in !his statement, local government /5 (ree to determine its own priorities and policies for the reform of Local L ows that restricts competition. (Adapted from CPA Clause 5(2)]

tOCAl G OV ERN M ENT CLAU SE 7 COMPETITION POLICY STATEMENT

lOCAl

GOV ERNMENT
ClAuSE 7 COMPETlTION
POLICY

SfAT EMfN T

Application LR.2
Subiect to the requirement to ossess loco I lows, loco! government is free to determine its own priorities and develop policies for review ond reform. It is expected however, that where local government determines that the benefits of a restriction on competition to the community as a whole outweigh the costs, that local government will be in a position to iustify a decision not to reform those loco I lows. In doing so, local governments will need to ensure that the cost benefit onolysis under Principles lR. 1 ond lR.4 is tronsporent. rigorous and open to scrutiny.

PRINCIPLE LR.3

local government, in consultation with the State, has developed a ,dble' for the review of all existing local lows that restrict competition. Tho.sa local Lows must be subject to further review and, where appropriate; reform by the year 2000. [Adapted from CPA Clause 5(3)]

Application LR.3
34 The following local laws have been identified as haVing a potential direct or indirect effect on competition: All local laws relating to: • • • • • • • • • • • • • • abatement of nuisances, admission chorges, advertising; aerodromes, amplifiers, omusements, animals, awnings; balconies, basketball courts, bazaars, bee-keeping, bill posting; birds, bawling greens, bowsers-petrol. brickmaking, bridges; brothels, building, cabins-holiday, comps-holiday, caravans and camping; carnivals, chalets, charges for admission, clearing of vacant land; council works and undertakings, courts-sporting, dancing rooms; deposturing fees, discaunts·rates and charges, diseased animals; drih-sand, employees duties, employment offices, examination of vehicles; excavating and quarrying, explosives, extractive industries, fairs, fees; fareshares, furnaces, grazing of stock, hand bills, hawkers, hoardings;
ie~ies, iunk yards, labaur mart, land-declared too wet for bUildings;

licences, liquids-flammable, management of property, markets; meetings, motels, notices and plans, noise, nuisances, parking stations and facilities;

• • •

piers, planning, plans, public stalls, quarrying; rates - poyment of, registration - licenses, sales-public, sale yards, scoles and weighing machines, shawgraunds, street trading;

lOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

lOCAL

GOVERNMENT
CLAUSE 7 COMPETITION

POlICY STATEMENT

•

swimming pools-public, timber yards, trading undertakings, undertakings and works;

•

water-supplies, watercourses, zoning.

All the above local laws must

be

reviewed and, w here appropriate

reformed , by the year 2000. In carrying out that review local government w ill comply with Principle lR .4 (belowl and associated obligations set out in this statement.

PRINCIPLE LR.4

A review of Local Laws should include, but is not limited to, lerms of reference that: • clarify the obiectives of the Legislation; • identify the nature of the restriction on competition; • analyse the likely effect of the restriction on compelition and on the economy generally; • assess and balance Ihe casls and benefits of the restriction; and • consider allernalive means for achieving the same result including nonlegislative approaches. [Adapted from CPA Clause 5(9)]
35

Application LR.4
A review of local lows is not limited to. but must incorporate the above principles. Where feasible, local government should consult w ith affec ted parties and allow those parlies to comment an any proposed changes to those local laws.

PRINCIPLE LR.5

Local government will ensure that all new proposals for Local Laws that restriet competition are accompanied by evidence that they are consistent with the requirements in principle LR, 1 namely that: (a) the benefits of the restriction /0 the community as a whole outweigh the costs; and (b) the obiectives of the Local Laws can only be achieved by restriding competition. [Adapted from CPA Clause 5(5)]

Application LR.S
local government will ensure that, from 1 January 1997, all proposals for legislation , (including locallawsl that restrict competition are accompanied

LOC AL GOVERNMENT CLAUS E 7 COM PETIT ION POLICY STATEMENT

lCX:Al GOVERNMENT ClAUSE 7 COMPETITION POtlCY STATEMENT

,,

by evidence that establishes principles lR. land LR .5 have been complied with. In considering proposals for legislation, local government will consider gUidelines for regulatory impact statements currently being developed by the State's Competition Policy Unit. which will be effective from 1 January 1997.

PRINCIPLE LR.6

Local government must develop a review and reform slrategy that complies wilh the obligations under LR.3 and LRA. The review and reform strategy musl be published in the. annual repo.rI of' each local government. [Adapted from CPA Clause 5(6)]

Application LR.6
Due to the nature

of local

laws and the number of local governments with

responsibility for them, it has not yet been possible for State and local Government representatives to review extensively the operation
36

of all
0

legislation ond determine a review ond reform agenda. The list in lR.3 is the result

of a

preliminary analYSis of legislation that may potentially have

direct or indirect effect on competition. ConSistent with lR .2 above local government will determine its own policies and priorities for the review, ond where appropriote reform, of its By-lows and local lows. In developing the review and reform strategy required under this statement, local government should first review and reform that legislation which has the greatest economic impoct on competition. The locol Government Competition Policy Commmee will maintain on overSight role to ensure thot loco I government is effectively meeting the implementation requirements under the legislation review obligations and prOVide input and assistance where required . local government must develop a review and reform strategy for the By·laws and local lows listed atlR.3 and publish that strategy in its next onnual report.

PRINCIPLE LR.7

Local governmenl must review all Local Laws every 8 years· in accordance with the principles for legislolion review In Ihis stolemenlc
[Adapted from CPA Clause 5(6)]

Application LR.7
The local Government Act 1995 requires that locollaws be reviewed every 8 years. When local government is conducting such reviews it will ensure that Principles lR . 1 and lR.4 are complied with for all local lows that have a potential direct or indirect effect on competition .

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLtCY STATEMENT

lOCAl

'\
.......

GOVERNMENT CLAUSE 7 COMPETITION
POtICY

STATEMENT

PRINCIPLE LR.8

Local gavernmenl will include in ils annual report a s/oremenl on the applico/ion and implementolion of the legislolion review priM/pIes t~ aclivities and functions. [Adapted from CPA Clause 5(1 Oil

r~

Application LR.8
The annual reporl must include: • a slolemenl of Ihe local lows which have been reviewed and reformed as a resull of Ihe legislolion review principles; • a slolemenl

of

Ihe oclivilies 10 which Ihe application

of the

legislolion

review principles were considered bUI nol applied; • a slolemenl indicoling Ihol all the legislolion review principles in Ihis slolemenl have been complied with; • a copy

of the

review and reform slrolegy developed under principles

lR .6 ;ond • any olher informolion considered relevonl w ilh regard 10 Ihe implemenlolion of Ihe legislolion review principles.

I()~ A L

GO V ERNMENT C LA U SE 7 C OM PET I TI ON PO LI CY STATEME NT

THE COMPETITION PRINCIPLES AGREEMENT
38

LOCAL

GOVERNMENT
CLAuSf 7 COlv'lPETITION P OtiCY STAT£MENT

AnACHMENT 1 COMPETITION PRINCIPLES AGREEMENT

BETWEEN
THE COMMONWEALTH OF AUSTRALIA THE STATE OF NEW SOUTH WALES THE STATE OF VICTORIA THE STATE OF VICTORIA THE STATE OF WESTERN AUSTRALIA THE STATE OF SOUTH AUSTRALIA THE STATE OF TASMANIA THE AUSTRALIAN CAPITAL TERRITORY, AND THE NORTHERN TERRITORY OF AUSTRALIA

WHEREAS the Council of Australian Governments at its meeting in Hobart on 25 February 1994 agreed to the principles of competition policy articulo ted in the report of the National Competition Policy Review: AND WHEREAS the Parties intend to achieve and maintain consistent and complementary competition laws and policies which will apply to all businesses in Australia regardless of ownership: THE CONVv\ONWEALTH OF AUSTRALIA THE STATE OF NEW SOUTH WALES THE STATE OF VICTORIA THE STATE OF QUEENSlAND THE STATE OF WESTERN AUSTRALIA THE STATE OF SOUTH AUSTRALIA THE STATE OF TASIvVINIA THE AUSTRALIAN CAPITAL TERRITORY, AND THE NORTHERN TERRITORY OF AUSTRALIA ogree os follows:

39

Interpretation

1.

(I)

In this Agreement, unless the context indicates otherwise: "Commission " means the Australian Competition and Consumer Commission estoblished by the Trode Proctices Act; "Commonwealth Minister means the Commonwealth Minister responsible for competition policy;
H

constitutional /rode

Of

commerce" means:

tOCAI GOVERNMENT ClAUSE 7 COMPETITtON POliCY STATEMENT

lOCAl
GOVERNMENT ClAUSE 7 COMPE TITION POLO STAT EMENT

(a) (b)

trade or commerce among the States; trade or commerce between a State ond a Territory or between two
Territories; or

Ic)

trade or commerce between Australia and a place outside Australia;

"Council" means the Notional Competition Council established by the Trade Practices Act; "iurisdiction" means the Commonwealth. a State. the Australian Capital Territory or the Northern Territory of Austrolio; "Party" means a iurisdiction that hos executed, and has not withdrawn from. this Agreement; "Trade Practices Act" means the Trade Practices Act 1974. (2) Where this Agreement refers to a provision in legislation which has not been enacted at the date of commencement of this Agreement, or to on entity which has not been established at the dote of commencement the date when the provision or entity commences operation .

of

this

Agreement, this Agreement will apply in respect of the provision or entity from

(3)

Without limiting the moilers that may be taking into occount, where this Agreement calls:

40

10) for the benefits of a porticular policy or course of action to be bolonced
against the costs of the policy or course Ib)

of action;

or

far the merits or appropriateness of a particular policy or course action to be determined; or

of

(c)

for on assessment obiective;

of the

most effective meons of achieving

0

policy

the following moilers sholl, where relevant, be token into account: (d) government legislation and policies relating to ecologically sustainable development; (e) social welfare and equity considerations, including community service obligations; If) government legislation and policies relating to matters such as occupotional health and safety. industrial relations and access and equity; (g) economic and regional development. including employment and investment Ih) growth ,

the interests of consumers generally or of a closs of consumers; the competitiveness of Australian businesses; and the efficient ollocotion of resources.

Ii)
Ii)

14)

II is not intended that the matters set out in subclause (3) should affect the interpretation

of

"public benefit" for purposes of authorisations or notifications

under the Trade Practices Act.

lOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

LOCAl

GOvERN!v\ENI
,
ClAUSE 7 COMPETITION POlICY STATEMENT

(5)

This Agreement is neutral with respect to the nature and form ownership.

of ownership of

business enterprises . It is not intended to promote public or private

Prices Oversight of Government Business Enterprises

2.

(I)

Prices oversight of State and Territory Government business enterprises is primarily the responsibility of the State or Territory that owns the enterprise.

(2)

The Parties will work cooperatively to examine issues associated with prices oversight of Government business enterprises and may seek assistance in this regard from the Council. The council may provide such assistance in accordance with the Council's work program.

13)

In accordance with these principles, State and Territory Parties will consider establishing independent sources

of price

oversight advice where these do

not exist.
(4) An independent source of price oversight advice should have the following

characteristics:
10) it should be independent from the Government business enterprise whose prices are being assessed; (b) its prime obiective should be one of efficient resource allocation but with regard to any explicitly identified and defined community service obligations Imposed on
0

41

business enterprise by the Government or

legislature of the iurisdiction that owns the enterprise:

(e)

it should apply to all significant Government business enterprises that are monopoly, or near monopoly, suppliers

of goods

or services (or bath);

(dl (el

it should permit submissions by rnterested persons; and its pricing recommendations, and the reasons for them, should be published.

151

A Party may generally or on a case-by-case basis : (01 with the agreement

of

the Commonwealth, subiect its Government

business enterprises to a prices oversight mechanism administered by the

Commission; or
Ibl with the agreement of another iurisdictian, subiect its Government business enterprises to the pricing oversight process of that jurisdiction. (61 In the absence

of

the consent

of

the party that owns the en terprise, 0 Stote or

Territory Government business enterprise will only be subject to a prices overSight mechanism administered by the Commission if: (01 the enterprise is not already sublect to a source

of price overSight advice

which is independent in terms of the principles set out In subclause (4); (bl a lurisdiction which considers that it is adversely affected by the lock of price overSight {on •affected iurisdiction "I has consulted the Party that owns the enterprrse, and the mal/er is not resolved to the satisfaction of the affected jurisdiction;

LOCAL GO V ERNMENT CLAUSE 7 CO M PETtTtON POltCY ST A TEMENT

LOCAl GOVERNMEN T CLAUSE 7 COMPETITION POLICY
STAT EMENT

lei

the offected jurisdiction has then brought the moner to the ollention of the Council ond the Council has decided: Ii) that the condition in paragraph 10) exists; ond jii) thot the pricing of the enterprise has a significant direct or indirect impoct on the constitutionoltrode or commerce;

Id)

the Council has recommended that the Commonwealth Minister declore the enterprise for price surveillance by the Commission; and

Ie)

the Commonwealth Minister has consulted the Porly that owns the enterprise.

Competitive Neutrality Policy and Principles
3.

II)

The objective of competitive neutralily policy is the elimination of resource ollocotion distortions arising out of the public ownership of entities engaged in significant business activities: Government businesses should not enioy any net competitive advantage simply as a result of their public sector ownership. These principles only opply to the business octivities of publicly owned entities, not to the non-business, non-profit activities of these entities.

12)

Each Porly is free to determine its own agendo for the implementation of competitive neutrolily prinCiples.

13)
42

A Porly may seek ossistance with the implementotion of competitive neutrolily principles form the Council. The Council moy prOVide such assistance in accordonce with the Council's work program.

14)

Subiect to subclouse 16), for significont Government business enterprises which ore classified as "Public Trading Enterprises" ond "Public Finoncial Enterprises under the Government Financiol Stotistics Classification: 10) the Porties will, where apprapriote, odapt a corparatisatian model for these Government business enterprises Inoting thot a possible approach to corporatisation is the model developed by the inter-governmental comrninee responsible for GTE National Performance Monitoring); and Ib) the Parties will impose on the Government business enterprise: Ii) full Commonwealth, State and Territory taxes or tax equivalent systems; Iii) debt guarantee fees directed towards offsening the competitive advantages pravided by government guorantees; and liii) those regulations to which private sector businesses ore normally subject, such as those relating to the protection of the environment, and planning and approvol processes, on an equivalent bosis to privote sector competitors.

15)

Subiect to subclause 16), where an agency lather than an agency covered by subclouse 14)) undertakes significont business activities as port of a broader range of functions, the Parties Will, in respect of the business activities: 10) Ib) where appropriate, implement the principles outlined in subclause 14); or ensure that the prices charged for goods ond services will take account, where appropriate, of the items listed in poragraph 41b), and reflect full cast ollribution for these activities.

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

lOCAl GOVERNMENT CLAUSE 7 CO'\llPETiT ION

poliCY

STATEflAENT

16) Subclauses 14) and IS) only require Ihe Parlies 10 implemenl Ihe principles specified in Ihose subclauses 10 Ihe exlenl Ihal Ihe benefils 10 be realised from implemenlalian aulweigh Ihe casls. 17) Subporagraph 14l1blliii) shall nal be inlerpreled 10 require Ihe removal of regula lion which applies 10 a Governmenl business enlerprise or agency Ibul which does nal apply 10 Ihe privale seclar) where Ihe Parly responsible for Ihe regulalion considers Ihe regulalian 10 be appropriale. 18) Each Parly will publish a policy slalemenl on compelilive neulralily by June 1996. The policy slalemenl will include on implemenlalian limelable and a complainls mechanism. 19) Where a Siale or Terrilory becomes a Parly 01 a dale laler Ihan December 1995, Ihal Parly, will publish ils policy slalemenl wilhin six monlhs of becoming a Parly. 110) Each Parly will publish an annual reporl on Ihe implemenlalian of Ihe principles sel oul in subclauses Ill. 141 and 151. including allegalians of nan-compliance.

Structural Reform of Public Monopolies

4.

11)

Each Parly is free 10 delermine ils own agenda for Ihe reform of public monopolies.

121

Before a Parlyl inlraduces campelilion 10 a sec lor Iradilionally supplied by a public monopoly, il will remove from Ihe public monopoly any responsibililies for induslry regulalion. The Parly will re-Iocale induslry regulalion funclians so as 10 prevenl Ihe farmer monapolisl eniaying a regulalary odvanlage over ils lexisling and palenliai) rivals.

43

13)

Before a Parly inlraduces compelilion 10 a markel Irodilionally supplied by a public monopoly, and before a Parly privalises 0 public monopoly, iI will underlake a review inlo: 101 Ihe appropriale commerciol obieclives for Ihe public monopoly; Ibl Ihe merils of seporaling any nalural monopoly elemenls from polenlially campelilive elemenls of Ihe public monopoly;

Icl Ihe merils of separaling polenlially compelilive elemenls monopoly; {dl

of

Ihe public

Ihe mosl effeclive means of seporaling regulalary funclions from commercial funclions of Ihe public monopoly:

lei IfI

Ihe mosl effeclive means of implemenling Ihe compelilive neulralily principles sel oul in Ihis Agreemenl; Ihe merils

of

any communily service obligalions underlaken by Ihe public

monopoly and Ihe besl means of funding and delivering any mandoled communily service abligalions; Igi Ihe price and service regula lions 10 be applied 10 Ihe induslry: ond Ihl Ihe appropriale finonciol relalionships belween Ihe owner of Ihe public monopoly and Ihe public monopoly. including Ihe role dividends and capilal slruelure.

of

relurn largels,

LOCAL GOVERNMENT CLAUSE 7 CO M PETITION POLICY STATEMENT

lOCAt GOVfRNNifNT ClAuSE 7 COMPETITIO N POLICY
stATEMENT

141

A Porly may seek ossislonce wilh such a review from Ihe Council. The Council may provide such ossislonce in accordance wilh Ihe Council's work program .

Legislation Review
5.

III

The guiding principle is Ihol legislolion lincluding Acls, enoclmenls, Ordinances or regulolionsl should nol reslricl compelilion unless il can be demonslroled Ihol:

101 Ihe bene fils of Ihe
cosls; and

reslriclion 10 Ihe communily as a whole oulweigh Ihe

Ibl Ihe objeclives of Ihe legislolion con only be achieved by reslricling
competition.

121 131

Subjecllo subclause Ihe reform

131. 141

each Porly is free 10 delermine ils own agenda for

of legislolion

Ihol reslricls compelilion . each Porly will develop a limeloble by June 1996

Subjeci 10 subclause

for Ihe review, and where oppropriole. reform of all exisling legislolion Ihol reslricls compel ilion by Ihe year 2000.

141
44

Where a Siole or Terrilory becomes a Porly 01 a dole loler Ihon December 1995, Ihol Porly will develop ils limeloble wilhin six monlhs of becoming a Porly.

151

Each Porly will require proposals for new legislolion Ihol reslricls compelilion
10 be occomponied by evidence Ihol Ihe legislolion is consislenl wilh Ihe

principle sel Oul in subclause

11 I. 131 and 151.
Ihe Porly will syslemolicolly

161

Once a Porly has reviewed legislolion Ihol reslricls compelilion under Ihe principles sel out in subclouses review Ihe legislolion olleosl once every len years.

171

Where a review issue has a nOlionol dimension or effeci on compelilion lor bolhl, Ihe Porly responsible for Ihe review will consider whelher Ihe review should be a nOlionol review. If Ihe Porly delermines a nOlionol review is oppropriole, before delermining Ihe lerms may have on interest in those moilers.

of

reference for, and Ihe

oppropriole body 10 conduct the notional review, il will consul I Porlies Ihol

181

Where a Porly determines a review should be a nOlionol review, Ihe Porly may requesl the Council 10 underloke Ihe review. The Council may underloke the review in accordance wilh the Council's work program .

191

With au I limiling the terms of reference of a review, a review should:

101
lei

clorify Ihe objeclives

of

the legislolion:

Ibl identify Ihe nature of Ihe restriction on competition; analyse the likely effect of Ihe reslriclion on compelilion and on the economy generally; Idl assess and balance the costs and benefils lei

of

the reslriclion ; and

consider alternative means for achieving Ihe some resull including nonlegislative approaches.

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

lOCAl

GOVERNMEN T

ClAusE 7
COMPET IT ION

POLICY
STATEMENT

{101

Each Party will publish on annual reparl on ils progress lawards achieving Ihe obieclives sel aul in subclause

{31. The Council will publish an annual

reparl consalidaling Ihe reparls of each Party.

Access to Services Provided by Means of Significant Infrastructure Facilities
6.

{ll

Subiecl 10 subclause (21. Ihe Commonweallh will pul forward legislalion 10 eslablish a regime far Ihird party access 10 services provided by means significanl infraslruclure facililies where:

of

101 il would nol be economically feasible
(b) access 10 Ihe service
is

10 duplicale Ihe facility;

necessary in order 10 permil effeclive compel ilion

10 a downslream or upslream markel ;

Icl

Ihe facility is of nalianol significonce having regard 10 Ihe size of Ihe facility. ilS imparlance 10 conslilulional Irade or commerce or ils imparlance 10 Ihe nalianal economy; and

Id)

Ihe safe use of Ihe facility by Ihe person seeking access can appropriate regulatory arrangemenls exis!.

be

ensured

01 on economically feasible casl and. if Ihere is a safety requiremenl.

121

The regime 10

be eslablished

by Commonweallh legislalion is not inlended to
45

cover a service provided by means of a facility where Ihe Stole or Terrilary Party in whose iurisdiclion Ihe facility is silualed has in place on access regime which covers Ihe facility and conforms 10 Ihe principles sel oul in Ihis douse unless:

10) Ihe Council determines Ihal Ihe regime is ineffeclive having regard
Terrilory; or Ib)

10 Ihe

influence of Ihe facility beyond Ihe lurisdiclional boundary of Ihe Siale or

subslanlial difficuhies arise from Ihe facility being silualed in more Ihan

one jurisdiction.

(31

For a Siale or Terrilary access regime 10 conform 10 Ihe principles sel oul in Ihis clouse. il should:

10) apply
Ii) (iiI

10 services provided by means of significanl infraslruclure facililies

where: il would nol

be

economically feasible 10 duplicale Ihe facility;

0 access 1 Ihe service is necessary in order 10 permil effeclive

compelilion in a downslream or upslream markel; and liii) Ihe safe use

of

Ihe facility by Ihe person seeking access con

be

ensured 01 on economically feasible casl and. if Ihere is a safety requiremenl. apprapriale regula lor} arrangemenls exisl; and (b) incorparale Ihe principles referred 10 in subclause 141. 141 A Siale or Terrilary access regime should incorporale Ihe following principles:

101 Wherever possible third party access

10 a service prOVided by means

of

a facility should be on Ihe bosis of lerms and condilions agreed between Ihe owner of Ihe facility and Ihe person seeking access.

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POliCY STATEMENT

ICXAl

GOVERNf.AENT CLAUSE 1 COMPETITION
POlicY

STAT£WNT

Ib)

Where such agreement cannot be reached, Governments should establish a right for persons to negotiate access to a service provided by means

of a

facility.

Ic)

Any right to negotiate access should provide far on enfarcement process.

Id)

Any fight to negotiate access should include a dote a~er which the right would lapse unless reviewed and subsequently extended; however, existing contractual rights and obligations should not be outomoticolly revoked .

Ie)

The owner of a facility that is used to provide a service should use all reasonable endeavours to accommodate the requirement of persons seeking access.

If)

Access to a service for persons seeking access need not be on exactly the some terms and conditions. Where the owner and a person seeking access cannot agree on terms and conditions far access to the service, they should be required to oppoint and fund an independent body to resolve the dispute, if they have nat already done so.

Ig)

Ih)
46

The decisions of the dispute resolution body should bind the porties; however, rights preserved .

of appeal

under existing legislative provisions should be

Ii)

In deciding an the terms and conditions far access, the dispute resolution body should take into account : Ii) the owner's legitimate business interests and investment in the facility; Iii) the costs to the ow ner of providing access . including any costs of extending the facility but not costs associated w ith losses arsing from increased competition in upstream or downstream markets;

liii) the economic value to the owner of any additional investment that the person seeking access or the-owner has agreed to undertake; fjv) the interests of all persons holding contracts for use

of

the facil ity;

Iv) firm and binding contractual obligations of the owner ar other persons lor both) already using the facility; Ivi) the operational and technical requirements necessary for the safe and reliable operation of the facility; Ivii) the economically efficient operation

of

the facility; and

Iviii) the benefit to the public from hoving competitive markets. Iii The owner moy be required to extend, or to permit extension of, the focility that is used to provide a service if necessary but this would be subject to: Ii) such extension being technically and economically feasible and consistent with the safe and reliable operation of the facility; Iii) the owner's legitimate business interests in the facility being protected ;

lOCAl GOVERNM ENT ClAUSE 7 C OMPE TtTION POliCY S TATEMENT

lOCAl
GOVEIINMENl

ClAUSE 7 COMPETITION POliCY SlATEMENI

and liii) the terms of access for the third porty taking into account the costs borne by the parties for the extension and the economic benefits to the porfies resulting from the extension .

Ik)

If there hos been a material change in circumstonces, the parties should be able to opply for
0

revocalion or modification of Ihe occess arrangement

which wos made ot the conclusion of the dispute resolution process. (I) The dispute resolution body should only impede the existing right of to use a facility where the dispute resolution determined such compensation. 1m) The owner or user of a service shall not engage in conduct for the purpose hindering access to that service (n) there is a case for compensation of that person and, if oppropriate,
0

person

body has considered whether

of

by another person.

Seporate accounting orrangements should be required for the elements business which ore covered by Ihe access regime.

of a

(a)

The dispute resolution

body, or relevant authority where provided for under

specific legislation should have access to financial statements and other
accounting information perfaining 10 0 service.

(p)

Where more than one State or Terrilory access regime applies to a service, those regimes should be consistent and. by means of vested jurisdiction or other cooperative legislative scheme, provide for a single process for persons to seek access to the service, a single body aspect
10

47

resolve disputes about any

of access and

a single forum for enforcement of access arrangements .

Application of the Principles to Local Government

7

(I)

The principles set out in this Agreement will apply to local government, even though local governments are not Parties to this Agreement. Each State and Territory Party is responsible for applying those principles
10

local government.
10

(2)

Subjeci

10

subclause (31, where clauses 3 , 4 and 5 permit each Party

determine its own agenda for the implementation

of

the principles set out in

Ihose clauses. each State and Territory Party will publish a statement by June

1996
(0) 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 0 Stote or Territory becomes a Party at a dote later than December

1995, that Party will publish ils statement within six months of becoming
Party.

0

Funding of the Council
8. The Commonwealth will be responsible for funding the Council.

lOCAl GO VERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

L OCAL
GOVE~NME NT

CtAuSE 7 COMPE TlTION POliCY SlATEfv'lfN I

Appointments to the Council 9.

11)

When the Commonwealth proposes that a vacancy in the office

of Council

President or Councillor of the Council be fined. it will send wrillen notice to the States and Territories that are Parties inviting suggeslions as to suitable persons to fill the vacancy. The Commonwealth will allow those Parties a period of thirty five doys from the dote on which the nolice was sent to make suggestions before sending a notice

of

the type referred to in subclause

12).

12)

The Commonwealth will send to the States and Terrilories that are Parties wrillen notice of persons whom it desires to put forward 10 the Governor· General far appointment as Council President or Councillor

of

the Council.

13)

Within thirty five doys from the date on which the Commonwealth sends a notice

of

the type referred 10 in subclause (2), Ihe Party to w ham the

Commonwealth sends a notice will notify the Commonwealth Minister in writing as to whether the Party supports the proposed appointment. If Ihe Party does nol nOlify the Commonwealth Minister in wriling within that period, the Parr/will

be

taken to support Ihe proposed oppointmenl'

14)

The Commonwealth will not pul forward to the Governor-General a person for appOintment as a Council President or Cauncillar of the Council unless a majority of the States and Territaries that ore Parties support, or pursuant to this clause are taken to support, the appointment.

48

Work Program of the Council, and Referral of Matters to the Council
10.

11)

The work of Ihe Council lather than wark relating to a function under Part iliA of the Trade Practices Act or under the Prices Surveillance Act 1983) will be the subject

of a

work program which is determined by the Parties.

(2)

Each Party will refer proposals for the Council 10 undertake work (other than work relating to a funclion under Pan iliA of the Trade Practices Act or under the Prices Surveillance Act 1983) to the Parties for possible inclusion in the work program .

(3)

A Party will not put forward legislation confirming addi tional functions on the Council unless the Parties have determined that Ihe Council should undertake those functions as port

of

its work program.

14)

Questions as to whether a mailer should

be

included in the work program

will be determined by Ihe agreement of a majority of the Parties. In the event that the Parties ore evenly divided on a question of agreeing to the inclusion of a mailer in the work program, the Commonwealth shall determine the
oulcome .

(5)

The Commonwealth Minister will only refer mailers 10 the Council pursuant to subsection 29B( 1) of the Trade Practices Act in accordance with the work program .

(6)

The work program

of

the Council sholl

be

loken to include a request by the

Commonwealth for the Council to examine and report on the moilers specified in subclause

212) of the Conduct Code Agreement.

lOCAl GOVERN M ENT ClAUSE 7 COMPETtTION POliCY STATEMENT

lOCAl GOVERNMENT

CLAUSE 7 COMP£TITrON POliCY

STATEMENT

Review of the Council

11.

The Parties will review the need for, and the operation of, the Council after it has been in existence far five years.

Consultation

12.
la}

Where this Agreement requires consultation between the Parties or some of them, the Party initiating the consultation will: send to the Parties that must be consulted a wfillen notice selling aut the matters on which consultation is to occur;

Ib}
Ic}

allow those Parties a period of three months from the date on which the nolrce was sent to respond to the moilers set out in the notice: and where requested by one or more of those Parties, convene a meeting between it and those Parties to discuss the moilers set out in the notice and the responses, if any. of those Parties.

New Parties and Withdrawal of Parties

13.

11}
12}

A jurisdiction thot is not a Party at the dote this Agreement commences operation may become a Party by sending wrillen notice to all the Parties. A Party may withdraw from this Agreement by sending written notice to 011 other Parties. The withdrawal will become effective six months after the notice

was sent.
[3) If a Party withdraws from this Agreemenl Ihis Agreemenl will conlinue in force. e wilh respeci to the remaining Parties.

Sending of Notices
14.
A nOlice is sen I to a Party, by sending ilia the Minisler responsible for Ihe competition legislalion of thai Party.

Review of this Agreement

15.

Once this Agreement has opera led for five years, Ihe Parties will review ils operation and lerms.

Commencement. of this Agreement
16.
This Agreement commences once the Commanweolth and 01 leosl three other jurisdictions hove execuled if.

lOCAl GOVERNMENT CLAUSE 7 COMPHITION POLICY STATEMENT

lOCAl

GOVER NME N T
ClAUSE 7

COMPETITION poliCY STAtEMEN t

50

LOCAL GO V ERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

LOCAL
GOVE~NMENT

,

ClAuSE 7
COMPETITION

POliCY STAI£MENT

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LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT

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GOVERNME NT
CLAUSE 7

COMPE TITION
poLICY

SlAT EMENT

52

LOCAL GOVERNMENT CLAUSE 7 COMPETITION POLICY STATEMENT