Harper Review recommendations may impact Qld's procurement conduct

The final report of the independent Harper review of competition policy commissioned by the Federal Government, which was published on 31 March 2015, makes 56 recommendations for reforms across three key areas – competition policy, laws and institutions.

These recommendations, if implemented, will directly affect Queensland:

  • Recommendation 1, which would require the State Government to commit to a list of principles about competition law, building on the old National Competition Policy principles
  • Recommendation 17, which would result in mandatory reporting about the compliance of government businesses with competitive neutrality principles
  • Recommendation 18, which would see an independent Australian Council for Competition Policy reporting on the State’s progress in reviewing government commercial policies such as procurement and commissioning, public-private partnerships and privatisation guidelines and processes, to ensure that they incorporate competition principles
  • Recommendation 24, which would see the Competition and Consumer Act 2010 amended so that competition law provisions would apply to any activity the State Government undertakes in trade or commerce, thus removing the current exemption for government procurement.

If the Competition and Consumer Act is amended in the way suggested by the report to capture all government procurement, agencies would need to conduct complete procurement compliance programs. It is possible that current procurement conduct could fall foul of competition laws.

For example, in the case of Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2007] HCA 38, the High Court found that although Baxter’s conduct aimed at eliminating its competitors was unilateral, the government purchasers had set up a situation where this could happen. They had done this by accepting a bundled offer when the tender had not called for it and by agreeing to a very long contract period. In different circumstances, if the conduct of the government purchaser was anti-competitive, it could raise the prospect of liability for the State.

One potential new area of exposure for the State is the changes proposed to the misuse of market power prohibition in s. 46. Clearly, the State, with its significant purchasing power, will have a substantial degree of market power in a number of markets.

At present, s. 46 prohibits a person from taking advantage of that market power for an anti-competitive purpose. It has proved very difficult for the ACCC to successfully prosecute corporations for this kind of conduct, mainly because the courts have applied a test of whether the conduct could be taken if the market were truly competitive.

The Harper Review recommends changing the prohibition so that conduct that has the purpose or effect, or likely effect, of substantially lessening competition in a market is prohibited.

This proposal to introduce an effects test has been widely criticised. An effects test would introduce the risk that competitive conduct could be caught by the prohibition because efficient participants in the market can damage non-efficient participants by acting in competitive ways, as well as ways that are anti-competitive.

It remains to be seen how the Federal Government views this difficult issue.

The Federal Treasurer’s website indicates that the Federal Government supports the broad direction of the final report. However, it conducted its own consultation to seek feedback from industry, consumers and all levels of government on the final recommendations.

The consultation process is now complete. It will inform the government’s response to the report that is to be released later in the year and the development of appropriate legislative changes. Crown Law Legal Updates will continue to keep you informed of developments. For more information or assistance with other matters, contact Assistant Crown Solicitor Melinda Pugh on 322 96315.

The information in this publication is provided for general purposes only. It is not to be relied on as a substitute for legal advice. Crown Law and the Department of Justice and Attorney-General accept no liability for losses caused by reliance on the material in this publication. Formal legal advice should be obtained for particular matters.

Published: 28 August 2015

Author: Melinda Pugh