What do planning and zoning have to do with the Harper Review into competition policy? Quite a bit.

Although the media and the legal community have largely focused on other issues arising from the federal government’s Competition Policy Review Final Report (Harper Report), released on 31 March 2015, the word ‘planning’ occurs 159 times throughout the document, and the recommendations identify planning and zoning rules as one of the three priority areas that should be reviewed immediately. The report also raises issues on the competitive neutrality of government acting as both proponent and consent authority on various projects but, on the whole, the key focus is on the constraints to land use across Australia and its impact on competition.

This is not, the first time these issues have been the subject of government reports. In 2008, the ACCC shared similar sentiments to those expressed in the Harper Review. The Productivity Commission has echoed these views before also.

In 2010, at the State level, the NSW Department of Planning and the (then) NSW Better Regulation Office published the Promoting Economic Growth through the Planning System Review Report, which recommended making a Competition State Environmental Planning Policy (Competition SEPP). This SEPP was intended to remove anti-competitive barriers in environmental planning and assessment, and to promote economic growth and competition. Alas, the proposed Competition SEPP has not moved beyond draft status, and we are still in the situation where competition in NSW is an indirect matter for consideration when assessing development.

Importantly, Harper Report states:

Land is an important input to the production of goods and services and a source of amenity for consumers. Even small policy improvements in this area could yield large benefits to the economy.

Planning systems by their nature create barriers to entry, diversification or expansion, including through limiting the number, size, operating model and mix of businesses. This can reduce the responsiveness of suppliers to the needs of consumers.

Planning regulations should work in the long-term interests of consumers. They should not restrict competition unless the benefits of the restriction to the community as a whole outweigh the costs, and the objectives of the regulations can only be achieved by restricting competition. Subjecting planning regulations to the public interest test will ensure they do not inappropriately limit entry to markets.[1]

(Emphasis added)

What is interesting about the above quote is the emphasis on consumers and planning, whereas most planning regimes across Australia would incorporate this as one of a number of possible considerations when assessing development. In NSW, section 79C of the Environmental Planning and Assessment Act 1979 requires the consent authority, when determining a development application, to take into consideration a range of matters. None of these matters specifically includes ‘the long-term interests of consumers’, that is not to say these cannot be considered. However, economic considerations such as competition need to be considered under the heads contained within section 79C having regard to the case law that has developed. On this point, there are three seminal decisions that have been handed down:

  • Kentucky Fried Chicken v Gantidis (1979) 140 CLR 675, in which Stephen J stated that the ‘mere threat of competition to existing businesses, if not accompanied by a prospect of a resultant overall adverse effect upon the extent and adequacy of facilities available to the local community if the development proceeded with, will not be a relevant town planning consideration’.[2]
  • Fabcot Pty Ltd v Hawkesbury City Council (1997) 93 LGERA 373, where Lloyd J applied the Gantidis principle, stating ‘economic competition between individual trade competitors is not an environmental or planning consideration to which the economic effect described in s 90(1)(d) [the predecessor to section 79C] is directed. The Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW) are the appropriate vehicles for regulating economic competition … It is not part of the assessment of a proposal under the Environmental Planning and Assessment Act for a consent authority to examine and determine the economic viability of a particular proposal or the effect any such proposal on the economic viability of a trade competitor’.[3]
  • Randall Pty Ltd v Willoughby City Council (2005) 144 LGERA 119, in which Basten JA stated that ‘there is a danger in seeking to identify a pattern of exclusive characterisation which would place economic competition within one statutory framework and planning considerations within another … It is … implausible to suggest that economic impacts on others must fall outside the statutory concept’.[4]

There is a clear difference between the judgment of Basten JA in the Court of Appeal and the judgement of Lloyd J in Fabcot.

The Harper Report’s recommendation for balancing these considerations is that:

state and territory governments should subject restrictions on competition in planning and zoning rules to the public interest test, such that the rules should not restrict competition unless it can be demonstrated that the benefits of the restriction to the community as a whole outweigh the costs, and the objectives of the rules can only be achieved by restricting competition.[5]

The Harper Report goes on to state that the following competition policy considerations should be taken into account:

  • Arrangements that explicitly or implicitly favour particular operators are anti-competitive.
  • Competition between individual businesses is not in itself a relevant planning consideration.
  • Restrictions on the number of a particular type of retail store contained in any local area is not a relevant planning consideration.
  • The impact on the viability of existing businesses is not a relevant planning consideration.
  • Proximity restrictions on particular types of retail stores are not a relevant planning consideration.
  • Business zones should be as broad as possible.
  • Development permit processes should be simplified.
  • Planning systems should be consistent and transparent to avoid creating incentives for gaming appeals.[6]

The Harper Report conclusions reflect many of the submissions received in response to the Draft Report. The Harper Report states (based on the submissions) that ‘there is general dissatisfaction with the current arrangements’ and that ‘[s]ubmissions suggest land use restrictions can pose considerable barriers to effective competition by constraining the supply of urban land, concentrating market power and creating barriers to entry for new businesses’. [7]

The Harper Report goes on to state:

Within two years, each of these governments should implement reforms to ensure the rules do not unnecessarily restrict competition. As part of this process, collaboration across jurisdictions can assist in developing ‘best practice’ guidelines that each government can adopt in line with its own local considerations.[8]

The above provides the new Planning Minister, Rob Stokes, “grist for the mill” for any reform agenda he pursues.