Last week the Government released its response to the Harper Competition Policy Review. Whilst much of the media focus has been on this response the Government also released at the same time its response to the Productivity Commission's 2013 Review of the Part IIIA of the Competition and Consumer Act (CCA)(PC's Review of Part IIIA) which is of more relevance to infrastructure owners such as rail, port and airport owners. In this short update we explain the significance to infrastructure owners of the Government's responses.  

Increase in infrastructure owners' bargaining position...

The PC 2013 Review of Part IIIA made recommendations to the Government to amend the declaration criteria in Part IIIA which changes slightly increased the bar to declaration. However, the Government then asked the Harper Committee to consider the Productivity Commission's recommendations as part of its Competition Policy Review. In doing so the Harper Committee made recommendations to further increase the bar to declaration under Part IIIA. However, last week the Government rejected the key recommendations of the Harper Committee in respect of the declaration criteria and instead endorsed the original recommendations of the Productivity Commission from 2013. Notwithstanding, the bar to declaration will increase once the Government enacts legislation to adopt the Productivity Commission's recommended changes to Part IIIA. The Government's position is to the advantage of access providers, not otherwise subject to an access regime.

Specifically, the Government proposes to:

  • Slightly increase the bar to satisfaction of the promotion of competition test of declaration. The Government proposes to re-establish the interpretation of this test prior to the Full Federal Court's decision in 2006 in the Sydney Airport case. In that case the Full Court arguably materially lowered the threshold to a test of a comparison of access with and without access. To clarify the test the Government proposes that criterion (a) be a comparison of competition with and without access on reasonable terms and conditions through declaration. 
  • Lower the bar to satisfaction of the uneconomic to duplicate test of declaration. The Government proposes to amend the test to make it a clear form of natural monopoly test to render irrelevant the High Court's interpretation of this test as a 'privately profitable test' from the Fortescue Pilbara access case. In expressly rejecting the High Court's 'private profitability test' and Harper's endorsement of the High Court's interpretation the Government stated: 'The Harper Review's recommendation for this criterion would keep the bar for a declaration a very high, potentially leading to inefficient duplication of infrastructure and weakening the incentive for commercially negotiated outcomes.' 
  • Reformulate the test of public interest to increase the bar for its satisfaction. The Government stated 'Expressing this test in a negative 'not contrary to the public interest' - is too low a hurdle. Given that access is an imposition on infrastructure service providers, all tests should be framed from the perspective of protecting their property rights unless there are persuasive reasons not to.'

But...

The Government is now undertaking further consultation on changes to the misuse of market power provisions in section 46 of the CCA. The Harper Committee recommended changes to the misuse of market power test by changing it to an effects test which would increase the legal threat faced by infrastructure owners and operators should they not agree terms for use of the infrastructure with access seekers. Any change to the misuse of market power provision is likely going to enhance the bargaining position of access seekers. However, whether the increased bargaining strength obtained by access seekers from an enhanced misuse of market power provision will outweigh the increased bargain position of infrastructure owners and operators from the Government's proposal to increase the bar to declaration under Part IIIA will be dependent upon the Government's final form of amendment to the misuse of market power provisions to be announced around March 2016.