The privatisation of state-owned assets is a hot topic of public conversation in 2015.

Federal and state governments are considering the sale of various public assets, the Harper Panel’s Final Report made various recommendations concerning privatisation, recent state elections featured privatisation as a central election issue, and the federal government’s Energy White Paper released last week recommended privatising state-owned electricity assets to enhance competition and productivity.

Throughout this, the ACCC has been vocal about its focus on privatisation and the need to ensure appropriate regulation and market structures.

KWM partners discuss competition law issues arising from privatisation

In the above video, King & Wood Mallesons partners Andrew Monotti and Wayne Leach discuss a number of competition law issues arising from the privatisation of state-owned assets. These range from merger review by the ACCC under section 50 of the Competition and Consumer Act 2010 (Cth) (“CCA”), which prevents acquisitions which substantially lessen competition in a market, to the potential need for access undertakings under Pt IIIA of the CCA.

As Andrew and Wayne make clear, there are a range of issues and potential challenges that need to be carefully managed in privatisations, which typically involve a competitive bid process.

The Harper Review pushes for competition laws to apply to governments and for governments to consider competition in their privatisation policies

The Harper Panel’s Final Report recommended that:

  • Competition laws be applied to the Crown (including Commonwealth, State, Territory and local governments) if it is undertaking activity in trade or commerce;
  • Australian governments review their procurement policies, including privatisation guidelines and processes;
  • Governments apply a public interest test to their privatisation policies and practices such that they should not restrict competition unless:
    • the benefits of the restrictions to the community as a whole outweigh the costs; and
    • the objectives of the policy can only be achieved by restricting competition; and Australian governments review their procurement policies, including privatisation guidelines and processes; and
  • An independent body (such as the Australian Council for Competition Policy, which the Panel recommended be establish) report on progress in reviewing government procurement and privatisation policies and ensuring privatisation incorporates competition principles.

As noted in our detailed alert, the Panel’s recommendation that competition laws be applied to governments may have implications for the way governments privatise assets, especially the way they may offer comfort to bidders that other government-owned assets will not compete away value. However, even if the federal government accepts the proposed amendments, it appears unlikely that the necessary reform will occur in time to apply to the privatisation of many federal and NSW government assets for which sales processes are either underway or imminent.

Bruce Billson, Minister for Small Business, has indicated he aims to develop a “response action plan” by the end of 2015 following an 8–week consultation and discussions with state and territory governments.

Although recognising the consumer benefits that are likely to arise from privatisation, the Harper Panel echoed the ACCC’s concern that governments should not seek to maximise asset sale proceeds at the expense of competition. It emphasised that the privatisation should occur in a way that promotes competition and prevents monopoly pricing.