The Final Harper Competition Policy Review Report (Harper Review) released on Tuesday 31 March 2015 creates real opportunities for legislative change that could benefit airline operators.
Specifically, it creates an opportunity for structural change in the aviation industry by recommending reform in relation to the supply of jet fuel and the cost of air traffic control services. The Australian Government is expected to respond to the recommendations by the end of May 2015. Prior to that time, businesses have a further opportunity to put forward any views. Further detail is below:
- Jet fuel supply: The Harper Review recommends reform to facilitate greater competition in jet fuel supply at Australian airports. This could reduce the jet fuel differential in Australia, which BARA observes is among the highest globally. The Harper Review leaves the details of reform to be determined. Reform could involve deemed declaration of infrastructure to ensure that potential jet fuel suppliers can obtain access to the jet fuel infrastructure supply chain on commercial terms.
- Cost of air traffic control services: The Harper Review recommends reform to the pricing structure for services provided by Airservices Australia but leaves the details of reform to be determined. If accepted, this could result in a reduction in the prices imposed for air traffic control services at major capital city airports and an increase in the corresponding prices at regional airports.
- Protections against use of power: The Harper Review recommends bringing the misuse of market power prohibition into line with the other provisions in Part IV of the CCA. If implemented, these amendments would make it significantly easier to prove a contravention of section 46, primarily because of the addition of an ‘effects’ test and the removal of the ‘take advantage’ limb.
The ACCC has long advocated for the addition of an effects test on the basis that it is difficult for it to prove the subjective purpose of an accused.
The taking advantage limb has traditionally provided comfort to firms engaging in conduct that would be a rational business strategy even for a firm without substantial market power. The removal of this limb would expand the reach of the prohibition and place significant importance on the interpretation of the substantial lessening of competition test, which the Harper Review recommends inserting in place of the existing proscribed anti-competitive purposes.
In addition, the Harper Review endorses the continued application of the unconscionable conduct prohibition to B2B dealings. The recent decision of the Federal Court penalising Coles $10m for misusing its bargaining power with suppliers is a significant development in the law of unconscionable conduct which is likely to result in more extensive use of this prohibition.
- Streamlined authorisation process: The Harper Review recommends streamlining the authorisation process and expanding the circumstances in which the ACCC may grant authorisation to include circumstances where the proposed conduct does not substantially lessen competition. If implemented, both of these changes would make it easier to obtain authorisation in respect of co-ordination agreements between carriers.
- Clarification regarding cartel conduct: The Harper Review recommends simplifying and restricting the operation of the cartel laws. Specifically, the recommendations include:
- Expressly requiring a nexus with Australia by limiting the operation of the cartel laws to cartel conduct involving persons who compete to supply products to or acquire products from persons resident in or carrying on business within Australia. If implemented, this would address the fact that the current cartel laws do not contain any express jurisdictional limitation. In this respect the current cartel laws differ from the provisions relevant to the recent judgment in ACCC v Air New Zealand where the Federal Court found that conduct did not breach Australian competition law because it did not occur in a ‘market in Australia.
- Limiting the circumstances in which firms will be deemed competitors such that the cartel laws apply. If implemented, this would provide greater certainty regarding the potential field of operation of the cartel laws. That field is currently very wide following the decision of the Federal Court in early 2014 to fine Flight Centre $10m for engaging in price fixing conduct with carriers. In its judgment, the Court concluded that travel agents such as Flight Centre were in competition with carriers. That judgment was appealed by Flight Centre and a decision is expected shortly.