The NSW Civil and Administrative has recently considered the extent to which a local council carries on a business for the purposes of the Fair Trading Act 1987 and the Competition and Consumer Act 2010 (CCA). The judgment contains significant lessons for the application of anti-competition and consumer laws to not only local councils, but also state government authorities.
Plath v Snowy Monaro Regional Council  NSWCATAP 165, concerned an application by a resident, Mr Plath, seeking to recover from the Council a sum of $141 which had been levied as charges for waste management, and onsite sewerage management. Mr Plath alleged that he had been required to pay those amounts, with no service ever having been provided to him by the Council.
Mr Plath commenced the proceedings under the Fair Trading Act 1987, which applies consumer protection laws in NSW.
In order for the Tribunal to have jurisdiction to consider the claim, Mr Plath had to prove that Council ‘carries on a business‘ in the supply of waste management and onsite sewerage management services.
The relevance of carrying on a business
The question of when a government body carries on a business has broader significance in the application of competition and consumer laws to government authorities.
For local council and state government authorities:
- anti-competition legislation in Australia (the CCA), which prohibits actions such as the formation of cartels, will apply only to the extent that councils and state authorities carry on a business; and
- the consumer protection provisions in the Australian Consumer Law (ACL), adopted in NSW by the Fair Trading Act, will apply whether or not a council or a state government authority is carrying on a business. Instead, the ACL will generally apply where an authority engages in ‘trade or commerce‘. The Courts have held that this is a lower bar.
What is meant by carrying on a business?
Despite the position regarding the application of the ACL, the Fair Trading Act only gave the Tribunal jurisdiction to determine Mr Plath’s claim if the Council was carrying on a business.
The Tribunal held that the Council was not carrying on a business in providing domestic waste management services and in providing approvals for onsite sewerage management.
In terms of waste management services, the Tribunal placed particular emphasis on s 24 of the Local Government Act 1993, which gives Councils a discretionary power to provide services appropriate to the needs within the local community and the wider public. The Tribunal held significantly that:
... We are of the opinion that that service is in the nature of a governmental service intended to support the council’s objectives outlined in the LG Act. Indeed s 24 limits the services which the section authorises the respondent to engage in to those “appropriate to the current and future needs within its local community and of the wider public”. Such services do not have the character of a commercial enterprise or a business character … . Rather, they have the character of the performance of a statutory function. …
Similarly, the approval of an application for onsite sewerage under s 68 of the Local Government Act 1993 was the exercise of a governmental function under that Act. It was tied to the regulation of the activity.
Although the decision related solely to jurisdiction, the reasoning provides a good indication of when councils and state government authorities are likely to be subject to anti-competition law.
Where an authority is engaged in a regulatory or statutory function, such as domestic waste collection, it will not be carrying on a business.
However, local councils in particular should be hesitant to extend the reasoning of the Tribunal too far. Whilst the Tribunal relied heavily on the terms of s 24 of the Local Government Act, not every service provided to advance the current and future needs of the community will be governmental in character. If a council ran a cinema for instance it would likely be engaging in a business activity.
In any event, given the guiding principles in s8A of the Local Government Act, councils should seek to comply with anti-competition and consumer law principles in all of their dealings, irrespective of whether or not the council is carrying on a business. This is particularly the case in respect of dealings with consumers.
You can read the case here.