ACCC Chairman Rod Sims has recently commented in a number of speeches and media interviews that the ACCC is aware that at least 20 Australian local government bodies (including, to our knowledge, a number of Victorian councils) attributed some of the increase of rates and charges to the introduction of the Carbon Tax in 2012.

With the repeal of the Carbon Tax, Mr Sims has foreshadowed that:

we'll be knocking on their door to make sure that those rates come down… because waste and general electricity costs do affect council rates… what went up should come down and we'll be in contact with councils to make sure that happens.[1]

There are strong grounds for Victorian councils to politely, but firmly, respond to any knocks at the door from the ACCC and reject any allegations they have acted unlawfully.  We explain why below.

Carbon Tax Repeal

The Clean Energy Legislation (Carbon Tax Repeal) Act 2014 (Cth) (Repeal Act) repeals Australia's carbon tax and amends the Australian Consumer Law (ACL) set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA) to prohibit carbon tax-related price exploitation and false or misleading representations regarding the effect the repeal of the carbon tax will have.  These changes to the ACL took effect on 18 July 2014.

The changes to the ACL provide the Australian Competition and Consumer Commission (ACCC) with additional powers to monitor and take action to ensure that these cost savings are not only accurately conveyed but also passed over to consumers, in addition to its existing powers in relation to false, misleading or deceptive conduct.

A new provision in the ACL, s 60K, prohibits an entity from making in trade or commerce a false or misleading representation concerning the effect of the carbon tax scheme or its repeal on the price of its goods or services.  Section 60K only applies during the carbon tax repeal transition period, which runs from 1 July 2014 to 30 June 2015.

The prohibition in section 60K is in addition to the existing prohibitions on making false, misleading or deceptive representations in trade or commerce under sections 18 and 29 of the ACL.

Application to Council Rates and Charges

In 2012, at least 20 local councils around Australia attributed increases in council rates or charges to the introduction of the carbon tax.

Since its repeal, a number of councils have indicated their willingness to reduce these rates. For example Brisbane City Council is offering a one-off rate refund of $36.00 to all ratepayers to return the estimated cost savings of the carbon tax from the 2014-2015 budget[2] and is also contemplating lowering the fees for waste transfer stations.

However, not all councils may be in a position to reduce rates and charges following the Carbon Tax repeal.

The ACL applies to local government in different ways, depending upon the circumstances.

As a council is not 'a trading or financial corporation formed within the limits of the Commonwealth', the Commonwealth Parliament does not have constitutional power to make laws regulating their activities as a corporation.

To overcome this limitation on the Commonwealth Parliament's law making power:

  • section 12 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) applies the ACL as a law of Victoria to, among others, bodies corporate incorporated under the law of Victoria, which does include councils (s5(2)(a) Local Government Act 1989 (Vic))
  • s131(2)(a)(i) of the CCA applies the ACL as a law of the Commonwealth in relation to a supply or possible supply of goods or services to a corporation
  • section 6 of the CCA extends the constitutional basis for operation of the CCA (and ACL) to include conduct involving the use of postal, telegraphic or telephonic services (including the Internet) or radio or television broadcasts
  • the entities to which section 60K applies are defined in section 60A to include, as well as corporations, bodies corporate and bodies politic.

So, the ACL (including sections 18, 29 and 60K) will apply to councils in most circumstances.

However, many statements made by local government will not be conduct 'in trade or commerce' and therefore not subject to the prohibitions on false, misleading or deceptive representation under sections 18, 29 or 60K of the ACL.

For example, under sections 127 and 129 of the Victorian Local Government Act 1989, councils are obliged to prepare a proposed budget each year and publish it for public comment before it is adopted.

We consider it unlikely that any statements by a council made or published in relation to a proposed budget as part of the statutory budget process would amount to a representation in trade or commerce to which any of section 18, 29 or 60K of the ACL could apply.

Further, to the extent that an elected councillor (or a candidate for election) made a statement in relation to the impact of the Carbon Tax or its repeal on council rates or charges, even in their official capacity as the mayor or a councillor of the council, it is likely that such a statement would be constitutionally protected speech on political or governmental affairs, and not a statement 'in trade or commerce.'  Finally, in many circumstances it will be highly debatable whether a council rate or charge is a price for the supply of goods or services by the council, in the sense required by s60K.

Xinyu Zhang