Bills Digest no. 66 2009–10
Trade Practices Amendment (Infrastructure Access) Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced: 29 October 2009
House: House of Representatives
Portfolio: Treasury
Commencement: Sections 1–3 on the day of Royal Assent; Schedules 1–4,
items 1–11 and 13–25 of Schedule 5 on the day after Royal Assent; and item 12
of Schedule 5 immediately after the commencement of items 1–11 of Schedule 5.
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
The purpose
of the Bill is to amend Part IIIA of the Trade Practices Act 1974 (TPA)
to streamline administrative processes associated with the application of the
National Access Regime.
According to the Independent Committee of Inquiry into
National Competition (the Committee of Inquiry):
As a general rule, the law imposes no duty on one firm to do
business with another. The efficient operation of a market economy relies on
the general freedom of an owner of property and/or supplier of services to
choose when and with whom to conduct business dealings and on what terms and
conditions. This is an important and fundamental principle based on notions of
private property and freedom to contract, and one not to be disturbed lightly.[1]
Despite this acknowledgement, the Committee of Inquiry
report of August 1993 (known as the Hilmer Report after the Chairman, Fred
Hilmer) recommended the implementation of a national competition policy for
Australia to improve productivity, increase international competitiveness and
to maintain and improve living conditions.[2] Australia’s commitment to national competition principles was subsequently
enshrined in the Competition Principles Agreement and the Agreement to
Implement the National Policy and Related Reforms entered into between the
Commonwealth, State and Territory Governments in April 1995.[3]
Amendments to the TPA[4] which came into effect in 1995 established ‘a new legal regime under which
firms could be given a right of access to “essential facilities”[5] owned by another firm, when the provision of such a right meets certain public
interest criteria’.[6]
That legal regime is the National Access Regime which is contained in Part IIIA
of the TPA. Section 44DA of Part IIIA requires decisions about access regimes
to be consistent with the principles set out in the Competition Principles
Agreement.
In 2001 the Productivity Commission reviewed the National
Access Regime.[7] It considered that (emphasis added):
Given the in principle case for some curbs on the exercise of
monopoly power in the provision of essential infrastructure services, the
limited experience in Australia with access regimes, and ongoing structural
change in a number of infrastructure sectors, abandoning access regulation
at this stage would be inappropriate.[8]
The Productivity Commission did, however, recommend a number
of changes. The government response to the recommendations was largely
positive.[9]
The Trade Practices Amendment (National Access Regime) Act 2006 made the
necessary amendments to the TPA. In particular, the amending Act inserted
statutory pricing principles to provide guidance for pricing decisions and to
contribute to consistent and transparent regulatory outcomes over time as well
as certainty for investors and access seekers.[10]
In the same year, the Council of Australian Governments
(COAG) agreed to the Competition and Infrastructure Reform Agreement[11] in which all the parties agreed, amongst other things, to ‘introduce requirements that regulators will be bound to
make regulatory decisions under an access regime within six months, provided
that the regulator has been given sufficient information’.[12]
As a further step in November
2008, COAG agreed to the National Partnership Agreement to Deliver a Seamless
National Economy.[13]
The Hon Chris Bowen MP (the
Assistant Treasurer) outlined the further reforms to the National Access Regime
arising from that Agreement stating that:
The reforms aim to improve the efficiency, timeliness and effectiveness
of regulatory decision-making under the Regime in Part IIIA of the [TPA].
While the Regime appears to be operating effectively, there
are concerns it is generating regulatory risks that are hindering investment in
essential infrastructure.
Some infrastructure owners and access seekers have argued
that processes under the Regime are too lengthy and costly.
Currently, processes under the National Access Regime can go
on for years. The National Access Regime needs to be improved to make decisions
and arbitration faster.[14]
The Bill has been referred to the Economics Legislation
Committee for inquiry and report by 9 March 2010.[15]
A spokesman for Fortescue Metals Group Limited (FMG) applauded
the Government’s efforts stating:
Despite favourable rulings from the National Competition
Council, the Federal Court, the Full Bench of the Federal Court and the Full
Bench of the High Court over five years, Fortescue is still waiting to gain the
right to negotiate for access.[16]
On the other hand, Minerals Council of Australia chief
executive Mitch Hooke is reported to have said the planned amendments did not
go far enough and there was still ‘confusion and uncertainty’, adding that:
… changes to the [Trade
Practices Act] should ensure the use of infrastructure was mandated only in
circumstances where the economic benefits of doing so unambiguously outweighed
the costs. Otherwise, future investment in critical infrastructure could be
significantly stymied.[17]
According to the Explanatory
Memorandum, the Bill has ‘no significant financial impact on Commonwealth
expenditure or revenue’.[18]
The key complaint about the National Access Regime is that
it takes too long. This is evident in the applications by Fortescue Metals
Group Limited (FMG) for declarations of access to infrastructure owned by BHP
Billiton Iron Ore Pty Ltd (BHP).
BHP carries on the business of the mining, blending and
other processing of various types of iron ore in the Pilbara region of Western
Australia for the purpose of producing bulk iron ore products for sale. The
ore is transported from mine to port via two distinct rail lines in the Pilbara
region being the Mt Newman rail line and the Goldsworthy rail line.[19]
Subsection 44F(1) of the TPA provides that a person can
request that the National Competition Council (NCC) recommend to the designated
Minister that a particular ‘service’ be declared.[20]
On 15 June 2004, FMG made an application to the NCC under section 44F of the
TPA for declaration of a service so that it could gain access to part of the Mt
Newman rail line and part of the Goldsworthy rail line.[21]
‘Service’ is defined in section 44B of the TPA
as a service provided by means of a facility and includes:
- the use of an
infrastructure facility such as a road or rail line
- handling or
transporting things such as goods or people
- a communications
service or similar service
but does not include:
- the supply of goods
- the use of
intellectual property
- the use of a
production process
except to the extent that it is
an integral but subsidiary part of the service. (Emphasis added.)
The NCC advised that, as a preliminary matter:
- the Mt Newman rail line service would be considered further for
declaration, but
- the Goldsworthy rail line service would not, because it was part
of a ‘production process’ and therefore exempt from the provisions of Part IIIA
of the TPA.
In response, both BHP and FMG made applications to the
Federal Court under section 39B of the Judiciary Act 1903. In essence,
the action taken by BHP sought to prevent the NCC from proceeding any further
in its consideration of the application about the Mt Newman rail line.
The action taken by FMG sought to have the NCC include the Goldsworthy line in
its recommendations to the Minister.
The NCC’s final recommendation—that the Mt Newman line
should be declared to be a ‘service’ for a period of 20 years—was provided to
the relevant Minister for a decision on 24 March 2006. As the Minister did not
publish a decision within the 60 day time limit, under subsection 44H(9) of the
TPA he was deemed to have made a decision not to declare the ‘service’.
Even though BHP and FMG had issued proceedings in the
Federal Court in December 2004 and February 2005 respectively, the Federal
Court did not publish its decision on the matters until October 2006.[22]
The issue for the single judge of the Federal Court, Justice
Middleton, was the meaning of the terms ‘service’ and ‘use
of a production process’. These issues had been comprehensively
considered in the earlier case of Hamersley Iron Pty Ltd v National
Competition Council (Hamersley) which provides valuable context to the FMG
applications and BHP’s response.[23]
In Hamersley the issue to be determined was whether a rail track
‘service’ and associated infrastructure operated by Hamersley Iron Pty Ltd,
involved the use of a ‘production process’. Justice Kenny considered that the
term ‘production process’ acted as an exclusionary criterion within the
definition of ‘service’. Fortifying her conclusions by reference to the Hilmer
Report,[24] Justice Kenny determined that the purpose of the exclusion was to strike a
balance, that is, to permit appropriate utilisation of certain
infrastructure by third parties and, at the same time, protect the viability of
investments made by those who had invested in, for example, the processes of
production.[25]
The application by Robe River Iron Associates to declare the
rail line operated by Hamersley a ‘service’ which Robe could access, was
refused. For those in the resources sector, the Hamersley decision
acted as a disincentive to potential applicants for access and provided some
certainty to service owners/operators about the prospects of success of any
future applications.[26]
It is likely that BHP would have commenced the relevant
proceedings feeling quite confident of the outcome, given the decision in Hamersley.
However the judge considering the BHP and FMG proceedings determined that the Hamersley decision was ‘plainly wrong’.[27]
That being the case:
- the application by BHP in relation to the Mt Newman rail line was
dismissed, and
- the application by FMG in relation to the Goldsworthy rail line
was successful.
BHP lodged an appeal against that decision.[28]
However, the majority decision of the Full Court of the Federal Court, made in
2007, confirmed the original decision that the bulk iron ore rail track
transport services provided by the Goldsworthy rail facility was a ‘service’
under Part IIIA of the TPA and could, therefore, be the subject of a
declaration of access.
The Productivity Commission had recognised the need for
clarification of the term ‘production process’ in its 2001 report, stating:
While the current exclusions from the coverage of Part IIIA
should be retained, developments in relation to the ‘production facility’
exemption should be monitored by the National Competition Council. Should
judicial interpretation of that exemption lead to outcomes that detract from
efficiency, it may be necessary to remove the provision or clarify its intent.[29]
BHP lodged an appeal to the High Court against the decision
of the Full Court of the Federal Court. However, the High Court’s decision in
2008 affirmed the decision so that the judicial interpretation of the term
‘production process’ is now clear.[30]
FMG’s initial applications were submitted to the NCC in June 2004. The Federal Court decisions merely considered preliminary matters under the Judiciary
Act 1903. They were not decisions about whether access should be granted
under Part IIIA of the TPA.
In relation to the Mt Newman rail line, a decision is
deemed to have been made under subsection 44H(9) of the TPA that the rail line
not be declared a service. FMG has sought a review of this decision by the
Australian Competition Tribunal in accordance with section 44K of the TPA. The
matter is still before the Australian Competition Tribunal and no hearing date
has been set.[31]
In relation to the Goldsworthy rail line, FMG made a
new application to the NCC on 16 November 2007 under the name of its
wholly owned subsidiary, The Pilbara Infrastructure Pty Ltd. The NCC
recommended that the application be approved on 28 August 2008. The Treasurer decided
on 27 October 2008 that the application was approved.[32]
BHP lodged an appeal against the Treasurer’s decision with the Australian Competition
Tribunal on 14 November 2008.[33]
Twenty-one months elapsed between the FMG applications and
the NCC recommendation to the Minister. Whilst it is acknowledged that the FMG
applications took significantly longer than most others, the recommendation
process by the NCC commonly takes months rather than weeks. A further two
months may elapse while the relevant Minister considers the recommendation.
There follows a right of appeal to the Australian Competition Tribunal. Whilst
this process is underway, significant financial resources and personal energies
may be diverted away from the facility owner’s core business, to its ultimate
detriment.
The proposed amendments in Schedule 1 of the Bill are
intended to create tighter time limits for the making of recommendations by the
NCC and decisions by the Australian Competition and Consumer Commission (ACCC)
and the Australian Competition Tribunal.
The proposed amendments in Schedule 4 of the Bill will also
streamline the process for amending access undertakings.
Five separate Federal Court judges have now turned their
minds to the meaning of the phrase ‘the use of a production process’. Each
formed a view, apparently, by considering the Hilmer Report and its intention.
In effect though, the differing approaches to decision making by the individual
judges and the varied outcomes of that process have highlighted the very
difficulties faced by the Committee of Inquiry which stated that:
… the Committee is conscious of the need to carefully limit
the circumstances in which one business is required by law to make its
facilities available to another. Failure to provide appropriate protection to
the owners of such facilities has the potential to undermine incentives for
investment.[34]
These concerns were echoed by Qantas Chairman, Leigh
Clifford, who is reported as saying:
The bottleneck at the ports ... the reality is governments
aren't going to be able to afford that. Therefore, there has to be an
incentive for the private investor to invest in infrastructure. The problem
with infrastructure is the cash flow goes out forever and a day, and it comes
back in years out … We’ve got to think about how we can encourage private
equity into infrastructure, and that applies across the board - be it roads,
rail, ports.[35]
The proposed amendments in Schedule 2 of the Bill will
address this. Schedule 2 will allow a person with a material interest in a new
infrastructure facility to apply for a decision that a service to be provided
by that facility is ineligible to be a declared service. This is based on a
recommendation by the Productivity Commission.[36]
In its 2001 report the Productivity Commission, in considering different
approaches to the problem, stated:
… some form of access holiday arrangement could be used. Most
participants favoured an approach which would exempt a new project from
exposure to an access regime until it had returned the cost of capital agreed
in advance with the regulator. Once a project had become ‘NPV positive’, any
additional profits would be shared by the facility owner and the regulator (on
behalf of service users).
The approach, which has
parallels with a resource rent tax, would have important advantages. For
example, it would provide certainty to investors …[37]
The existing provisions of Part IIIA of the TPA contain
‘target’ time limits for the making of recommendations by the National
Competition Council and for making of decisions by the Australian Competition
and Consumer Commission (ACCC) and the Australian Competition Tribunal. In
each case it is expected that the responsible body will use their ‘best
endeavours’ to meet those targets.[38]
Items 2, 17, 25, 37, 49, 58 and 60 of Schedule
1 repeal existing references to ‘target’ time limits. Instead, Schedule 1
introduces the concept of an ‘expected period’ within which
recommendations or decisions are to be made.
The pattern of the proposed amendments is repeated in a
number of Divisions of Part IIIA of the TPA which are set out below. It should
be noted that Schedule 2 inserts a new Division 2AA and that Division
contains time limits which are in the same terms as those set out in Schedule 1
as outlined below.
Items 1–16 of Schedule 1 amend Division 2 of Part
IIIA of the TPA which relates to ‘declared services’. It is the Division on
which the FMG applications were based. Existing section 44F of the TPA provides
for the making of a written application to the NCC asking that it recommend
that a particular service be declared. Item 4 inserts proposed
section 44FA which will empower the NCC to give a written notice to a
person requesting specified information within a specified period. Any
information which is received within that period must be taken into
account by the NCC in making its recommendation.
Item 5 repeals existing section 44GA and inserts proposed
section 44GA which will impose time limits on the NCC in the making of its
recommendation. In particular, proposed subsection 44GA(2) provides
that the expected period for consideration is 180 days. However proposed
subsection 44GA(3) does allow for stopping the clock in which case
the days which elapse are disregarded for the purpose of calculating the
consideration period. This will occur where:
- the NCC, the applicant and the service provider make an agreement
to that effect in writing, or
- a notice is given to a person by the NCC under proposed section
44FA requesting information, in which case the days that elapse are
disregarded.
Nevertheless proposed subsection 44GA(4) provides
that the number of days disregarded must not be more than 60 days in total.
Where the NCC is not able to make its recommendation within
the expected period it must notify the designated Minister in writing. That
notice must specify how long the consideration period is to be extended: proposed
subsection 44GA(7).
Existing subsection 44H(1) provides that on receiving a
declaration recommendation, the designated Minister must either declare the
service or decide not to declare it. Existing subsection 44H(9) provides that
if the designated Minister does not publish a decision on the declaration
recommendation within 60 days after receiving it, then he or she is taken, at
the end of that period, to have decided not to declare the service and to have
published that decision not to declare the service.
Item 7 repeals existing subsection 44H(9) and inserts proposed subsection 44H(9). The effect of the change is that, if
the designated Minister does not publish a decision on the declaration
recommendation within 60 days after receiving it, then he or she is taken, at
the end of that period, to have made and published a decision in accordance
with the recommendation of the NCC. Proposed subsection 44H(10) provides an exception, so that if the designated Minister is prevented from
declaring the service, for example, because it is a service that is the subject
of an access undertaking in operation under Division 6, then at the end of the
60 day period the designated Minister is taken to have made and published a
decision not to declare the service.
Existing section 44J provides that the NCC may recommend to
the designated Minister that a declaration be revoked. Item 9 inserts proposed
subsection 44J(9) which provides that where the designated Minister has not
made a decision on the revocation within 60 days, he or she is taken to have
made and published a decision that the declaration is revoked.
Existing section 44K allows a provider to apply in writing
to the Australian Competition Tribunal for a review of a declaration by the
designated Minister. Similarly there is a right of review to the Australian Competition
Tribunal by the applicant for the declaration where the designated Minister has
decided not to declare a service. Item 13 repeals existing subsection
44K(6) and inserts proposed subsections 44K(6)–(6B) which specify that
the Australian Competition Tribunal may seek assistance or information from the
NCC for the purposes of a review. Item 16 makes similar changes to
section 44L in relation to the assistance which the Australian Competition
Tribunal may seek from the NCC in relation to a review of a revocation
decision.
States and territories are entitled to proclaim their own
access regimes for essential facilities if they wish to do so. Section 44M of
the TPA sets out the process by which states and territories can ascertain
whether or not an access regime they introduce is an ‘effective access regime’ for the purposes of the TPA.
The practical consequence of a state or territory regime
being regarded as an effective access regime is that the NCC cannot make a recommendation that a service be ‘declared’ under Part IIIA if that service is
already the subject of an effective access regime.
In practical terms the process is as follows:
- the
state or territory prepares an access regime which will normally be given
effect by specific legislation
- the
regime is submitted to the NCC by the responsible state or territory Minister
- the
NCC reviews the regime in a public process by which it seeks and considers
submissions made by the state or territory as well as by interested members of
the public
- the
NCC publishes a draft report and invites and considers submissions on it
- the
NCC forwards a final report to the federal Treasurer with a recommendation on
whether or not, in its opinion, the regime is an effective one, and
- the
federal Treasurer then makes a decision on the recommendation and publishes
that decision.[39]
The existing target time frame for the recommendation by the
NCC is six months from the date of the original submission.[40]
The target time frame for the decision by the Treasurer is 60 days.[41]
The NCC has made a number of access declarations in respect
of state gas, electricity and rail access regimes.[42]
Items 17–36 of Schedule 1 amend Division 2A of Part
IIIA of the TPA. Under section 44M, where a state or territory that is a party
to the Competition Principles Agreement has established a regime for access to
a service, the responsible Minister for the state or territory may make a
written application to the NCC asking it to recommend that the Commonwealth Minister
decide that the regime for access to the service is an ‘effective access
regime’.
The Bill contains a number of amendments which are in
similar terms as the amendments to Division 2 as follows:
- item 17 inserts proposed section 44MA which
empowers the NCC to request a person to provide information of a specified
nature and within a specified time to assist it to make its recommendation.
Any information which is received in response to such a notice and within the
specified time frame, must be taken into account by the NCC
- item 27 empowers the NCC in the same terms to request
information in relation to extending a decision by the Commonwealth Minister
that a regime is an ‘effective access regime’
- item 22 inserts proposed subsection 44N(4) so that
where the Commonwealth Minister does not publish a decision on the
recommendation within 60 days, he or she is taken to have made and published a decision
in accordance with the NCC’s recommendation. Where the recommendation of the
NCC was that the access regime is an ‘effective access regime’ then the duration of deemed decision is the same period as that recommended by
the NCC
- item 30 applies in the same terms in relation to a
decision by the Commonwealth Minister to extend the period that a regime is an
‘effective access regime’
- item 31 provides that the NCC must make a recommendation
within the expected period for consideration, being 180 days.
However proposed subsection 44NC(3) does allow for stopping the
clock in similar terms to those detailed in item 5 above. Where the NCC is not
able to make its recommendation within the expected period it must notify the
designated Minister in writing. That notice must specify how long the
consideration period is to be extended: proposed subsection 44NC(7)
- existing section 44NE empowers the NCC to invite public
submissions on an application under Division 2A. Item 33 repeals and
substitutes proposed subsection 44NE(3) so that the NCC must take into
account any information provided in public submissions within the specified
time limit in making their recommendation, and
- existing section 44O provides a right of review to the Australian
Competition Tribunal by the state or territory Minister who made the original
application or who applied to extend the period of the effective access
regime. Item 36 inserts proposed subsections 44O(5)–(5B) in the
same terms as item 13 set out above in relation to the assistance which the Australian
Competition Tribunal is able to request from the NCC.
Division 2B sets out the processes that apply to the ACCC in
making a decision to approve, or refuse to approve, a tender process for the construction
and operation of a facility that is to be owned by the Commonwealth, or a state
or territory, as a competitive tender process. If the ACCC makes such a
decision, the NCC cannot recommend declaration of any service provided by means
of the facility and specified in the application, and the designated Minister
cannot declare any such service.
Items 37–48 of Schedule 1 amend Division 2B in the
following manner:
- the ACCC may request a person to provide information of a
specified nature and within a specified time to assist it to make its decision
about the tender process. Any information which is received in response to
such a notice and within the specified time frame, must be taken into
account by the ACCC in making the decision: item 39
- the ACCC must make a decision within the expected period—being
90 days. However proposed subsection 44PD(2) does allow for
stopping the clock in which case the days which elapse are disregarded for the
purpose of calculating the consideration period. This will occur where:
- the ACCC and the applicant make an agreement to that effect in
writing or
- a notice is given to a person by the ACCC under proposed
section 44PAA requesting information or
- a notice seeking public submissions is given by the ACCC under proposed
section 44PEA
- unlike the proposed amendments to Division 2 and 2A, the proposed
amendments to Division 2B do not set a limit on the number of days which can be
disregarded
- if the ACCC has not published its decision at the end of the
expected period (as extended by clock stoppers) it is taken to have approved
the tender process as a competitive tender process and published a decision to
that effect: item 40, and
- existing section 44PG allows for a right of review by the Australian
Competition Tribunal in respect of the ACCC’s decision. Item 45 repeals
existing subsection 44PG(5) and inserts proposed subsections 44PG(5)–(5B) in the same terms as item 13 set out above in relation to the assistance which
the Australian Competition Tribunal is able to request from the ACCC. Item
48 makes similar changes to section 44PH in relation to the assistance
which the Australian Competition Tribunal may seek from the ACCC in relation to
a review of a revocation decision.
Where a person seeks access to an essential service but is
unable to reach agreement on the terms and conditions of that access with the
owner or provider, he or she may apply to the ACCC under Division 3 of Part
IIIA of the TPA to have the dispute determined by arbitration. Items 49–54 of Schedule 1 amend Division 3 as follows:
- the ACCC must make a final determination within the expected
period—being 180 days. However proposed subsection 44XA(2) does allow for stopping the clock in certain circumstances in which case the
days which elapse are disregarded for the purpose of calculating the
determination period. However if the ACCC has not published its final
determination at the end of the expected period (as extended by clock stoppers)
it is taken to have made and published a final determination that does not
impose any obligations on the parties or alter any obligations that exist at that
time between the parties: item 50, and
- existing section 44ZP allows for a right of review by the Australian
Competition Tribunal in respect of the ACCC’s final determination. Item 54 repeals existing subsection 44ZP(5) and inserts proposed subsections
44ZP(5)–(5B) in the same terms as item 13 set out above in relation to the
assistance which the Australian Competition Tribunal is able to request from
the ACCC for the purposes of a review.
Section 44ZZA of the
TPA enables the ACCC to accept ‘access undertakings’ from any
person who owns infrastructure to which a third party might seek access. The advantage
of using this method is that the facility owner makes the actual undertaking
about access and so has ownership of it. Once an access undertaking has been
accepted, then the facility owner is quarantined from any attempt by a third
party to seek a declaration under Division 2.
The process to be followed by the ACCC in assessing proposed
access undertakings is essentially a public process:
- on
receipt of an application the ACCC publishes the application and seeks
submissions on it
- once
the submissions have been assessed the ACCC will prepare and publish a draft
decision. The ACCC often retains experts in the particular area to assist it
in its consideration of the matter. Any one affected by the matter is entitled
to make a submission on the draft decision, and
- the
ACCC considers all the submissions and makes a final decision.[43]
The existing target time frame for the ACCC to make a
decision on an access undertaking is six months.[44]
Items 58–69 amend Division 6 as follows:
- the ACCC must make a decision on an access undertaking within the expected period—being 180 days. However proposed subsection 44ZZBC(2) does allow for stopping the clock in certain circumstances set
out in the relevant table. Where the clock is stopped, the days which elapse
are disregarded for the purpose of calculating the decision making period. However
if the ACCC has not published its decision at the end of the expected period it
is taken to have made and published a decision not to accept the application: item
64
- the ACCC may request a person to provide information of a
specified nature and within a specified time to assist it to make its
decision. Any information which is received in response to such a notice and
within the specified time frame, must be taken into account by the ACCC: proposed section 44ZZBCA, and
- existing section 44ZZBF allows for a right of review by the Australian
Competition Tribunal in respect of the ACCC’s decision. Item 69 repeals
existing subsection 44ZZBF(5) and inserts proposed subsections 44ZZBF(5)–(5B) to clarify the assistance which the Australian Competition Tribunal may seek
from the ACCC for the purposes of a review.
Item 70 inserts proposed section 44ZZOAA which
limits the information to which the Australian Competition Tribunal may have
regard on review to those documents which were taken into account by the decision
maker or those documents which were used by the NCC in forming its
recommendation.
Item 2 of Schedule 2 inserts into section 44B of the
TPA the definition of ‘proposed facility’ which is ‘a facility
that is proposed to be constructed (but the construction of which has not
started) that will be structurally separate from any existing facility, or a
major extension of an existing facility’.
Item 7 of Schedule 2 inserts proposed Division 2AA into Part IIIA of the TPA. It introduces a process by which the NCC can
recommend to the ‘designated Minister’[45] that a ‘proposed facility’ is ineligible to be a declared
service.
The process will operate as follows:
- a person with a material interest in the service which the
proposed facility will provide may apply to the NCC asking for an ‘ineligibility
recommendation’ in respect of the service. That application must be in
writing and must be made before construction of the proposed facility commences: proposed subsection 44LB(1)
- the NCC must then either recommend that the designated Minister
decide that:
- the service is ineligible to be a declared service—and for how
long: proposed paragraph 44LB(2)(a)
- the service is not ineligible to be a declared service: proposed
paragraph 44LB(2)(b)
- there are limits on the power of the NCC so that it can only make
an ‘ineligibility recommendation’ if at least one of the matters
listed in subsection 44G(2) is not satisfied: proposed subsection 44LB(3)
- the NCC can request that a person provide further information
which is relevant to making its recommendation. The request must be in writing
and specify the time within which the information is to be provided. Where the
NCC makes such a request, any information which is provided in compliance with
the request in the time specified must be taken into account: proposed
section 44LC
- the NCC may also publish a notice inviting public submissions on
the application: proposed subsection 44LE
- the NCC must make its recommendation within the ‘expected
period’, that is, 180 days starting on the day the application is
received: proposed subsections 44LD(1) and (2). However, proposed
subsection 44LD(3) provides for stopping, and subsequently restarting, the
clock in certain circumstances
- where the NCC is unable to make its recommendation within the
relevant period it must notify the designated Minister in writing of the
relevant reasons and specify the time within which it will make its
recommendation: proposed subsections 44LD(7) and (8), and
- the NCC must publish its recommendation and the reasons for the
recommendation on the day the designated Minister publishes their decision on
the recommendation, or as soon as possible after that day: proposed section
44LF.
- Once the NCC has made its recommendation, the designated
Minister must, having regard to the objects of Part IIIA of the TPA, decide:
- whether the service is ineligible to be a declared service and
specify the period of ineligibility, being no less than 20 years: proposed
paragraph 44LG(1)(a), or
- the service is not ineligible to be a declared service: proposed
paragraph 44LG(1)(b).
In addition:
- the decision of the designated Minister must be published, along
with the reasons for the decision: proposed subsection 44LH(1)
- where the designated Minister does not publish his or her decision
within 60 days from the day the recommendation is received, the designated
Minister is taken to have made a decision in accordance with the ineligibility
recommendation of the NCC: proposed subsection 44LG(6). This means that
if the NCC recommended that the service be ineligible to be a declared service
for a specified period, the effect will be that the designated Minister is
deemed to have made a decision in the same terms[46]
- proposed section 44LI provides a similar process of
recommendation by the NCC, and subsequent decision by the designated Minister,
to allow for revocation of the decision that a service is ineligible to be a
declared service. This could occur where the facility used to provide the
service is materially different from the proposed facility described in the
application or upon request from the person who is the provider of the service,
and
- proposed sections 44LJ and 44LK provide the mechanism for
the review of ineligibility decisions and revocation decisions respectively.
The right of review is to the Australian Competition Tribunal. Application for
review must be made within 21 days after publication of the designated
Minister’s decision. The Australian Competition Tribunal is empowered to
affirm, vary or set aside a decision that a service is ineligible to be a
declared service: proposed subsection 44LJ(8). The Australian
Competition Tribunal may affirm or set aside a decision that:
- a service is not ineligible to be a declared service: proposed
subsection 44LJ(9)
- an ineligibility decision is revoked: proposed subsection 44LK(8), or
- an ineligibility decision is not to be revoked: proposed
subsection 44LK(9).
An ‘access undertaking’ is a document which
establishes the terms and conditions under which a service provider is willing
to offer or negotiate access to a service provided by an essential facility to
an access seeker. The TPA does not prescribe the information that should be
provided in an access undertaking, although they generally deal with matters
such as the terms and conditions of access to the service; and various obligations
on the part of the provider, for example, not to hinder access to the service,
to implement a particular business structure, to provide information to the
ACCC or to comply with decisions of the ACCC in relation to matters specified
in the undertaking.[47]
Schedule 3 amends the TPA to allow for the ACCC to accept
access undertakings with ‘fixed principles’ that will apply to
any subsequent undertaking relating to that service. The amendments do not
prescribe the nature of fixed principles although the Explanatory Memorandum
provides the following examples:
- a parameter such as an asset value
- a formula or methodology such as an efficiency benefit sharing
formula (where the service provider’s net efficiency gains in expenditure under
the current access undertaking are shared between the access provider and
access seekers in any subsequent access undertaking)
- an obligation such as the standard at which the service is to be
provided, or
- a process such as a procedure that the service provider
will follow before undertaking new investment in the relevant facility.[48]
Item 5 of Schedule 3 inserts proposed section
44ZZAAB into the TPA which will:
- allow for terms which are ‘fixed principles’ to be
included in an access undertaking
- the fixed principles apply for a ‘fixed period’ which will commence when the access undertaking comes into operation (or some
later time) and extend beyond the expiry date of the undertaking so that it can
be applied to any later undertaking in respect of the same service
- empower the ACCC to reject an undertaking where it considers that
the undertaking:
- contains a term which should be a ‘fixed principle’ but is not
- contains a term which is a ‘fixed principle’ but should not be,
or
- contains a fixed principle and the ‘fixed period’ should be
different, and
- empower the ACCC to consent to the variation or revocation of a
fixed principle if there is no undertaking in operation.
Items 7 and 8 insert proposed paragraphs
44ZZBF(6)(ba) and 44ZZBF(7)(ba) so that a decision to vary or revoke
a fixed principle by the ACCC is subject to review by the Australian
Competition Tribunal. Item 6 inserts proposed subsections 44ZZBA(6) and (7) which set out the date of effect of the ACCC’s decision to vary or revoke
a fixed principle:
- if no person applies to the Australian Competition Tribunal for
review, then the decision takes effect 21 days after the making of the decision,
or
- if a person applies to the Australian Competition Tribunal for
review within 21 days, the decision comes into effect at the time of the Australian
Competition Tribunal’s decision.
Items 1 and 2 of Schedule 3 are consequential
amendments to the definitions of ‘access undertaking application’ and ‘access undertaking decision’ in section 44B of the TPA.
Currently, any amendment to an access undertaking requires
the proposed undertaking to be withdrawn or rejected in accordance with
existing subsection 44ZZA(7) of the TPA. The service provider must start a new
decision‑making process by submitting a new access undertaking containing
the amendments. This causes delays and increased costs to the infrastructure
provider.
Item 3 of Schedule 4 inserts proposed section
44ZZAAA which will allow the ACCC to issue an ‘amendment notice’ in respect of an undertaking which has been submitted to it. That amendment
notice must be in writing and specify the following:
- the nature of the amendment or amendments which the ACCC proposes
to be made
- the reasons for the proposed amendments and
- the period within which the person is to respond to the amendment
notice.
Item 2 of Schedule 4 repeals existing subsection
44ZZA(7) and substitutes a new subsection 44ZZA(7). This will allow an
infrastructure provider to provide a revised undertaking to the ACCC in
accordance with the amendment notice rather than having to withdraw the access
undertaking and start the process again.
The ACCC must not accept the revised undertaking if the
amendments made are not the same as those proposed in the amendment notice and
do not address the reasons for those proposed amendments. In that case it must
be returned to the person within 21 days of the ACCC receiving it: proposed
subsection 44ZZAAA(6). In addition, item 1 inserts proposed subsection
44ZZA(3B) to empower the ACCC to reject the undertaking if it incorporates
amendments of a kind, made at a time, or made in a manner that:
- unduly prejudices a person who, in the opinion of the ACCC has a
material interest in the undertaking, or
- unduly delays the process for considering the undertaking.
Where a person gives a revised undertaking in accordance
with the amendment notice, the revised undertaking is taken to be the
undertaking given for the purposes of Part IIIA of the TPA: proposed subsection
44ZZAAA(7).
Item 1 of Schedule 5
inserts proposed section 29LA into the TPA to allow for the members of
the NCC to make decisions via the circulation of papers rather than at a
meeting.
Existing section 44F of the TPA provides that a person may
make a written application to the NCC asking that the NCC recommend that a
particular service be declared. Item 4 inserts proposed subsections
44F(6)–(9) allow a person to also request the NCC to vary the application
at any time before the NCC makes its decision. Under proposed subsection
44F(9) the NCC may reject the variation if it is of a kind, or the request
is made at a time, or made in a manner that:
- unduly prejudices a person who, in the opinion of the NCC has a
material interest in the application, or
- unduly delays the process for considering the application.
Items 5–7 amend existing section 44G which limits the
power of the NCC to recommend declaration of a service. The effect of the
amendments is that the NCC cannot recommend the declaration of a service if a
state or territory access regime has already been certified under Division 2A
of Part IIIA of the TPA. Items 8–10 amend existing section 44H which
governs the making of a declaration by the designated Minister, in the same
terms.
Item 13 inserts proposed sections 44KA and 44KB.
In its Annual Report 2007–08 the NCC expressed its belief that ‘service
providers would have less incentive to commence a review as a means of delaying
the negotiation process if decisions were not automatically stayed by the
commencement of a review’.[49] Proposed section 44KA gives effect to this recommendation.
As a further incentive to minimise delays in the declaration
process the NCC stated:
Unlike most court proceedings … there are no provisions for
costs to be paid or awarded in relation to a review of a declaration decision
by the Tribunal. (By contrast the [National Gas Law] contains provisions for
the Tribunal to award costs in a review.) Costs provisions similar to those in
the NGL could usefully be applied for reviews of declaration decisions. This
would discourage conduct designed to waste time and provide an additional
incentive to ensure parties comply with Tribunal directions. The Council notes
that under the NGL the Tribunal must not make an order requiring the original
decision maker (including the Council and the relevant Minister) to pay costs
unless they cause delays or otherwise act inappropriately.[50]
Proposed section 44KB will empower the Australian
Competition Tribunal to order that a person who has been made a party to
proceedings for a review of a declaration pay all or part of the costs of
another person who has been made party to the proceedings. The designated
Minister will be exempt from such an order unless the Australian Competition
Tribunal considers the designated Minister’s conduct was engaged in without
regard to the matters enumerated in proposed paragraphs 44KB(2)(a)–(d).
Under existing section 44S, once a service has been declared
the access provider and the access seeker must negotiate the terms of the
access. If the parties are not able to come to an agreement, either party may
notify the ACCC that an access dispute exists. The access dispute is then
arbitrated by the ACCC under section 44U. Item 16 inserts proposed
section 44YA which requires the ACCC to terminate an arbitration in
relation to a declared service in the event that the Australian Competition
Tribunal sets aside or varies the declaration on review.
Item 19 inserts proposed section 44ZZCBA so
that the ACCC may defer arbitration of an access dispute where the Australian
Competition Tribunal receives an application for review of the declaration of
the service but does not make an order to stay the operation of the declaration.
However, the ACCC must defer arbitration of an access dispute where the Australian
Competition Tribunal receives an application for review and makes a stay order.
It is often the case that a market is dominated by a single
piece of infrastructure and some form of monopolistic power is conferred on the
firm owning the infrastructure, both in the existing, as well as related,
markets. This can occur to the extent that the firm exhibits quite marked
pricing power or where it is uneconomic for other firms to duplicate the
infrastructure.
To balance the rights of consumers with the infrastructure
owner in such cases, Australia has developed a national system for third party
access to key economic
infrastructures. This system allows potential competitors to seek access to
infrastructure as a means to introduce competition into affected markets.[51]
Whilst the National Access Regime, which is established by
Part IIIA of the TPA, has not been universally embraced—especially by those who
have been called upon to provide access to their infrastructure—it is a fact of
the Australian economic landscape.[52]
The Bill aims, amongst other things, to improve the efficiency and the
timeliness of the decision making processes which underpin the National Access Regime.
The amendments are based on the recommendations of the Productivity Commission
and, to some extent, on the experiences of FMG arising from their applications
for access which have been so strenuously resisted by the infrastructure owner.
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2434.
Paula Pyburne
23 November 2009
Bills Digest Service
Parliamentary Library
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