2.1
The Commonwealth fisheries quota system has not changed substantiality since it was implemented in 1991. In 2005, a Ministerial Direction to the Australian Fisheries Management Authority (AFMA) confirmed the Government's continuing support for the quota system, which combines a total allowable catch (TAC) and individual tradable quotas (ITQs).
2.2
Inquiry participants held range of views on the benefits and drawbacks of the fisheries quota system—and ITQs in particular. While industry associations, regulators and research bodies were broadly in favour of the quota system, individual fishers who submitted expressed a range of concerns. Regardless of their overall view, most inquiry participants acknowledged that ITQs 'have their drawbacks'.
2.3
This chapter outlines reported benefits and drawbacks of the current system from the perspective of economics and fisheries management. The chapter looks at:
benefits of the quota system for fisheries management;
drawbacks of ITQs in and small and multispecies fisheries;
impacts of ITQs on fishers;
unintended consequences of ITQs, including:
concentration of quota ownership;
non-fishing investors and foreign ownership;
options for reform suggested by inquiry participants.
2.4
Community outcomes, and the impacts of the quota system on smaller fishers, are discussed in Chapter 3—this includes discussion of maximising the net economic returns from fisheries to the Australian community. Environmental and ecological issues are addressed in Chapter 4. Chapter 5 sets out the committee's conclusions and recommendations across all areas.
Benefits of the quota system for fisheries management
2.5
While most inquiry participants acknowledged that the system of TAC and ITQs can result in 'winners and losers', many also praised its benefits for effective fisheries management.
2.6
The introduction of TAC and ITQs in Commonwealth fisheries has had a dramatic effect on the number of vessels and the problem of over-fishing in Australia. There are now approximately 300 fishing vessels operating in Commonwealth fisheries, compared with around 1000 in the late 1980s, and a significant number of studies indicate that the quota system has 'proved an effective remedy for overcapitalisation in many fisheries'.
2.7
The Commonwealth Fisheries Association Inc. (CFA), which represents most of the stakeholders involved in Commonwealth and jointly-managed fisheries, described the current system as 'stable and effective', and highlighted the input of a broad range of highly experienced organisations and individuals to fisheries management. CFA Director, Brian Jeffriess AM said the 'legislation is very clear' in its support for ITQs, and argued that countries with the longest history of ITQ management have the best records of sustainability.
2.8
Mr Jeffriess said the quota system has removed the 'race to fish' (making fisheries safer) and reduced over-investment (making fisheries more efficient). This view was supported by Simon Boag, Executive Officer of the South East Trawl Fishing Industry Association (SETFIA), who described quota systems as 'the best of a bad lot of options', and Captain Roger King from the Tasmanian Rock Lobster Fishermen's Association (TRLFA), who said the introduction of ITQs in Tasmania reduced dangerous fishing practices.
2.9
Some participants, including The Fisheries Research and Development Corporation (FRDC), noted that ITQs can reduce ''bad' fishing practices by encouraging long-term stewardship' by rights holders. However, FRDC also observed that ITQs alone are 'insufficient' to reduce bad fishing practices, with additional measures needed to incentivise good practice. Similarly, Dr Nick Rayns said, 'ITQs are not perfect but they are the best option we currently have to allocate TACs that ensure sustainable catch levels for Australian fish stocks'.
2.10
Noting that most forms of fisheries management will result in some 'hardship' for fishers, Dr Reyns argued that a 'science-based TAC' used in conjunction with a 'publicly agreed harvest strategy', and ITQs, 'have been and still are the preferred way' to sustainably manage fisheries.
2.11
Darvin Hansen from Tasmanian Seafoods Group praised the ITQ system that was introduced in 1985 in the abalone industry, saying that ITQs and zoning have 'helped to ensure the long-term sustainability of the industry'. Mr Boag pointed to the eastern stock of orange roughy as a quota system success story, saying the choice to set quotas 'at almost nil for 15 or 20 years … allowed that stock to rebuild spectacularly'.
2.12
Chairman of the Sydney Fish Markets, Grahame Turk, argued quota ownership is 'part of good fisheries management' and essential for food security in Australia. He suggested Commonwealth fisheries may be more suited to ITQs than state fisheries, because many of them are 'large single species fisheries'.
Drawbacks of ITQs in fisheries management
2.13
Inquiry participants acknowledged that the quota system can have drawbacks, and ITQs may not be suitable for many small and multispecies fisheries. Concerns centred around the inflexibility of the quota system, and the cost and effort involved in running stock assessments to produce periodic TACs. SETFIA noted that some Commonwealth fisheries, such as the Northern Prawn Fishery, are not managed under ITQs because the species has a very short lifespan, making it unsuitable.
2.14
While ITQs have improved the management of many fisheries, CFA explained that they 'bring other management challenges', that many fisheries are 'not suited' to ITQs, and that 'poor management and/or poor implementation' has led to poor outcomes in the past. Dr Alistair Hobday from the Commonwealth Scientific and Industrial Research Organisation (CSIRO) said fisheries management is 'expensive' under the quota system, as 'you have to collect a lot of data to produce something like a stock assessment'. This is simply not worthwhile for many small fisheries.
State fisheries
2.15
The strongest evidence against ITQs was provided by witnesses involved in New South Wales (NSW) and Queensland state fisheries, where ITQs have been introduced in recent years, following the lead of the Commonwealth.
2.16
The Queensland Seafood Industry Association (QSIA) submitted that it believes Queensland commercial fisheries are already sustainable and quotas are 'a solution to a problem that does not exist'. QSIA argued the Queensland Spanner Crab fishery has been 'mismanaged', leading to a 48 per cent devaluation of the fishery quota; and the Queensland Spanish Mackerel Fishery, managed under a quota system for over twenty years, has been a 'catastrophic failure'.
2.17
Dr Eric Perez, Chief Executive Officer (CEO) of QSIA, questioned the basis for decisions to impose quota systems in Queensland fisheries, saying catch limits introduced have not been 'scientifically based or based on historical catch'. QSIA was concerned there had been no regulatory impact statement done prior to introducing TAC and ITQs and no protections in place to ensure the supply of seafood for consumers.
2.18
Director of the Green Shirts Movement Australia, Rachael Cruwys, argued that the concept of ecological sustainability has been used to justify the move to ITQs in Queensland, but the real motivations are economic. In addition, Dr Perez added that a restriction on holding less than 1.2 tonne of mud crab quota had pushed small players out.
2.19
Commenting on the allocation of quota in NSW, long-time fisher and previous director of the NSW Seafood Industry Council, Mr Brad Warren said:
In the recent NSW fishing reforms, which included a once only allocation of quota shares, fishers and representative organisations were splintered into two factions; those that could see a windfall for themselves as individuals, and those that could see the potential destruction of their business.
2.20
The Professional Fishers Association of NSW argued that ITQs 'shouldn't be deemed as a general coverall for all fisheries management'. CEO, Tricia Beatty said the Association rejects the Productivity Commission's finding in its 2017 report that ITQs should be 'the default position', because this position 'does not recognise the complexity of fisheries'. ITQs require fishers to specialise in specific species, do not allow for 'fluctuations in seasonality' of fish stocks, and Ms Beatty prefers harvest strategies as a management tool. Similarly, Veronica Papacosta, CEO of Seafood Industry Australia, argued it should be 'a case-by-case assessment of a fishery'.
2.21
Mary Howard from the NSW Wild Caught Fishers Coalition highlighted impacts on the mental health and livelihoods of many fishers in NSW as a result of the introduction of ITQs—a system she argued may suit Commonwealth fisheries but be unsuitable for 'small-scale estuary general fisheries at the state level'.
Impacts of ITQs on fishers
2.22
Reported benefit for fishers of the introduction of ITQs into fisheries management included:
ITQs may make fishing operations more profitable, as inefficient participants may be compensated to retire from fishing, leaving only efficient operators;
remaining fishers can 'adjust their ITQ holdings to meet changing business needs'; and
fishers may be able to take out loans secured against their ITQ to upgrade their equipment.
2.23
However, there were differing views among inquiry participants as to whether these potential benefits are realised in practice.
Views of fishing industry associations, regulators and research bodies
2.24
Industry associations, fisheries management bodies, and research institutions were largely positive about the benefits of ITQs for fishers, identifying 'a reduction in the race to fish, resulting in lower costs to fishers and overall improved economic performance'.
2.25
FRDC said the ability to transfer their fishing rights means 'fishers can adjust their operations to minimise their costs and maximise their revenues'. In this way, ITQs work increase the economic efficiency of fishing under the TAC. However, FRDC noted that ITQ systems are 'highly dependent on the quota market functioning as required'.
2.26
CFA submitted that long-term fishing rights encourage commercial fishers to 'invest and operate their businesses sustainably', with 'larger interest groups and companies' offering more 'career pathways' in fishing.
2.27
In NSW, where the introduction of ITQs was much more recent than at the Commonwealth level, some inquiry participants were highly critical of the impacts on fishers. Mrs Howard suggested fishers in that state were 'forced down' a process they did not want to go down and told to 'get big or get out'. It was her view that the NSW State Government knew there would be winners and losers, and that jobs would be lost, and designed the system to intentionally reduce employment in the industry.
2.28
Ultimately, industry associations, science and research bodies, and regulators argued that, while they are 'not perfect', ITQs are preferable to input controls in improving the sustainability and economic outcomes of fishing.
Views of individual fishers
2.29
In February 2022, the CSIRO published an analysis of the submissions to this inquiry, entitled Conflicting perceptions of quota-based systems in Australia, in which it observed a marked difference in the views of industry associations compared with individual fishers who submitted. While fishing industry associations were largely positive about the benefits of ITQs for fishers, individual fishers who submitted were more critical.
2.30
Figure 2.1 below shows the divergence in positive verses negative points of view on the economic impacts, and overall impacts, of ITQs, with fishers far more likely to report negative economic and overall impacts. The divergence in views is discussed in more detail in Chapter 3 of this report.
Unintended consequences of ITQs
2.31
A significant proportion of evidence to the inquiry focussed on unintended economic outcomes of ITQs. According to Professor Caleb Gardener from the Institute for Marine and Antarctic Studies (IMAS) at the University of Tasmania, the potential for perverse outcomes of ITQs has been understood since their introduction, with the issue raised during a legislative inquiry in Tasmania in 1997. While the theory behind ITQs suggested quota holders would continue to fish their quota themselves, Professor Gardener said this has changed over time, as arrangements have become more complex.
2.32
The main issues with ITQs raised by inquiry participants were:
it is difficult and expensive to enter the industry and finance is often difficult to secure;
the system of tradable quota holdings may be leading to market concentration of quota holdings over time;
potential profits from holding ITQs encourage non-fishing investors and foreign investors into the market; and
quota may be owned by entities that are not harvesting the fish (quota 'squatting').
Barriers to entry
2.33
The Department of Agriculture, Water and the Environment (the Department) described the Australian commercial seafood industry as relatively small and comprising a mix of family-owned companies and a few larger businesses. The Department said there is limited or no entry for new industry participants in most Commonwealth fisheries, as the resource is already 'fully allocated'.
2.34
The Sydney Fish Markets—a current quota holder—said buying more quota was financially prohibitive. One reason for this is that the banks will only lend 10 to 20 percent of capital costs, as owning quota is considered 'a risky business'. Captain King said it is the same situation for those wanting to borrow to invest in rock lobster quota. However, due to the existence of a deed with the Tasmanian government around abalone access rights, buyers can use '50 per cent of the abalone deed, or the abalone unit' as collateral to secure finance for quota in that particular stock.
2.35
Director of the Tasmanian Seafood Industry Council (TSIC), Christopher Parker said 'restriction of access to the quota' means new entrants cannot get into the Tasmanian seafood industry:
There is no future for any young guy who wants to enter the industry like I did and make their way through the industry for 40 years. There is just no future for these people anymore unless they go into a family business.
2.36
However, some stakeholders said it is still possible to buy into fisheries, perhaps more so at the state level. Captain King said:
You can still get in. You can still by one craypot in Tasmania. In Western Australia you can buy five. I've got a friend who bought five. You can build your holding. I started with nothing when I started fishing. Now I have a holding in Western Australia and a small holding in Tasmania.
Consolidation of quota ownership
2.37
A number of inquiry participants raised concerns about concentration of quota ownership over time, and a move from owner-operators to non-fisher owners and/or investors. CSIRO noted that the concentration of quota ownership by large companies often raises 'social concerns', with richer entities able to 'monopolise the quota market', sometimes 'at the expense of small-scale local interests'.
2.38
Dr Klaas Hartmann from IMAS argued that consolidation 'gives large entities the power to dictate fishing terms for fishers'. He observed a 'substantial divide' between quota holders and lease fishers, saying they 'have very different economic incentives for future management changes'. Similarly, QSIA suggested 'big players' in the quota market can 'set the price for quota and manipulate that price'.
2.39
Captain King expressed concerns about consolidation in lobster fisheries, saying there has traditionally been 'a limit of 200 pots per entity or related entity', but there is 'some concern amongst' members of the TRLFA that this is 'not being complied with'. However, attempts to confirm this have been unsuccessful. He added that the TRLFA supports ensuring that there is 'a maximum holding that genuinely related entities can hold in a fishery'.
2.40
AFMA confirmed that consolidation is occurring in 'some' fisheries, for some species, but there is still adequate access to quota in most fisheries:
For example, in the Southern Bluefin Tuna Fishery quota ownership has transferred from some original line fishers to the farm-based sector through open market transactions. However, there continues to be significant annual leases of Southern bluefin tuna quota to the east coast based longline fishers to support their fishing operations.
2.41
Dr Rayns suggested that aggregation of quota in fisheries is a natural result of commerce, and fisheries are 'no different from other parts of the Australian economy—agriculture, housing and forestry for example'. Ms Papacosta said consolidation may not necessarily be because of ITQs, and Mr Chauncey Hammond from Tasmanian Seafoods pointed to consolidation in non-ITQ fisheries.
2.42
SETFIA was not concerned about concentration of quota ownership in the South East Trawl Fishery (also called the Southern and Eastern Scalefish and Shark Fishery (SESSF)) at this time. However, AFMA submitted that there is 'evidence of concentration of quota ownership for some species' in the SESSF, but the lease market is 'largely successful in distributing quota' among operators.
2.43
Despite not seeing concentration as an imminent threat, SETFIA submitted that too much aggregation in the market would risk 'a market bargaining power imbalance occurring between quota owners, fishers, and wholesalers'. SETFIA saw this risk increasing where entities are involved in 'two more of these supply chain links'.
2.44
Tasmanian Seafood was 'circumspect' about the idea that 'many fisheries can be overtaken by large corporates'. As the largest holder of quota in Tasmanian abalone, Tasmanian Seafoods holds 14 per cent of the quota, which it accumulated over 40 years, and the next largest quota holder has six per cent.
2.45
While SETFIA recognised the potential negative impacts of too much concentration in the market, Mr Boag also believed some 'competitive tension' is healthy as is encourages greater efficiency across the supply chain. Ms Papacosta said consolidation 'creates innovation' by providing capital for upgrading manufacturing processes, training employees, and improving fishing practices. This view was echoed by Tasmanian Seafoods, who explained that its size allows it to invest in ongoing jobs, 'plant and equipment in regional areas', and—critically—sustainability science.
2.46
The committee heard evidence from Western Australia about fisheries management in that state. Director of Fisheries and Agriculture Resource Management at the Western Australian Department of Primary Industries and Regional Development (WA DPIRD), Dr Rick Fletcher said 'any form of unitised access' may result in consolidation, but quotas are 'more likely' to lead to concentration of ownership among non-fishing investors. Western Australia has previously tried 'to control the level of consolidation of units', but their efforts have not been successful, and they have now 'moved away from trying to directly control effort consolidation'.
2.47
CFA concluded that quota markets are currently sufficiently diverse, but there could be a role for the Australian Competition and Consumer Commission (ACCC) to monitor the sector and address any competition issues that arise, which the CFA would support.
Vertical integration
2.48
Over time, some fish processors and retailers have acquired quota, leading to vertical integration in some markets. Professor Gardener described quota‑holding fish processors as a category of 'quota brokers': the processor acquires quota shares and leases them to fishers, who may then be 'required to land all the fish back to that processor'. Professor Gardener argued this creates a power imbalance, and can lead to market control and distorted prices.
2.49
CSIRO noted vertical integration was a concern for many fishers, who see themselves as being 'locked in to supplying processors at a below-market price' and 'afraid of speaking out' in a fear of losing access to the quota.
2.50
Ms Beatty said in NSW they are seeing co-ops and fish markets investing in quota and saying to lease fishers, 'if you lease quota from us you must put the kilograms through us'.
2.51
Companies who own quota and processing facilities were, understandably, positive about their arrangements. Tasmanian Seafoods said it is not aware of any 'tension' in relation to its vertical integration, and that the company has 'always acted very ethically with its share' of the market. Tasmanian Seafoods controls approximately 25 per cent of the processing market for abalone, with one other processor controlling another 35 per cent.
2.52
Similarly, Mr Turk was positive about the Sydney Fish Markets' investment in quota, which it made when its largest supplier was retiring and wanted to sell. Mr Turk said Sydney Fish Markets bought the quota to ensure the security of its supply.
2.53
Mr Jeffriess said, in his view, the only 'significant shareholding' of processors in Australia is in the rock lobster industry: 'If I were a rock lobster fisherman, I would raise the issue with the ACCC'.
2.54
The committee received a small number of public and confidential submissions alleging potential anti-competitive conduct related to vertical integration in certain fisheries. The committee sought advice from the ACCC which confirmed that it is currently investigating one or more complaints of this nature, though investigations are at an early stage and no further comments could be made.
Non-fishing investors
2.55
A 'recurring theme' of the inquiry was a concern about quota being owned by investors who lease quota out rather than fishing it themselves. CSIRO noted:
Most saw investors as contributing to the key problems in the system, particularly relating to issues facing lease-dependent fishers. Some detailed analyses … suggested that investors were the main (if not only) beneficiary of ITQs…
2.56
Participants commented on investors in the South East Trawl Fishery and other fisheries, with TSIC arguing that the current system and market forces will lead to 'fewer boats, fewer owner-operators and more investors in our ITQ fisheries'. Lefkas Fisheries submitted that small fishers have 'little bargaining power' when trying to lease additional quota and that 'unreasonable conditions' are often imposed by quota holders who 'dictate exactly where the smaller fisher's catch is on-sold'.
2.57
Asked to provide data on SETFIA's membership, Mr Boag reported that less than half of SETFIA's 30 or so members are 'involved in catching' and the organisation has two quota-only members. However, the South East Trawl Fishery is still 'very much an organisation of owner-operator fishermen'. While there are some large companies who own quota, they are dependent on 'the availability of fishermen'.
2.58
A novel outcome of quota investment raised with the committee was the investment by the World Wildlife Fund (WWF) into fish quotas in Queensland. The WWF has invested in the quota with the intention of retaining the fish for the environment. QSIA was critical that the quota system and legislation allowed this type of investment and argued, as a quota holder, you should 'use what you've bought'. This view was echoed by the NSW Seafood Industry Council. However, Mr Jeffriess said the CFA does not share those concerns and he believes there is a role for that kind of investment.
Foreign ownership
2.59
A number of inquiry participants were concerned that investors may be located outside Australia, or outside the region they have bought quota in, and that current registers on quota holdings do not provide sufficient transparency around this issue.
2.60
TSIC observed that, while most wild catch fishers are 'Tasmanian family owned and operated businesses', they are seeing an increase in foreign and mainland ownership in the 'processing and marine farming' sectors, in particular. TRLFA argued for banning foreign ownership but acknowledged it is hard to confirm if entities are foreign owned.
2.61
Researchers confirmed that foreign and interstate ownership of quota are difficult to measure. However, Professor Gardner said IMAS is 'confident' that out of jurisdiction ownership is currently underestimated, and trending upwards:
You tend to find that people who own quota outside the jurisdiction just as investments will establish a relationship with a local Tasmanian based processing company, or, in fact, typically an internationally based processing company who's got an operation in Tasmania, and they will just form a partnership. So the units will be transferred. So you're just dealing with a postcode based in Tasmania but the owners might actually be anywhere.
2.62
The committee also heard positive evidence on foreign ownership and investment. The NSW Seafood Industry Council said foreign businesses operating in Australia are not 'a problem', and SETFIA stated its support for AFMA's current process of 'deeming'—where foreign vessels are 'deemed Australian vessels' for the purposes of fishing in Australian waters—saying this provides benefits for Australia.
2.63
Professor Gardener explained that the Commonwealth managed toothfish fishery may not exist without foreign investment because sometimes it takes 'large amounts of investment to make industries functional'. Mr Jeffriess confirmed that the Commonwealth toothfish fishery has significant foreign ownership and observed that foreign investment can help protect the market.
2.64
IMAS submitted examples of jurisdictions where there are limits on foreign ownership, including Icelandic and Alaskan fisheries, and Western Australian rock lobster fisheries.
2.65
A number of participants suggested improved transparency around quota holdings—including foreign ownership—would be a beneficial reform. This proposal is discussed under 'options for reform', below.
Quota squatting
2.66
Inquiry participants discussed the issue of 'quota squatting', where quota holders retain quota but do not extract the fish. This can be due to a number of factors, including the availability of fish in a certain year, the price and popularity of different species, or availability of vessels and crew. Sometimes the cost of harvesting the fish can be higher than the revenue of sale.
2.67
Professor Gardener gave the example of the skipjack fishery off Queensland, where 'the TACs are not being taken'. While around 180 000 tonnes of skipjack tuna are harvested on the 'other side of the border', 'zero catch' has been taken since 2009. TSIC described a similar outcome with southern rock lobster when prices were affected during the pandemic.
2.68
Professor Gardener argued governments should explore options to prevent quota squatting, such as a 'use it or lose it' policy or something like a land tax, which creates an incentive to fish the quota:
At the moment, it seems unacceptable to have these valuable public resources sitting there not being used and not providing the sustainable, healthy seafood to the Australian community that they could be. There are solutions there, and that's something that could be explored.
2.69
An alternative view was put by Mr Turk, from the Sydney Fish Markets, who agreed that quota should not be allocated to an entity that never uses it, but felt a 'use it or lose it' approach could be too prescriptive. This view was supported by the NSW Wildcaught Fishers Coalition.
Options for reform
2.70
A number of inquiry participants highlighted their strong support for the current fisheries quota system and suggested the system be maintained and strengthened. CFA recommended the committee 'recognise and support the continuity, and where possible the strengthening, of the existing management arrangements'. With 'considerable investment' made over the last three decades, CFA argued any 'uncertainty' could de-stabilise fishing businesses and markets, while some other participants were supportive of possible changes to the quota system.
2.71
FRDC pointed out that ITQs and TACs 'go together', and one could not be changed without changing the other. Similarly, SETFIA argued it would be 'very difficult to unscramble the egg', and the only viable option for dramatically reforming the system would be through government buybacks of quota rights. However, IMAS pointed to a number of modifications that can and have been made to quota systems in other jurisdictions.
2.72
One example provided was the potential use of quota auctions, which could 'capture the full resource rent for [a] public proportion of the catch shares'. In practice this would mean a share of the ITQ in a fishery would be reserved for auction on a five-year lease term, providing some security for the buyer of the quota, as well as public benefits from resource rents. Dr Hartmann noted that changes such as this necessarily 'impact on the value of existing ITQ shares', but should not be discounted. IMAS's proposals for modified quota systems are further detailed in Chapter 3.
2.73
This section outlines three options provided by inquiry participants which they believe would address some of the unintended consequences of the quota system. The committee's conclusions and recommendations are contained in the final chapter of this report, Chapter 5.
A loan facility for fishers
2.74
Bryan Skepper from the NSW Seafood Industry Council suggested that banks struggle to understand fishing quota property rights, meaning 'some of the fishers have had trouble accessing capital to invest in quota'. Mr Boag agreed that banks do not like to lend to the fishing industry, saying 'by and large, the only source of finance for small owner-operator fishermen is these larger quota-only owning companies'.
2.75
Given fishing quota is 'a property right established and managed by government', Mr Skepper proposed there should be 'some form of assistance provided' to help fishers buy quota and invest in their business, similar to agricultural loan schemes.
Require quota holders to be fishers
2.76
Some jurisdictions and fisheries have implemented arrangements that link quota to a registered vessel licence or require the quota holder to be on board the vessel when the catch is taken. IMAS submitted research around the operation of such restrictions in Iceland, the United States of America, the Gulf of Mexico, Canada and the Netherlands, saying this reduces 'the separation' between fishers and shareholders and the predominance of investors.
2.77
Iceland introduced rules requiring shareholders to 'own a vessel' with the annual individual quota then allocated to the vessel, rather than an entity. A rule was subsequently introduced that 50 per cent of the ITQ 'must be caught by the vessel it's allocated to'.
2.78
Dr Stewart Frusher said he believes fishers make better stewards of fisheries than investors do and argued for restrictions to quota holding for those who do not catch the fish. The committee heard about requirements in NSW, where anyone who wants to buy quota must have a fishing business to attach the quota to. However, this does not appear to deter investors, as the Sydney Fish Markets was able to get around the restriction by first purchasing 'a fishing business' (although the business does not conduct fishing). Mr Hammond, who works with Canadian fisheries where similar restrictions are in place, said companies use trust arrangements to 'get around it'.
2.79
Captain King argued that restricting who can own quota to active fishers is unfair, as retiring fisherman should not be 'be forced to divest themselves of the only investment they understand'. However, he was in favour of investors having 'a direct relationship with the fisherman who catches [the] quota'.
Increasing transparency around quota holdings
2.80
A concern shared by a number of inquiry participants was a perceived lack of transparency around quota ownership, and lease and sale transactions. For instance, when asked if he knew who the three biggest quotas owners in the South East Trawl Fishery are, Mr Skepper said, 'it's hard to get that information'.
2.81
Some industry participants proposed a register of quota ownership, including Ms Papacosta and Mr Skepper, who said the register should provide details on quota for sale or lease. Ms Papacosta said greater availability of data on foreign ownership of quota may 'provide assurance' to fishers and allow regulators to 'manage' the issue if it became a problem. SETFIA, Sydney Fish Markets, and Tasmanian Seafoods also supported a publicly available register detailing foreign ownership of quota. The NSW Seafood Industry Council recommended that quota ownership should be 'under the control' of the Foreign Investment Review Board.
2.82
The Australian Southern Bluefin Tuna Industry Association suggested some of these concerns may indicate a misunderstanding among fishers, or would be better directed towards state fisheries managers, rather than the Commonwealth:
A number of witnesses did not seem to know that the ownership of Commonwealth (AFMA) Statutory Fishing Rights (SFRs) and the SFRs held (owned SFRs ± leased for that season) are totally transparent.
2.83
The committee heard that AFMA already publishes monthly public registers showing quota and licence holdings, but many industry participants who might be expected to know about these registers appeared not to. AFMA also confirmed that the lists do not elucidate the beneficial owners of quota or identify foreign investment or non-fishing investors. AFMA CEO, Wez Norris explained:
We don't make any efforts to drill down beyond company information that's provided to us as a holder. One could do that, because there's sufficient information there to do ASIC searches and things like that, but, in terms of our ability to regulate the fishery, that's not something we do.
2.84
AFMA has also been working on a system to collect and eventually publish 'price data' on quota transactions. Mr Norris said challenges include finding a way to iron out inaccuracies in poor quality data, and encouraging industry compliance:
Unlike most of the other data that we collect, an enforcement program would be very, very difficult. Obviously, you're looking at an ATO style audit to enforce it. … So we very much rely on working with the industry to impress the importance of the data collection so that it comes through as accurate. Nevertheless, what we have seen is some quite large anomalies in the information that gets reported.
2.85
IMAS explained that a 'stock-market like structure' has been implemented in Iceland which facilitates leasing transactions:
… leasing transaction must now take place openly and anonymously. This was to reduce market failure from asymmetry of information, which had facilitated domination of large firms.
Addressing anti-competitive conduct
2.86
Addressing concerns around the concentration of quota ownership and barriers to entry in the market, Mr Skepper suggested there might be some value in imposing 'caps on the percentage of an industry that can be owned by single entities'. He said he believes New Zealand has a system like this in place.
2.87
IMAS pointed to research for New Zealand fisheries proposing limitations on the number of quota units that can be caught by individual operators and the introduction of specific 'processor quota' in Alaska to discourage vertical integration, while ensuring a supply of fish for processors.
2.88
Lefkas Fisheries also recommended government restricts the number of ITQ units that can be held by an individual organisation to no more than 10 per cent, 'to reduce the existence or creation of cartels'; and better regulate the ITQ leasing process, to 'prohibit the restrictive conditions place on the leaseholds of ITQs'. However, CFA questioned whether it is 'the role of fisheries management agencies to regulate competition in the supply chain', or whether these issues should be handled by the ACCC.
2.89
Competition issues raised in submissions to the inquiry may enliven provisions of the Competition and Consumer Act 2010. However, the ACCC explained that, as quotas and licencing are 'matters falling under specific regulation', their impacts on competition 'can be issues of policy design'. Where this is the case, the ACCC would be limited in what it 'can do in response to complaints'.
2.90
In the early 2000s, a Committee of Officials conducted a competition review of the Fisheries Management Act 1991, the Fisheries Administration Act 1991 and subordinate legislation. All quota and licence holders in Commonwealth fisheries were invited to make submissions, and twelve were received. In September 2002, the Committee's report was published; it 'identified restrictions' on competition contained within the legislation, assessed community benefits of the restrictions, and 'considered alternative means for achieving the same result'.
2.91
The review noted that, while Commonwealth fisheries legislation is specifically 'directed towards restricting competition in the harvesting of the nation's fish resources', this is necessary to correct market failures and protect the industry and ecology long-term. Reviewers looked at whether existing provisions supported the 'sustainable development of fish stocks with minimum resource rent dissipation'.
2.92
The report concluded there is 'a net public benefit arising from the existing restrictions on competition', and they should be retained. While it recommended the use of ITQs 'for any stock where it is possible to set and enforce practical TAC approaches', the review also recommended regulators retain the right to impose area closures and gear restrictions in fisheries management, and to use quota auctions, tenders or ballots.
2.93
The committee did not receive a submission from the ACCC, which has only recently commenced an investigation into potential anti-competitive conduct in the fishing industry. However, the outcomes of this investigation could be instructive.
2.94
The committee's recommendations for enhancing and protecting competition in the fisheries quota market are outlined in Chapter 5.