National access regime - proposals for change

On 25 October 2012, the Productivity Commission (PC) was asked to review the National Access Regime in Part IIIA of the Competition and Consumer Act 2010 to assess its role and efficacy and propose ways of improving its operation. The PC's review follows two other significant events regarding access regulation in Australia - recent amendments to Part IIIA in 2010 and the High Court's landmark decision in the Pilbara railways case in 2012.

Summary of Recommendations

On 28 May 2013, the PC released its Draft Report which, in summary, recommended:

• that 'declaration' rather than 'access' be the relevant cause of a 'promotion of competition' under criterion (a);
• a lower threshold for the 'uneconomical to develop another facility test' in criterion (b);
• making the 'effective access regime' test under criterion (e) a threshold issue; and
• having a more positive and prescriptive 'public interest' assessment under criterion (f).

Most significantly, the Report recommended that the ACCC should be given the express power, in the context of access dispute arbitrations, to order infrastructure owners to expand their facilities.

Submissions on the Draft Report closed on 5 July 2013.

Criterion (a) 

That access promote a material increase in competition in at least one market other than the market for the service being considered

The PC recommended that the competition test be amended so that it is only satisfied where access on reasonable terms and conditions through declaration (rather than access per se) would promote a material increase in competition in a dependent market.

Under this test, the comparison would be between the status quo (which in some cases might include users already having access) and a future with access or increased access on reasonable terms and conditions if the service were declared (giving parties a right to ACCC arbitration of access disputes).

Criterion (b) 

That it would be uneconomical for anyone to develop another facility to provide the service

The PC recommended that criterion (b) be amended to expressly include a 'natural monopoly test', which would be satisfied where total market demand could be met at least cost by the facility.

The recommendation departs from the High Court's decision in the Pilbara case, in which the Court adopted a 'private profitability test' (i.e. a consideration of whether anyone could profitably duplicate the relevant facility). The recommendation also departs from the 'net social benefit test' (i.e. an assessment of the costs and benefits to the community as a whole for one facility to provide those services rather than more than one) which had been adopted in earlier cases.

The PC considered that the natural monopoly test best addresses the economic problem the regime seeks to address by targeting natural monopolies directly. For this purpose, the PC recommended a broad definition of total market demand (which includes demand for the service in question as well as demand for any substitute services provided by facilities serving the relevant market) and also a broad definition of costs (which includes costs associated with additional maintenance and reduced operational flexibility which the provider incurs as a result of coordinating multiple users of its facility).

In the event that the private profitability test is retained, the PC recommended (in a departure from the High Court's decision in the Pilbara case) that the term 'anyone' should not include the incumbent provider (to prevent an incumbent avoiding declaration by arguing it could profitability duplicate its own facilities).

Criterion (e) 

That access to the service is not already subject to a certified access regime

The PC recommended that criterion (e) should be removed from the declaration criteria and applied as a threshold test, stating that a service cannot be declared if it is subject to a certified access regime. This would remove any unnecessary cost imposed on infrastructure service providers, access seekers and the National Competition Council (NCC) in assessing a declaration application against all declaration criteria where the service that is the subject of an application is also the subject of a certified regime.

Criterion (f) 

That access would not be contrary to the public interest

The PC recommended that the public interest test be amended to an affirmative test of whether declaration would promote the public interest (i.e. the Minster would be required to be positively satisfied that declaration would promote the public interest). This imposes a higher burden on access seekers and decision makers compared to the current test that access is 'not contrary' to the public interest. In addition the change refers to declaration of (rather than access to) the service, which the PC considers is better aligned to the economic problem the regime seeks to address. 

The PC also recommended that criterion (f) should be amended to include a non-exhaustive list of factors that decision makers should be required to have regard to as part of their assessment of the public interest, including the effect of declaration on investment in markets for infrastructure services and dependent markets, and compliance and administrative costs.

ACCC power to require an infrastructure owner to expand their facility

The PC recommended that Part IIIA be amended to confirm (consistent with the Tribunal's interpretation) that the ACCC's power to direct extensions, in the context of access dispute arbitrations, also encompasses expansions. The PC is seeking further information from interested parties on this recommendation, noting that the ACCC's power should be subject to robust and practical safeguards to protect the interests of all parties.

The PC also considered that because a decision by the ACCC to direct an extension or expansion may require complex operational, commercial and legal considerations, the ACCC should publish guidelines (developed through stakeholder consultation) on how the provisions would be exercised in practice. 

Deemed Ministerial decisions to increase opportunities for review

The PC recommended that when the Minister does not publish a declaration decision within the 60-day statutory time limit, he or she should be deemed to have followed the NCC's recommendation and to have adopted its reasons (rather than the current situation where the Minister is deemed not to have declared the service). This change would ensure written reasons are provided for all decisions, providing a basis for judicial review (in addition to the merits review available to the Tribunal).