CATCHWORDS
TRADE PRACTICES - access to services - declared services - review of Minister’s decision not to declare service - whether application for review is soundly based in law - whether facility is of national significance - whether access to service is contrary to public interest
Trade Practices Act 1974: Part IIIA
RE: APPLICATION FOR REVIEW OF THE DECISION BY THE COMMONWEALTH TREASURER PUBLISHED ON 14 AUGUST 1996 NOT TO DECLARE THE ‘AUSTUDY PAYROLL DEDUCTION SERVICE’ UNDER PART IIIA OF THE TRADE PRACTICES ACT 1974
BY: AUSTRALIAN UNION OF STUDENTS
Applicant
Q 1 of 1996
LOCKHART J (President), DR M BRUNT, DR B ALDRICH
28 JULY 1997
SYDNEY
COMMONWEALTH OF AUSTRALIA
Trade Practices Act 1974
IN THE AUSTRALIAN COMPETITION TRIBUNAL
No Q 1 of 1996
RE: APPLICATION FOR REVIEW OF THE DECISION BY THE COMMONWEALTH TREASURER PUBLISHED ON 14 AUGUST 1996 NOT TO DECLARE THE ‘AUSTUDY PAYROLL DEDUCTION SERVICE’ UNDER PART IIIA OF THE TRADE PRACTICES ACT 1974
BY: AUSTRALIAN UNION OF STUDENTS
Applicant
TRIBUNAL MAKING ORDER: LOCKHART J (President), DR M BRUNT, DR B ALDRICH
DATE ORDER MADE: 28 JULY 1997
PLACE ORDER MADE: SYDNEY
MINUTE OF ORDER
1.THE TRIBUNAL ORDERS THAT: the Minister’s decision not to declare the service be affirmed.
COMMONWEALTH OF AUSTRALIA
Trade Practices Act 1974
IN THE AUSTRALIAN COMPETITION TRIBUNAL
No Q 1 of 1996
RE: APPLICATION FOR REVIEW OF THE DECISION BY THE COMMONWEALTH TREASURER PUBLISHED ON 14 AUGUST 1996 NOT TO DECLARE THE ‘AUSTUDY PAYROLL DEDUCTION SERVICE’ UNDER PART IIIA OF THE TRADE PRACTICES ACT 1974
BY: AUSTRALIAN UNION OF STUDENTS
Applicant
LOCKHART J (President), DR M BRUNT, DR B ALDRICH
SYDNEY
28 JULY 1997
REASONS FOR DECISION
THE TRIBUNAL
This is an application for review of the decision of the ‘designated Minister’ (the description given by s 44K of the Trade Practices Act 1974) (‘the Act’)), the Honourable Peter Howard Costello, the Treasurer of the Commonwealth, ‘not to declare a service’ (the phrase used in s 44K(2)) under the Act.
If the designated Minister (to whom we shall refer for convenience as ‘the Minister’) decides not to declare a service, an application in writing for review of that decision may be made to this Tribunal by the person who applied for the ‘declaration and recommendation’ (s 44K(2)).
The application to the Tribunal is made in the name of the Australian Union of Students (‘AUS’), the address of which is stated as being in Wilmington, Delaware, United States of America. The form of application is signed by Mr Geoffrey James Bird, as National President of AUS and on its behalf.
The application for review gives a brief description of the service in these terms:
‘The “Austudy Payroll Deduction Service”, as defined in the application for a declaration recommendation, basically involves the Commonwealth Government setting up a payroll deduction system to allow students who receive government assistance to join organisations by ticking boxes on their application forms for government assistance.'
In the Tribunal’s view the applicant is seeking:
(a) to compel students who are applying for Austudy to complete and sign payroll deduction forms in addition to their application forms for Austudy. The students would be required to nominate on the payroll deduction form whether they wished to join AUS or some other organization as a prerequisite to their receipt of Austudy.
(b) to require the Commonwealth, through the Department of Education, Employment, Training and Youth Affairs (‘DEETYA’), to supply information about AUS to students.
(c) to require DEETYA to forward to AUS, fees and certain details about students who elected to join AUS.
(d) to request DEETYA to advance Austudy payments to students so that they may pay their AUS fees in advance.
(e) to require costs associated with the provision of the above services to be borne by the Commonwealth or the students who receive Austudy.
The applicant states that the ‘facility’ which DEETYA can use to provide the service is DEETYA’s computer network. The application defines the attributes of the computer network as including:
· a data base of names and addresses of students who receive Austudy;
· access to the funds belonging to those students; and
· the bargaining power to require students to complete a payroll deduction form (in that the entitlement to Austudy can be cut off if the election is not made).
Facts
Austudy is a programme having a statutory base and must be administered in accordance with the legislation, namely, the Student and Youth Assistance Act 1973.
DEETYA is the body responsible for administering Part 2 of the Student and Youth Assistance Act 1973 and the Austudy Regulations under which the ‘Austudy Scheme’ operates. That scheme provides financial assistance on a fortnightly basis to secondary and tertiary education students on low incomes who have applied and are eligible for Austudy. The rate is determined by the Austudy Regulations.
In 1995 DEETYA paid Austudy for distribution to approximately 485,000 students of whom about 275,000 students were enrolled in tertiary institutions. Those 275,000 students receive approximately $1b annually.
Until recently DEETYA published jointly with the National Union of Students (‘NUS’) an annual Austudy guide. From 1997 the Austudy Guide is to be published independently of NUS. DEETYA does not presently distribute any information about NUS.
DEETYA deducts tax from the recipients of Austudy who request such deductions and pays such deductions to the Australian Tax Office (‘the ATO’).
The Austudy Payroll Deduction Service as described by the applicant requires access to a number of processes and requires positive obligations to be imposed on persons other than DEETYA to be able to achieve its objectives.
If DEETYA is required to provide the applicant with what it seeks, DEETYA would incur significant costs, namely:
(a) new equipment may be necessary;
(b) changes to the computer system would be necessary. It may not be possible to make such changes as the computer system has limited redevelopment capacity.
(c) forms would need to be redesigned and printing costs would be incurred;
(d) the Privacy Act 1988 requirements would need to be met since access to personal information (for example, names and addresses) appears to be sought by the applicant. Students would need to be told in advance that designated information being provided in support of their application would be furnished to AUS;
(e) there would be additional mailing costs;
(f) additional staff would be required;
(g) additional recovery costs may be involved; for example, where it is found that a student has been overpaid and part of the amount overpaid has gone to AUS.
If all Austudy recipients were to bear the cost of providing what the applicant seeks, authority would need to be obtained, either to reduce the amount of Austudy being paid to recipients by a particular amount or to provide a separate additional appropriation to increase the amount provided by the Commonwealth in Austudy funds to cover the costs.
Legislative Background
This is the first time that Part IIIA of the Act has been considered by the Tribunal. Part IIIA of the Act evolved from the new National Competition Policy agreed upon between the Commonwealth, the States and Territories of Australia to ensure that universal and uniformly applied rules of market conduct applied to all market participants in Australia.
The Competition Policy Reform Act 1995 (Cth) and the associated agreements between the Commonwealth and the governments of the States and Territories were in response to the recommendations of the National Competition Policy Review chaired by Professor Hilmer (The Hilmer Report) which in 1993 made major recommendations to implement what the report described as the imperative for developing a national competition policy including:
· universal application of the Act to cover bodies such as unincorporated businesses and State and Territory government business enterprises;
· the review and reform of anti-competitive structures of public utilities;
· introducing regulation of natural monopolies, especially concerning terms and conditions of access to natural monopoly facilities;
· continuing price surveillance in a modified form;
· reviewing and reforming unfair competitive practices of government businesses.
The Hilmer Committee recommended the creation of the Australian Competition and Consumer Commission to succeed the Trade Practices Commission (‘ACCC’) and the National Competition Council (‘NCC’).
The principles embodied in the Hilmer Committee Report were broadly accepted by the Council of Australian Governments (‘COAG’) in February and August 1994 and given final acceptance in April 1995. At the April 1995 meeting of COAG the Prime Minister, Premiers and Chief Ministers signed two intergovernmental agreements to accept and implement the Competition Policy Reform Bill.
The first agreement (the Conduct Code Agreement) set out the agreed basis for extending the application of the Act and established consultative processes about modifications to the competition law and appointments to the ACCC. The second agreement (the Competition Principles Agreement) established the agreed principles concerning overseeing prices of utilities and other corporations with monopoly power, structural reform of public monopolies, competitive neutrality between the public and private sectors, a regime to provide access to essential facilities, and a programme to review anti-competitive legislation and regulations.
The Competition Policy Reform Bill primarily took the form of amending the Act and the Prices Surveillance Act. The Act was amended so that, with comparable State and Territory legislation, the prohibitions against anti-competitive conduct could be applied to all businesses in Australia. A new legal regime was created which facilitated businesses obtaining access to the services of certain essential infrastructure facilities.
It is to the access provisions of the Act to which the Tribunal now turns, since they are the provisions with which this case is concerned. The access provisions are contained in Part IIIA of the Act. They are designed to establish a regime to facilitate third party access to services of certain essential facilities of national significance.
Part IIIA - Access to Services
Part IIIA is based on the notion that competition, efficiency and public interest are increased by overriding the exclusive rights of the owners of ‘monopoly’ facilities to determine the terms and conditions on which they will supply their services. In Part IIIA the focus is upon facilities of national significance that it would be uneconomic to duplicate or replicate and that supply a service, access to which would promote competition in another market.
It is plain from the Second Reading Speech, the Explanatory Memorandum, the COAG policy communiques and the Competition Principles Agreement that the access arrangements for which Part IIIA provides are intended to:
· apply largely, or perhaps only, to facilities with ‘monopoly’ characteristics such as infrastructure networks of which examples are gas transmission pipelines, electricity transmission grids, railways and telecommunications networks;
· provide rights of access to facilities of national significance on reasonable commercial terms and conditions, where such access would promote competition in another market;
The following relevant expressions, defined in s 44B, are central to the operation of Part IIIA:
‘service’ is defined as meaning a service provided by means of a ‘facility’ and including:
'(a) the use of an infrastructure facility such as a road or railway line;
(b) handling or transporting things such as goods or people;
(c) a communications service or similar service; but does not include:
(d) the supply of goods; or
(e) the use of intellectual property; or
(f) the use of a production process;
except to the extent that it is an integral but subsidiary part of the service.’
‘Third party’ is defined 'in relation to a service’ as meaning:
‘a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service.'
The word ‘facility’ is not defined; but the dictionary definitions may be of some help. For example, the Shorter Oxford Dictionary defines ‘facility’ as ‘equipment or physical means for doing something’; but the Macquarie Dictionary adopts a broader concept, namely, ‘something that makes possible the easier performance of any action; advantage: transport facilities; to afford someone every facility for doing something.’
The access regime established by Part IIIA of the Act establishes two alternative means whereby third parties may obtain access to the relevant services by way of the declaration process.
The first is by having a particular service declared to be opened to access by third parties, such that a dispute about the terms and conditions of access which is not resolved through commercial arbitration can be subjected to compulsory arbitration by the ACCC.
The second enables the provider of a service to enter into an access undertaking with the ACCC setting out the terms and conditions and other arrangements under which third parties will be provided with access to the services of the facility.
Once the owner of a facility takes the latter course and enters into an access undertaking it is not possible for a third party to seek to have the service declared under the first procedure (ss 44G(1) and 44H(3)).
The first process is the relevant one for the present case.
Under this process a third party may request that the Council recommend to the relevant Minister that a particular service be declared (s 44F(1) of the Act).
Section 44G(2) is relevant to the Council’s decision to recommend whether a service be declared. Section 44G(2) provides as follows:
'(2)The Council cannot recommend that a service be declared unless it is satisfied of all of the following matters:
(a) that access (or increased access) to the service would promote competition in at least one market (whether or not in Australia), other than the market for the service;
(b) that it would be uneconomical for anyone to develop another facility to provide the service;
(c) that the facility is of national significance, having regard to:
(i) the size of the facility; or
(ii) the importance of the facility to constitutional trade or commerce; or
(iii) the importance of the facility to the national economy;
(d) that access to the service can be provided without undue risk to human health or safety;
(e) that access to the service is not already the subject of an effective access regime;
(f) that access (or increased access) to the service would not be contrary to the public interest.’
The Council must also consider whether it would be economical for anyone to develop another facility that could provide part of the service (s 44F(4)).
Section 44F(3) provides that if the applicant is a person other than the Minister, the Council may recommend that the service not be declared if the Council thinks that the application was not made in good faith.
Once the Minister has received a declaration recommendation s 44H(1) requires the Minister to declare the service or decide not to declare it. In reaching a decision the Minister must consider whether it would be economical for anyone to develop another facility that could provide part of the service s 44H(2). Under s 44H(4) the Minister cannot declare a service unless satisfied of all the matters specified in paragraphs (a) to (f) of subsection (4) (these are the same matters that the Council must consider under s 44G(2)).
Section 44H(7) requires the Minister to publish the declaration or the decision not to declare the service. At the same time, the reasons for the decision and a copy of the ‘declaration recommendation’ must be sent to the person who applied for it.
If the Minister decides not to declare a service then, as mentioned earlier, an application in writing for review of that decision may be made to the Tribunal by the person who applied for the declaration recommendation (s 44K(2)). The review by the Tribunal is a reconsideration of the matter; and for the purposes of the review the Tribunal has the same powers as the Minister (s 44K(4) and (5)). If the Minister has decided not to declare the service the Tribunal may either affirm the Minister’s decision or set it aside and declare the service in question (s 44K(8)).
Background to the Minister’s Decision
The National Competition Council (‘the Council’) received an application under s 44F of the Act (included in Part IIIA of the Act) for the Council to recommend under s 44G that a particular service be declared, namely, the ‘Austudy Payroll Deduction Service’. The application classified the ‘facility’ to provide the ‘service’ as the computer network of DEETYA.
The Council consulted with both Mr Bird and DEETYA before making a recommendation on the application. The Council recommended on 19 June 1996 that the service not be declared. In reaching that recommendation the Council stated in its letter to the Minister of 25 June 1996 that it was not satisfied that the service met the criteria outlined in s 44G(2)(b), (c) and (f). Section 44G(2) was set out above.
The Council prepared a statement of reasons to support its recommendation under s 44F of the Act. In that document the Council stated that it was satisfied that:
· Access to the ‘Austudy Payroll Deduction Service’ (‘the Service’) would promote competition in the ‘Student Representation Service’ market (para (a) of s 44G(2)).
· Access to the Service could be provided without undue risk to human health or safety (para (d)).
· Access to the Service was not already the subject of an effective access regime (para (e)).
The Council also rejected the submission made to it by DEETYA that the application was not made in good faith.
The Council concluded, however, that it was not satisfied:
· that it would be uneconomical for anyone to develop another facility to provide the service (para (b));
· that the facility was of national significance, having regard to the size of the facility and the importance of the facility to the national economy and constitutional trade or commerce (para (c)); and
· that access to the service would not be contrary to the public interest (para (f)).
The Council concluded that it was not satisfied of all the matters mentioned in s 44G(2) and therefore recommended to the Minister that the service not be declared.
The Minister decided not to declare the service and wrote to Mr Bird on 14 August 1996 informing him of that decision and the reasons for it, attaching also a copy of the Council’s recommendation. The Minister’s reasons substantially reflected the Council’s reasons.
The application for review of the Minister’s decision was then made to the Tribunal.
The Tribunal gave directions to prepare this matter for hearing, and decided that an initial question should be determined before engaging in a full scale review on the merits of the application which would involve considerable time and expense. The initial question was whether the application for review is soundly based in law and can properly be made under Part IIIA of the Act.
The parties to the review made written and oral submissions to us on this initial question; those parties are: AUS through Mr Bird, the Commonwealth of Australia and the Council.
With this background we now consider the initial question. This question is one of mixed fact and law. To the extent that questions of law must be decided, they have been decided by the President of the Tribunal.
Findings
As mentioned earlier, AUS describes the ‘Austudy Payroll Deduction Service’ as essentially involving the government of the Commonwealth setting up a payroll deduction system to allow students who receive government assistance to join organizations by ticking boxes on their application forms for government assistance.
The Tribunal accepts as correct the submission on behalf of the Council that in order to provide the Austudy Payroll Deduction Service a facility would need to provide:
· the right by law to gain some of the information held on the data base;
· a compulsive element to require students to make an election on the application form; and a punitive imposition in that they will not be entitled to be paid Austudy if they do not make an election;
· a mechanism to recover the cost of providing the Austudy Payroll Deduction Service from all students who are given loans or grants by DEETYA.
Various questions were argued before the Tribunal including the following:
· whether the applicant, being a body incorporated under the laws of Delaware in the United States of America, but not registered under Division 2 Part 4.1 of the Corporations Law (see s 343), is properly an applicant before the Tribunal;
· whether what the applicant describes as the ‘Austudy Payroll Deduction Service’ is a ‘service’ within the meaning of s 44B of the Act;
· whether DEETYA’s computer network is a ‘facility’;
· whether there is a relevant market for student representation.
We note that the relevant criteria which govern the declaration of a service are contained in sub-ss (2), (3) and (4) of s 44H.
In the Tribunal’s opinion there is a real doubt whether the applicant’s alleged service is a ‘service’ within the meaning of the Act. Whether such a computer network can constitute a ‘facility’ for the purposes of Part IIIA is also open to question.
However, the Tribunal does not find it necessary to decide these questions because in its opinion this application for review turns on two fundamental questions.
The first question is whether, assuming both that DEETYA’s computer system or data base is a ‘facility’ and the Austudy Payroll Deduction Service is a ‘service’ for the purposes of Part IIIA of the Act, the ‘facility’ is of national significance having regard to its importance to constitutional trade or commerce or to its importance to the national economy or to its size.
Austudy is a service provided by the Commonwealth government to supplement the living allowances of full-time students who have low family incomes. The receipt of Austudy allowance is, of course, important to students; but in the Tribunal’s opinion it has no significant impact on trade or commerce. If every Austudy recipient in Australia were a member of a student union, access would still only result in $1.5m in payments to the union annually, a very small sum when one views it in relation to the Australian economy. The facility that is used to provide Austudy, namely, the DEETYA computer system, is not in the Tribunal’s view of national significance having regard to the importance of the facility to trade or commerce.
For similar reasons the Tribunal is of the view that the DEETYA computer system is not of national significance having regard to the importance of the facility to the national economy.
Also, the Act talks of the ‘facility’ being of national significance having regard to its size. It is difficult to envisage how a computer network can be said to have physical dimensions which one may readily find in obvious facilities such as gas pipelines or electricity grids. A computer network may perhaps be said to be sizeable if one examines that question from the aspect of the quantity of information stored by the computer system. Assuming then that a computer network can be said to have size for the purposes of being a facility, the evidence shows that the Austudy data base run by the DEETYA computer network is used to provide Austudy to approximately 485,000 secondary and tertiary students.
This information is also available on other data bases (for example, tertiary campuses). The DEETYA database is one of many hundreds of national databases. Many other large national data bases are of comparable or even greater size; and they exist within both the public and private sectors. In the Tribunal’s opinion the DEETYA computer network cannot be said to be of national significance having regard to its size. Indeed, the consideration set down in s 44H(2) becomes relevant.
This is sufficient to enable the Tribunal to conclude that the application must fail; but the Tribunal will consider the second major question, that is whether access or increased access to the ‘service’ would be contrary to the public interest (s 44H(4)(f)).
The applicant submits that substantial benefits that would arise from the declaration of the ‘service’, namely:
· access to the Austudy Payroll Deduction Service will allow AUS to provide a better service to Australian students, apprentices and trainees by attracting more members, and hence increase revenues and provision for more services and greater bargaining power;
· access to the Austudy Payroll Deduction Service would promote competition in the market for the student representation service by lowering barriers to entry into the student representation service industry.
The Commonwealth submits that access to the Austudy Payroll Deduction Service would be contrary to the public interest for the following reasons:
· Austudy is a benefit which is tested according to the means of each student, and, where relevant, the income of parents or spouses is considered. Austudy is designed to provide financial assistance to secondary and tertiary students who are most in need of such assistance. It is not appropriate for benefits to be conditional on the nomination by a student of a student organization.
· A proposed general levy on all Austudy recipients to pay for access to AUS would not in our view be fair or just. The service which AUS seeks to have declared should not involve the organization seeking access to the service bearing the cost of access to the service; rather those costs would be borne by all Austudy recipients. This means that students who are not members of AUS, and thus do not use the Payroll Deduction Service, would be obliged to pay a share of the costs of the provision of the service. This would therefore reduce the total amount of Austudy available for students.
· AUS defines the service as including the requirement that DEETYA distribute information on any organization which is provided with access to the Payroll Deduction Service, so as to enable students to decide whether they wish to join the organization. It is inappropriate to require DEETYA to distribute information about AUS because this may well be viewed as the Commonwealth endorsing or supporting a particular organization which it does not fund and which is not associated with it in any way. A Commonwealth department would be in the position of being obliged to distribute information about organizations which the department has nothing to do with.
· Students who are not in receipt of Austudy would not be compelled to nominate a student organization. This would create an anomaly which would be unfair, especially having regard to the purpose for which Austudy is paid.
In the Tribunal’s opinion the submissions of the Commonwealth are correct. Fundamentally, what the applicant seeks is improperly to use, in furtherance of its own objectives, the coercive powers of the Commonwealth Government (a) to gain access to the Austudy database; (b) to compel students to make an election on their Austudy application form; and (c) to tax the students who are given loans or grants by DEETYA, for the purpose of recovering the cost of providing the Austudy payroll deduction service.
The Tribunal finds that access to the Austudy Payroll Deduction Service would be contrary to the public interest.
Finally, we make the point that Part IIIA of the Act plainly envisages that the achievement of third party access to a service is gained as a two stage process.
First, the declaration process whereby the Minister decides to declare a service, a process explained by us earlier; and secondly the access arrangements, whereby the terms and conditions of access are determined, either by private negotiation between the parties and registered with the ACCC or arbitration by the ACCC.
It is arguable that the service as defined in the application for review is a conglomerate of the elements of a service within the meaning of Part IIIA and terms of access to the service. If it is, then there must be grave doubts about the validity of the application for review. We need not decide this question. But it is important for future matters that this two stage process be observed, to avoid confusion between the elements of service and the terms and conditions of access to it.
For these reasons the Tribunal is of the opinion that the Minister’s decision not to declare the service should be affirmed.
I certify that this and the preceding twenty-six (26) pages are a true copy of the reasons for decision herein of the Australian Competition Tribunal.
Associate
Dated: 28 July 1997
Representative of the applicant: Mr G J Bird
Counsel for Commonwealth
of Australia: Mr G Johnson
Solicitors for Commonwealth
of Australia: Australian Government Solicitor
Counsel for National
Competition Council: Ms L Evans
Solicitors for National
Competition Council: Sharwood Eyers Wilkie
Date of Hearing: 4 February 1997
Date of Decision: 28 July 1997