ASCOLA Competition Law series
Edited by Josef Drexl and Vicente Bagnoli
Chapter 1: Competitive neutrality: addressing government advantage in Australian markets
The activities of government in the market have significant capacity to impede effective competition. Government impacts the level playing field of competition by making laws and regulations that restrict competition, by the less than comprehensive application of competition law to the entities which it owns and controls, including state-owned enterprises, and by the exemptions or exceptions it grants to itself or other favoured groups. Even where competition law expressly applies to government entities there are advantages that accrue to government-owned or controlled bodies merely because of government ownership or control. Policy designed to address this latter issue is termed competitive neutrality policy. The foundation of competitive neutrality policy is the principle that government business activities conducted in competition with the private sector should not have competitive advantage simply by virtue of their government ownership and control. Competitive neutrality policy implements mechanisms to ensure that advantages of this kind do not occur. This is a recognized problem worldwide and various jurisdictions have taken steps to redress the competitive balance. This chapter outlines the substantial steps taken under Australian competition law and policy to deal with the impact of government on the market and particularly with the issue of competitive neutrality. A detailed structured policy was implemented in 1995 to address competitive neutrality issues and substantial progress has been made to level the playing field for the private sector where government participates in the market.