This presentation by Deborah Jane HEALEY, Professor, UNSW Sydney, was made during the discussion “The promotion of competitive neutrality by competition authorities” held at the 20th meeting of the OECD Global Forum on Competition on 8 December 2021. More papers and presentations on the topic can be found out at oe.cd/pcnca.

1. OECD Global Forum on Competition 2021
Competitive Neutrality and Government Policy
Professor Deborah Healey
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2. Competition and competitive neutrality
The basic proposition:
• A level playing field delivers efficient supply of goods and services to consumers at the
best prices and fosters innovation
Government and the level playing field:
• Significant government businesses in competition with the private sector should not
have a competitive advantage just because they are owned and controlled by
government
• Competitive neutrality (CN) is steps or mechanisms put in place to ensure that the
market is “neutral” or that the level playing field exists
• CN has both national and international implications
• Interesting relationship with industrial policy and state capitalism

3. Formal developments: essential elements
• Recommendation of the OECD Council on Competitive Neutrality May 2021 an
important step to global implementation
• Competitive neutrality in the broad sense requires multiple initiatives which are included
in the Recommendations:
-Application of competition law to government businesses and its
enforcement as necessary
-Routine competition impact assessment: policies, laws and regulations
-Government business : SOEs and other entities- adjustment for
advantages of government ownership and control
-Fair, open and non-discriminatory government procurement
-Clear policy for transparent public service obligations

4. Exemptions from competitive neutrality:
public benefit
• Recitals to Recommendations recognise that achieving public policy objectives will in certain
circumstances require exceptions to competitive neutrality
• Public policy objectives are objectives befitting the public interest in the jurisdiction
• Stage of development, other considerations of political economy
• To ensure benefits of competition fully achieved, exceptions should be circumscribed and
carefully considered
• Philosophical balance between sovereignty of individual governments and the policies they
deliver to benefit the public, and the weighting to be given to competition in the
particular case
• Some disconnect between the two

5. Important questions
• Where should the line be drawn between governance and policy role of government
and its role as a market participant?
• How carefully do governments consider the impact of their policy decisions on market
competition in practice?
• Is unfettered competition always necessary or appropriate to achieve the greatest
public good?
• Can governments be held accountable for their failure to consider the long-term impact
of their deals except at the ballot box?

6. Policy initiatives in Australia
• Well-developed and highly regarded competition policy: competitive neutrality must
ultimately be to the public benefit in each case
• Examples of policy where profit maximisation appears to have been considered at the
expense of long-term competitive markets in decisions such as the privatisation of
government assets
• Sale of major airport giving purchaser the right of first refusal on building the second
airport and long term monopoly rights over car parking
• Long-term leases of critical infrastructure such as ports with restrictive conditions about
building additional ports or reducing container throughputs
• Sale of government land titles registry with immediate escalation in user costs
• Sale of the government’s 49% share of toll road to owner of majority where it was
already dominant in city’s toll road network

7. Policy examples from Australia
Should the ACCC have more options?
• ACCC has no formal advocacy role but can be requested by government to review and
report. It routinely advocates for competitive outcomes
• Give the ACCC a formal power under the Competition and Consumer Act 2010 to
investigate and advise government on issues of this kind prior to their implementation?
What about the imposition of obligations on Commonwealth and state
governments? Possibilities:
• Public review of privatisation proposals by Commonwealth or state regulatory body
• Require all governments within Australia to disclose and justify in a transparent way why
competitive outcomes have been compromised in the name of public benefit
• This could be done by laying the analysis or a report before Parliament for scrutiny
• Mandating full disclosures of analysis in Annual reports
• Impose regulation on assets with significant levels of market power to prevent monopoly
conduct