Regulatory framework

Prices surveillance

25.5 Part VIIA of the Trade Practices Act 1974 (Cth) (TPA) regulates the conduct of prices surveillance in Australia in relation to selected goods and services.^[4] The Australian Competition and Consumer Commission (ACCC) is the regulatory body responsible for prices surveillance.^[5] Part VIIA provides for three forms of prices oversight.

• Monitoring. The Minister may direct the ACCC to monitor the prices, costs and profits relating to the supply of goods or services in an industry or firm, and to report the results to the Minister.^[6]

• Price notification. The Minister, or the ACCC with the Minister’s approval, may declare goods or services of a specified description, or a particular firm in relation to goods or services, to be notified. Once notified, firms must advise the ACCC of any proposed price increases for these goods or services. The ACCC must make a determination about the notified price increase within a specified period (unless the firm agrees to an extension).^[7]

• Inquiries. The Minister may direct the ACCC, or another body, to conduct a public inquiry into matters relating to the prices for the supply of particular goods or services, or the supply of goods or services by a particular firm or firms, or within an industry. Alternatively, the ACCC may conduct an inquiry on its own initiative with the Minister’s approval. The inquiry body must report the results to the Minister.^[8]

25.6 The ACCC also conducts informal monitoring as part of its general objective to promote greater transparency of pricing and price competition. The areas subject to informal monitoring include public liability, professional indemnity and medical indemnity insurance; bank fees and charges; and petrol prices. This informal monitoring relies on publicly available information, and the co-operation of the monitored firms.^[9]

Pricing review

25.7 The Productivity Commission is the Australian Government’s principal advisory body on all aspects of microeconomic reform.^[10] The Commission’s functions include: holding public inquiries on matters relating to industry, industry development and productivity; investigating and reporting on complaints about the implementation of the Australian Government’s competitive neutrality arrangements; advising the Minister on matters relating to industry and productivity, as requested; initiating research on industry and productivity issues; and promoting public understanding of matters related to industry and productivity.^[11]

25.8 Under the Productivity Commission Act 1998 (Cth) (PCA), the Minister may refer a matter to the Productivity Commission for a commissioned study.^[12] A study could cover a particular sector of the economy or an industry, or it could involve wider social or environmental issues. For example, in 2001 the Productivity Commission released a research report, International Pharmaceutical Price Differences. The Minister had directed the Commission to examine the differences between the prices of pharmaceutical benefit items in Australia and the price of the same items in comparable overseas countries; and to identify, as far as possible, the reason for any differences.^[13]

25.9 The Commission may invite comment in the form of written submissions. Once complete, the final report is forwarded to the Government.^[14]

Pricing inquiry

25.10 Pricing inquiries are another form of prices oversight that is available to the Australian Government. There are two primary mechanisms available for initiating a pricing inquiry.

25.11 As noted above, the TPA provides that the Minister may direct the ACCC, or another body, to conduct a public inquiry into matters relating to the prices for the supply of particular goods or services by a firm or firms, or within an industry.^[15] These pricing inquiries may investigate market situations to determine the nature, significance and causes of alleged pricing problems. The inquiry body makes recommendations to the Australian Government as to the appropriate response.^[16]

25.12 Pricing inquiries have been used for several purposes in the past, including to: determine whether pricing outcomes reflect competitive market forces; advise the Minister on what types of prices oversight, if any, should be applied to the firm or firms under inquiry; assess price notifications in greater depth; encourage compliance with determinations about notified price increases; and play an educational role by bringing information into the public domain, facilitating public understanding of the pricing matters at issue.^[17]

25.13 The Minister may also direct the Productivity Commission to conduct an inquiry under the PCA.^[18] These inquiries may deal with matters relating to industry, industry development and productivity. In formulating its recommendations, the Commission must consider the interests of the community as a whole, and the interests of those most immediately and directly affected by the recommendations. It also must have regard to the economic, social, regional and environmental consequences of its recommendations.^[19]