House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)

Chapter 5 - Strengthening industry codes under Part IVB of the Competition and Consumer Act 2010

Outline of chapter and summary of new law

5.1 Schedule 4 to the Bill amends the Competition and Consumer Act 2010 to provide regulatory certainty for industry participants that are governed by industry codes prescribed by regulations made under Part IVB. These amendments are to address any unintended ambiguity and to ensure Part IVB industry codes apply across various markets as intended.

5.2 References in this chapter are references to the Competition and Consumer Act 2010 unless specified otherwise.

Context of amendments

5.3 Part IVB provides the industry codes framework. Industry codes of conduct are an important way to achieve the objectives of a fair and competitive market. Codes set out a framework for compliance by prescribing standards of appropriate industry practices and providing dispute resolution mechanisms.

5.4 Codes currently support the operation of a range of important markets, including the dairy, electricity, oil, franchising and horticulture industries.

5.5 Section 51AE provides that the regulations may prescribe an industry code. Regulations may declare an industry code to be either mandatory or voluntary. For a voluntary industry code, the regulations must specify the method by which a corporation agrees to be bound by the code and the method by which it ceases to be bound.

5.6 The ACCC enforces industry codes that are prescribed under the industry codes framework. In addition, the Act provides the Australian Energy Regulator with certain functions and powers which may be applicable in relation to the regulation of prescribed industry codes in the energy sector.

5.7 Regulations that prescribe industry codes are frequently reviewed and are often updated. To ensure a consistent approach to codes across industries, amendments to the industry codes framework are required to clarify the range of powers and functions that can be conferred on the regulators, Minister(s), and other relevant third parties.

Detailed explanation of new law

Definition of industry code

5.8 The existing definition of 'industry code' in section 51ACA means a code that regulates the conduct of participants in an industry towards other participants in the industry or towards consumers in the industry.

5.9 The definition is amended to clarify that an industry code may contain provisions of a kind prescribed by regulations (made for the purposes of Part IVB), whether or not the provisions regulate such conduct. [Schedule 4, items 1 and 2, sections 51ACA(1)-(2)]

Conferring functions and powers in relation to the code

Functions and powers

5.10 Schedule 4 to the Bill amends subsection 51AE(1) to confirm that if regulations prescribe an industry code, the industry code may confer on a person or body functions and powers in relation to the code, including the following:

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monitoring compliance with the code;

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dealing with disputes or complaints arising under, or in relation to, the code;

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dealing with matters relating to a prospective agreement (including disputes or complaints relating to the agreement), that would, if entered into, have the effect that one or more parties to the agreement is a participant in the industry to which the code relates;

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conducting investigations under, or in relation to, the code;

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providing exemptions from the code or specified provisions of the code;

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reviewing the operation of the code;

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any other matter relating to the operation, application or administration of the code. [Schedule 4, item 4, section 51AE(1A)]

5.11 Under section 51AE(1E) an industry code may require a person or body to give another person or body information or documents relevant to the operation, application or administration of the code (whether or not any of those persons or bodies are participants in the industry to which the code relates).

5.12 An industry code may also confer on a person or body (whether or not a participant in the industry to which a code relates) a function or a power to impose such a requirement.

5.13 Section 51AE(1E) does not override the common law privilege against self-incrimination. The common law privilege against self-incrimination continues to apply so that an individual cannot be compelled to provide information that would incriminate themselves. [Schedule 4, item 4, sections 51AE(1E) and (1F)]

Persons or bodies on whom an industry code may confer functions and powers

5.14 For the purposes of subsection 51AE(1A), the persons or bodies on whom an industry code may confer functions and powers are:

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the ACCC;

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the Australian Energy Regulator;

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the Minister administering the code (who is not necessarily a Treasury Minister); and

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any other person or body (whether or not a participant in the industry to which the code relates).

5.15 However, only the ACCC, the Australian Energy Regulator or the relevant Minister can provide exemptions from the code or specified provisions of the code. [Schedule 4, item 4, section 51AE(1B)]

Requirements as to form of conferral of function or power

5.16 Functions or powers conferred under a code may be exercised by legislative instrument or other kind of written instrument. [Schedule 4, item 4, section 51AE(1C)]

5.17 However, exemption decisions must be made by notifiable instrument (when applying to an entity) or otherwise by legislative instrument (for example, when applying to a class), despite anything to the contrary in the code. This approach provides legal certainty as to which entities are subject to the code and ensures an appropriate level of transparency. [Schedule 4, item 4, section 51AE(1D)]

5.18 The exemption instrument must be registered on the Federal Register of Legislation. An explanatory statement must also be registered for a legislative instrument. Legislative instruments are subject to parliamentary disallowance and sunsetting.

5.19 The exemption power is expected to be exercised reasonably and in accordance with criteria set out in existing industry codes (see, for example, criteria specified in Clause 5 of the Wheat Code). [Schedule 4, item 4, sections 51AE(1D)]

Interactions with the regulation making power under section 44AH(1)(b)

5.20 The amendments are not intended to limit section 44AH(1)(b) which provides that the Australian Energy Regulator's functions include any functions prescribed in regulations made under that power. Functions and powers of ACCC under industry codes

5.21 To avoid doubt, the functions and powers of the ACCC include any function or power conferred on the ACCC by an industry code prescribed for the purposes of Part IVB. [Schedule 4, item 7, section 51AEAA] Acquisition of property

5.22 Section 51(xxxi) of the Constitution provides that the Commonwealth Parliament may only legislate with respect to the acquisition of property by the Commonwealth on just terms.

5.23 Section 51AF(1) provides that that provision applies to sections 51AE(1A)(b) and (ba), a provision of an industry code prescribed for the purposes of Part IVB that is authorised by sections 51AE(1A)(b) and (ba), and any other provision of the Act or the relevant regulations, to the extent to which the provision relates to one of the aforementioned provisions.

5.24 Section 51AF(2) provides that the provisions - have no effect to the extent (if any) to which they would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from one person to another other than on just terms (within the meaning of that paragraph). [Schedule 4, item 8, section 51AF]

Application and validation provisions

Requirements for exemption instruments

5.25 The requirements relating to exemption instruments in section 51AE(1D) apply in relation to the exercise of a function or power that occurs on or after commencement of the amendments. [Schedule 4, item 9]

Validation of regulations made, and acts and things done, before commencement

5.26 To avoid ambiguity, the amendments validate any earlier regulations prescribing an industry code under Part IVB as well as any actions and decisions made under those codes (for instance by the ACCC), prior to these amendments being made. This ensures that pre-existing regulations, and decisions or actions taken under them before these amendments apply, continue to be valid and effective. [Schedule 4, item 10]

5.27 However, the validation provisions have no effect to the extent (if any) to which they would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph). [Schedule 4, item 11]

Effect of retrospective validation

5.28 No persons are adversely affected by the retrospective validation of determinations or exemptions purportedly made under section 51AE nor should their interests be affected given that the amendments are aimed at clarifying the current state of the law as it was intended and has been understood.

5.29 Schedule 4 does not retrospectively change the intention of the law. Rather, the Schedule ensures continuity of the legal rights and obligations which arose which were understood to arise from determinations and exemptions under existing codes.

5.30 The Schedule does not create new consequences or obligations under existing determinations or exemptions. Any persons who were not affected by such decisions remain unaffected upon commencement of these amendments. Likewise, persons who were affected continue to be affected in the same way. This approach ensures that determinations and exemptions under Part IVB continue to operate as they have always been intended and understood to operate.

5.31 Any persons who were affected by such determinations made under section 51AE at the time the original determinations or exemptions were made will continue to be persons who were affected by such determinations after the commencement of the Bill. The Bill therefore confirms that the determinations will continue to operate as they have always been intended and understood to operate.

Minor and technical amendments

5.32 Subheadings have been added throughout section 51AE to assist with readability. [Schedule 4, items 3, 5 and 6, sections 51AE(1), (2) and (3)]