Monday, November 22, 2021

Part IIIB - Why There is No Economic Case for Additional Access Regulation

Part IIIB - Why There is No Economic Case for Additional Access Regulation



Stephen P. King

Monash University - Department of Economics; Productivity Commission



Australia's competition laws include a general access regime for monopoly infrastructure (Part IIIA of the Competition and Consumer Act). Recently, there have been calls to extend this law - through a new 'Part IIIB'. This paper considers the proposed amendments and finds that there is no economic case for change.

Proponents of reform argue that the existing law has a gap. Our analysis shows that this is wrong and the current law can deal with both vertically integrated and separated facilities. We show that the current 'declaration criteria' identify both the relevant infrastructure services and the circumstances when regulatory action is warranted.

We also consider if there are either competition problems or economic distortions due to investment ‘hold up’ that could be fixed by Part IIIB? For competition, we conclude that any relevant concerns are already addressed by Part IIIA. For investment ‘hold up’ we note that this is a broad issue that arises in many industries. At best, Part IIIB would crowd out preferred business-to-business solutions to the hold-up problem. At worst, Part IIIB would create, rather than reduce, economic distortions.

Overall, we find that the case for further access regulation through a Part IIIB has not been established. Given Part IIIA, there is no regulatory gap for monopoly infrastructure industries in Australia that could be fixed by the proposed Part IIIB. Put simply, Part IIIB is a solution in search of a problem.

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