Application of the Australian Consumer Law to Government Commercial Activities
Paper delivered at Commercial Law and Government Conference, NSW State Library, 16 September 2016
Introduction
At the opening of the Parliament in 1960, the then-Governor General, William Morrison, First Viscount Dunrossil, commented (with prompting by Sir Garfield Barwick and Prime Minister Robert Menzies) that ‘the development of tendencies to monopoly and restrictive practices in commerce and industry has engaged the attention of the Government which will give consideration to legislation to protect and strengthen free enterprise against such a development.’
This marked the beginning of a revived interest in competition law in Australia, following the failure of the Australian Industries Preservation Act 1906 (Cth) to regulate anticompetitive behaviour.  This interest culminated, in the passage of the 1965 and 1974 Trade Practices Acts (TPAs), renamed in 2010 to the Competition and Consumer Act (incorporating the Australian Consumer Law) (CCA and ACL respectively).  With each legislative amendment came arguably wider scope for the Government to regulate private commerce and industry within Australia, and to encourage a (relatively) equal playing field for market participants in the private sector.
Less attention has been paid to market participation by governments. It is true that in the 1960s and 1970s, government commercial activity was far less widespread than it is today. Privatisation and deregulation of government assets, including the telecommunications and energy sectors, as well as many Australian airports, became more prevalent toward the late 1980s and early 1990s. Privatisation was touted as having the potential to lead to more productive and efficient industries, as well as lower prices for consumers.
Today, there are few commercial areas in which governments (whether federal, state or local) are not involved, whether directly, through a government agency or via contract/lease arrangements.  This reality has not altered the landscape of Australian competition law in any meaningful sense, despite the recommendations of the Hilmer Report in 1993.  Whether this trend continues, in light of the recommendations of the Harper Report earlier this year and with government commercial activity inevitably increasing in coming years, remains to be seen.
History and Relevant Provisions 
I want to start by tracing the history of the relevant provisions in the CCA (and its predecessors) as they apply to governments.  The earliest inception of the Act in 1965 contained section 8 which proclaimed:
The purpose of this section is the achievement of the orderly and convenient concurrent operation of this Act and complementary laws of the States, by means of cooperation between the Commonwealth and the States.
Thus, while early forms of competition legislation envisaged a role for government (in the sense of ensuring consistent implementation of the Act alongside existing law), this did not extend to dealing with the application of the legislation itself to any level of government – federal, state or local.
In 1977, the Fraser Government introduced the Trade Practices Amendment Act.  For the first time, there was inserted a section dealing with the application of competition legislation to government.  This followed the recommendations of the Swanson Committee, which one year earlier had observed that:
[It is] extremely important that the Trade Practices Act should start from a position of universal application to all business activity, whether public sector or private sector, corporate or otherwise. Only in this way will the law be fair, be seen to be fair, and avoid giving a privileged position to those not bound to adhere to its standards.
(Emphasis added.)
In the Explanatory Memorandum, the then-Minister for Business and Consumer Affairs, John Howard, explained that the Bill ‘provides for the Trade Practices Act… to apply to business undertakings of the Commonwealth Government and its authorities’.  
This became section 2A:
(1)	Subject to this section, this Act (other than Part X) binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth.
(2)	Subject to the succeeding provisions of this section, this Act applies as if –
(a)	the Commonwealth, in so far as it carries on a business otherwise than by an authority of the Commonwealth; and
(b)	each authority of the Commonwealth (whether or not acting as an agent of the Crown in right of the Commonwealth) in so far as it carries on a business; 
were a corporation.
(3)	Nothing in this Act makes the Crown in right of the Commonwealth liable to be prosecuted for an offence.
The Act therefore bound the Crown in right of the Commonwealth insofar as the Crown in right of the Commonwealth carried on a business, either directly or by a Commonwealth authority.  It is the concept of ‘carrying on a business’ that has caused the most difficulty since the 1977 amendments.
Business
The Act defines ‘businesses’ as inclusive of businesses not carried on for profit.  In section 2C, introduced following the adoption of the Hilmer Report, which I will come to in a moment, several other non-commercial activities are excluded.  
Beyond that, there is no legislative guidance as to the precise meaning of that phrase.  It has been left to the courts to grapple with the concept, who have provided the following principles:
•	The concept of ‘business’ should generally be construed widely, but will find its ultimate meaning in the context in which it is found.
•	‘Business’ may denote ‘activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis’, or ‘a course of conduct involving the performance of a succession of acts, and not simply the effecting of one solitary transaction’.
•	A government agency will conduct ‘business’ when its activities are ‘sufficiently systematic and regular, and sufficiently similar to commercial activities that private persons might engage in, to justify being characterised as a business’.
•	What is a sufficient degree of commerciality in business will be a question of fact.
I will later return to the concept of ‘carrying on a business’, and why this has done little to alleviate the issue of Crown immunity for anticompetitive behaviour. I will pay particular attention to the judgment of Emmett J in JS McMillan Pty Ltd v Commonwealth.
Early Judicial Consideration of Section 2A and TPA Crown Immunity
Until 1996, the Trade Practices Act was confined by section 2A to the Commonwealth Government.  Section 2B was then inserted, which expanded its reach to the States and Territories:
(1) Part IV, and the other provisions of this Act so far as they relate to Part IV, bind the Crown in right of each of the States, of the Northern Territory and of the Australian Capital Territory, so far as the Crown carries on a business, either directly or by an authority of the State or Territory. 
(Emphasis added.)
One of the earliest cases to consider the implications of the nascent section 2A was Bradken Consolidated Limited v Broken Hill Proprietary Company Limited (Bradken).  In that case, the applicants commenced an action in the Federal Court against the respondent, as well as against the Commissioner for Railways for the State of Queensland.  
The applicants sought to restrain the Commissioner from giving effect to contracts, arrangements and understandings contrary to the Trade Practices Act by virtue of their purpose/effect being to substantially lessen competition and/or give rise to exclusive dealing.  The respondents contended that the Trade Practices Act did not apply to the Commissioner as he was an instrumentality, or agent, of the Crown in right of the State of Queensland and was ‘entitled to all its rights, powers and privileges, and that the [TPA] is not intended to bind the Crown in the right of a State’.  
For Gibbs ACJ, there was ‘no doubt that the Commissioner is an agent of the Crown in right of the State of Queensland, and entitled to its privileges and immunities’.
His Honour noted that it was a recognised part of Australian law that the conduct of railways is a function of State governments.  The Court emphasised its preferred wider construction of Crown immunity.  For Gibbs ACJ, it seemed ‘only prudent to require that laws of the Parliament should not be held to bind the States when the Parliament itself has not directed its attention to the question whether they should do so’.  To hold otherwise would be judicial overreach.
Accepting that the Queensland Commissioner was not so bound, nor were the respondent companies.  
The high water mark for Crown immunity represented by Bradken was then torpedoed twelve years later in Bropho v Western Australia (Bropho).  The Court held that a statute would apply to and bind the Crown if its provisions, including its subject matter and disclosed purpose and policy, when construed in the context of permissible extrinsic aids, disclose an intention to bind the Crown.
The Court rejected any ‘prerogative to override the provisions of a duly enacted statute’.  It (indirectly) criticised the Bradken approach of treating Crown immunity as an ‘inflexible principle’ which would preclude a statute from binding the Crown unless a difficult test of ‘necessary implication’ were to be applied.  It did not, however, expressly overrule Bradken.
The Court also pointed out that ‘the Crown’ now extended well beyond the Sovereign.  Whereas there may have been overwhelming justification for a wide construction of Crown immunity in previous days, this was not the case now.  A legislative provision should not be read down ‘so that it is inapplicable to the activities of any of the employees of the myriad of governmental commercial and industrial instrumentalities covered by the shield of the Crown’.  For their Honours:
[T]here has been a growing tendency to question the appropriateness of the rule to modern circumstances… that tendency is not surprising in the context of the range of modern governmental activities and of recent developments in the approach to statutory construction.  Indeed, the contemporary approach to statutory construction, with its added emphasis on legislative purpose and permitted reference to a range of extrinsic material for the ascertainment of that purpose has added an element of anachronism to a judicial confinement of the permissible basis for discerning a legislative intent that the Crown be bound to what is manifest from the very terms of the statute.
There being no apparent difficulty in discerning an intention that the Crown was to be bound to the relevant legislation, the appeal was allowed.
Hilmer Recommendations
The 1993 Hilmer Report, commissioned by Prime Minister Keating following the establishment of the National Competition Policy Review, explored, among other things, the past and present justification for the current exemptions from trade practices legislation. The Report noted that ‘the general inclusion of Commonwealth business activity is consistent with the increasingly commercial orientation of much governmental activity’. This concern was mirrored by the previous Prime Minister, who had observed that:
There are many areas of the Australian economy today that are immune from [the TPA]: some Commonwealth enterprises, State public sector businesses…. This patchwork coverage reflects historical and constitutional factors, not economic efficiencies; it is another important instance of the way we operate as six economies, rather than one.
Taking into account some 150 submissions, the Report noted the concerns expressed as to the advantages enjoyed by Commonwealth-owned businesses. With respect to increasing privatisation, it highlighted that ‘the non-competitive habits developed through decades of operation in a tightly regulated environment run the risk of being perpetuated through private arrangements’.  The Report also noted the uncertainty in situations in which one Commonwealth department supplied goods or services to another, particularly given the unity of the Crown.  
Briefly, the Hilmer Report recommended:
•	that the national competition policy rules applied to commercial transactions between Commonwealth agencies when these transactions were undertaken in actual or potential competition with private firms;
•	that provisions in the TPA permitting certain activity of Commonwealth businesses be exempted by regulation, be repealed; and
•	that the shield of Crown immunity be removed from State and Territory governments insofar as they engaged in business.  
Citing Bropho, the Report noted that many of the historical considerations behind the doctrine of Crown immunity were inapplicable to a more modern style of government, in which ‘the activities of the executive government reach into almost all aspects of commercial, industrial and developmental endeavour’.
At a meeting of the Council of Australian Governments (COAG) on 25 February 1994, the Commonwealth and State and Territory Governments expressed agreement with the principles articulated in the Hilmer Report.  Among the outcomes of this meeting was the expansion of the TPA to include State and Territory Governments and the introduction of section 2B (see previous section). The COAG then entered into three separate agreements: the Conduct Code Agreement, extending the reach of Part IV to state and local government agencies carrying on a business; the Competition Principles Agreement; and the Agreement to Implement the National Competition Policy and Related Reforms.
These agreements brought further changes to the TPA through the Competition Policy Reforms Act 1995 (Cth). Further exceptions to the concept of a business in the form of section 2C were added, including (but not limited to) imposing or collecting taxes, levies or fees for licences and the granting or refusing to grant, revocation, suspension or varying of a licence. Also excluded were transactions involving only non-commercial government authorities.
Impact of the Hilmer Report
As ANU’s Dr Seddon commented at the time, while the aims of competitive neutrality and market equality were laudable, the Hilmer Report was narrowly focused and ignored a significant area of government commercial activity – namely, government procurement.  In this area, the Crown may undertake a commercial transaction including delivery of infrastructure projects or the heavy demands of health and education systems, but will not technically carry on a business, and so the shield of Crown immunity continued to apply. As was recognised later in the Harper Report, this has the potential to harm competition.  All the more so given the widespread popularity of market-based mechanisms used by governments to deliver public goods and services, frequently involving contracts with private sector service providers or the leasing of government-owned infrastructure.  
In GEC Marconi Systems v BHP-IT, Finn J commented: 
Government contracting… is of major significance in the economic life of this country…. It is somewhat surprising, that when the State enters the market place to acquire goods or services, it should exempt itself from those norms of conduct considered appropriate to the conduct of trade and commerce that it has imposed upon the private sector as of course – the more so given the “business-like” manner in which the Executive government commonly professes it conducts its affairs both internally and in its dealings with the community.
Dr Seddon also pointed out that the lopsided nature of government contracting would remain a source of disadvantage to the government, which, despite the advantages of Crown immunity, may still find itself in an inequitable market position when dealing with the private sector. In other words, anticompetitive behaviour is not ‘all one way’ and any reforms must take into account the special position, and associated disadvantages, of government when contracting.  For example:
•	The difficulties associated with damages as a remedy, arising from what Dr Seddon termed ‘the almost blind belief that contract is the answer to everything’. 
•	Substantial transaction costs to assist contractual adaptability.
•	Hidden costs of government contracting, including an increased risk of litigation, a loss of control over public expenditure and a danger of ‘locking in’ present and future governments, fettering policy formulation and change (i.e. a loss of flexibility).
Because of the restrictive definition of ‘business’, Dr Seddon proposed that apart from government business enterprises which themselves provide a product or service, it is difficult to find examples of where government or government bodies will carry on a business.  In other words, a government or authority must be selling a product or service – an activity that, in Dr Seddon’s words, is ‘miniscule when compared to procurement’. The changes brought about by the Hilmer Report were not particularly significant for commercial government activity.
Assessing his own Report earlier this year, Professor Fred Hilmer acknowledged that ‘Much has changed since [the publication of the Report] in 1993. Many of the changes are positive, and open opportunities for new business and new industries’.  He lamented the current partisan political atmosphere as having the potential to derail further reforms, including those of the nascent Harper Review. 
From Hilmer to Harper: Selected Cases
Many of the judicial developments concerning the application of the Trade Practices Act to government postdate the Hilmer Report. These decisions focussed primarily on deciding whether particular government activities were sufficiently within the definition of carrying on a business so as to be captured under sections 2A or 2B and so capable of regulation.  I propose to review only a selected few.
JS McMillan v Commonwealth
One of the earliest and most significant post-Hilmer decisions was that of Emmett J in JS McMillan Pty Ltd v Commonwealth.  The Commonwealth respondent invited tenders for the purchase of assets and commercial operations of the Australian Government Publishing Service (AGPS). The applicant, whose tender was unsuccessful, argued that the Commonwealth had acted in contravention of then-section 52 of the TPA.
Justice Emmett held that, while the conduct in question was undoubtedly in trade or commerce, the issuing of a request for tender and then dealing with prospective tenders did not relate to the carrying on of a business.  His Honour cited with approval the definition of business applied by Gibbs J (as his Honour then was) in Smith v Capewell, namely, a ‘course of conduct involving the performance of a succession of acts and not simply the effecting of one solitary transaction’.  His Honour then added the following pertinent remarks:
•	Mere repetition of an activity is not sufficient to constitute the carrying on of a business. Absence of a ‘system’ and any associated regularity might deny that a business is being carried on but the presence of these things does not necessarily establish the reverse.
•	In provision of services to the Commonwealth, AGPS has been doing so by the repetitive performance of a succession of acts. These are inherent functions of government such that they cannot be considered a business activity.
•	There must be maintained a distinction between functions of a government which are purely ‘governmental or regulatory and those which entail the carrying on of a business’. Whereas the Commonwealth Government acquires the services of AGPS systematically and regularly, for the purposes of governing (albeit too for remuneration), it cannot be said to be carrying on a business within the meaning of section 2A. 
•	The one-off selling of AGPS assets did not transform the government’s activities into that of carrying on a business.
Justice Emmett went on to reject the applicant’s contention that, were the activities of AGPS to have been considered a business, the Trade Practices Act would apply to all conduct connected in some way with that business.  His Honour described this interpretation as ‘attendant with a degree of arbitrariness’, holding instead that a government would only be bound where the conduct complained of is engaged in the course of carrying on the business. 
Corrections Corporation v Commonwealth
From government publishing services, I turn now to migration detention facilities.  In 2000, Finkelstein J considered whether the provision of detention centres amounted to carrying on a business in Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia (Corrections Corporation).  This was in the context of the Commonwealth putting out for competitive tender the provision of detention centres.  His Honour rejected the argument that this amounted to carrying on a business:
…operating a detention centre is not a trading or commercial activity of the executive branch. It is no different from a government maintaining and operating a prison for convicted felons. Maintaining and operating a prison may be described by some as “government business”, but it does not amount to the carrying on of a trading or commercial activity.  When laws provide that a person should be held in custody… the government is not providing any service either to the department which has responsibility for those persons or to the person in prison or in detention.  Even if what is being done could be characterised as the provision of a service, by no use of the English language could it be characterised as the carrying on of a business.
As to the broader tendering process being characterised as the carrying on of a business, Finkelstein J applied Emmett J’s test in JS McMillan.  His Honour held that the Commonwealth was seeking to find an appropriate provider of services; it was not itself ‘attempting to trade in goods or provide any services’.  This conduct did not have the requisite ‘commercial flavour’.
NT Power Generation v Power and Water Authority
Dr Seddon noted that NT Power Generation v Power and Water Authority ‘looked bad for Hilmer in its initial stages’. The case concerned access to power lines owned by the respondent (the Power and Water Authority) a Territory statutory corporation. The respondent granted a licence to the appellant (NTP) to sell electricity it generated at a mining power station. NTP sought access to the respondent’s infrastructure. The respondent refused to grant such access until a Territory Government Policy Review was carried out. The appellant alleged that refusal of such access amounted to a breach of the then-section 46 of the TPA. 
The Full Court held that the respondent was not carrying on a business and so was not bound by the relevant provisions of the TPA. This was on the basis that the respondent did not provide access to its infrastructure to anyone.  For Branson J, sections 2A and 2B:
…disclose no intention… to require the Crown… to engage in a business activity; rather they are concerned with the standards of conduct which are to be observed if the Crown does choose to engage in a business activity.  
The High Court reversed the Full Court.
Broadly, the High Court (Kirby J dissenting) held that the respondent’s refusal to provide electricity transmission and distribution services to the appellant constituted the carrying on of a business. The Court cited the Hilmer Report and the Second Reading Speech of the consequent 1995 legislative reforms.  For the Court:
•	While the conduct proscribed by the Act must be engaged in in the course of the respondent carrying on a business, the conduct itself did not need to be the actual business engaged in. 
•	The respondent’s contention that its refusal to supply access meant that it was not carrying on a business ‘substitutes the question of defining markets for the question of whether a business is being carried on.’ The words ‘market’ and ‘business’ have different meanings, and nothing in the Act limits the meaning of business by reference to market definition.  The respondent’s use of its infrastructure assets was a part of its carrying on a business, whether or not it was in an acquisition, sales or hire market. 
•	In treating the non-supply of access to infrastructure as crucial, this detracted from ‘the legislative goal of securing equivalent treatment of non-government and government businesses’, particularly as private businesses’ similar refusal may fall within the contravening language of section 46.  That section has long been held to compel market participants to do something cf. merely refraining from doing something.
The Court noted that as the respondent’s permission was required to enable the appellant to take advantage of its existing licence to sell electricity, the corresponding refusal of permission would not bring its conduct within a section 2C exception.
NT Power Generation suggested a willingness by the High Court to give effect to the Hilmer Report objectives and to have government commercial activities (at least to the point where these could be considered to be carrying on a business), when anticompetitive, treated similarly to the private sector.  This was even more apparent three years later in ACCC v Baxter Healthcare Pty Ltd.
ACCC v Baxter Healthcare
The respondent, Baxter Healthcare, manufactured several types of sterile fluids used by Australian hospitals as well as peritoneal dialysis (PD) products and machines for the treatment of chronic kidney failure.  It enjoyed an effective monopoly on these products. In response to tender invitations by State and Territory Governments, Baxter made an offer to supply sterile fluid and PD products item-by-item at a specific (higher) price, and an alternative offer to supply these on an exclusive, sole-supplier basis for a cheaper price.
The ACCC argued that this constituted both a misuse of market power under section 46 and exclusive dealing under section 47 of the then-TPA. The ACCC conceded that each State or Territory purchasing authority was the Crown for the purposes of the TPA and that the purchasing authorities were not carrying on a business (applying the reasoning of Emmett J in JS McMillan and of Finkelstein J in Corrections Corporation).  However, there remained a question as to whether Baxter, as government supplier, enjoyed or was protected by Crown immunity.
At first instance, Allsop J (as his Honour then was) held that the TPA could not apply to Baxter as to subject its conduct to the TPA would be to subject also the State and Territory Governments to the TPA when they were immune from its operation by reason of the shield of the Crown.  This his Honour found by applying a train of reasoning applied by Gibbs ACJ in Bradken; namely, that if the remedies sought in that case would have been granted against the respondent companies, the Commissioner himself would be prejudiced by the TPA’s operation just as much as if its provisions had been directly enforced against him. This is a neat indication of the ‘government contracting’ problem to which Dr Seddon has referred a number of times.
The Full Court upheld Allsop J on the issue of Crown immunity.
The High Court revisited the principles of Crown immunity outlined in Bradken and modified somewhat in Bropho. It definitively stated that the Bradken position on Crown immunity no longer ‘accurately represent[ed] the law’. 
The Court then considered the cases in which a statutory provision not binding on the Crown by reason of Crown immunity must be ‘denied an incidence upon a subject of the Crown [i.e. one in the position of Baxter Healthcare] because that incidence would in legal effect be upon the Crown’. For the Court, the situation before it resembled a provision which, if applied to Baxter, would ‘adversely affect some proprietary right or interest of the Crown, legal equitable or statutory’.
The Court examined the kind of right involved in this case.  It warned of ‘a risk of confusing governmental, commercial or even political interests with legal, equitable or statutory rights and interests’. For the Court:
There are many laws, some of which apply to governments and some of which do not, that constrain freedom of contract. Some of those laws that do not apply to governments have an indirect effect upon governments, in their application to people dealing with governments. Some of those laws operate for the protection of governments. A law to promote competition and fair trading may, in some of its aspects, operate in that way.
The Court emphasised legal consequences.  It cautioned that a conclusion which would find Baxter Healthcare enjoying a general immunity not available to the government itself when carrying on business would be problematic, and impossible to reconcile with the purposes of the TPA.  It would also go beyond what would be necessary to protect the legal rights of the government.  The goal of the TPA is to promote competition rather than preserving or satisfying party expectations.
For the High Court, the approach of Allsop J and the Full Court was too wide and inconsistent with the narrowing reach of Crown immunity that had been the law since Bropho, especially following the acceptance of the Hilmer Report by all three levels of government.  In order to protect legal rights of the Crown, it was ‘not necessary to deny that entering into or performing a contract could involve a contravention of s 46 or s 47 by a non-government party’. The general immunity simply could not be extended so far.  
On remittal to the Full Court, Baxter Healthcare was found to have taken advantage of its market power under section 46 as well as to have engaged in exclusive dealing under section 47.
Beyond Baxter and ‘Business’
There have been few cases dealing with Crown immunity in respect of trade practices legislation post Baxter Healthcare.  Some have criticised the ACCC’s concession in that case that the relevant government purchasing authorities were immune by reason of their not carrying on a business per section 2 of the Act.  Indeed, in a separate concurring judgment, Kirby J lamented the inattention given to the ‘text, purpose, and character of the Constitution and of the governmental policies it creates’. Applying these preferred tests, his Honour found the ACCC’s concession as to the Government’s ‘carrying on a business’ to be erroneous:
The error in the parties’ approach [i.e. the ACCC’s concession] illustrates an inclination of the legal mind, when a new text intervenes, to go on reasoning as if the text did not exist; to fail to adjust past legal notions to the language of the text; and to apply preceding common law principles without regard to the fundamental impact on them of the intervening provisions of the new written law which enjoys higher legal authority.
This is a reflection of Dr Seddon’s observations as to the restrictions of the section 2A ‘carrying on a business’ definition, which would fail to catch government commercial activity in many instances. As Dr Seddon comments, ‘the sections that purport to remove Crown immunity actually maintain it in a very substantial way, namely, in respect of government’s principal commercial activity of procurement’.  Any widening of that definition, however, was thought at the time, according to one commentator to ‘open up a veritable Pandora’s box of issues regarding the appropriateness of the business of the executive being assessed and appraised by another arm of the same executive’. 
The difficulty with the definition of ‘carrying on a business’ is apparent when one considers the range of government activities that have fallen alternatively inside, or outside, that concept. In Sirway Asia Pacific Pty Ltd v Commonwealth of Australia, Sundberg J identified instances of government commercial activity which were held not to fit the definition of carrying on a business:
•	operating detention centres;
•	inviting tenders to be submitted and dealing with prospective tenderers;
•	providing pharmaceutical, sickness and hospital benefits and medical and dental services in the administration of national health legislation;
•	operating the Trade Practices Commission;
•	leasing and developing a site for the purposes of establishing Cabinet and Ministerial offices;
•	managing a national park; and
•	providing police and corrective services. 
As his Honour noted, New South Wales was found by Hely J to be carrying on a business through the Ambulance Service of New South Wales by providing paramedic services at sporting events, and first aid training for reward.
Justice Jagot acknowledged the difficulty of the definition ‘carrying on a business’ in a recent interlocutory decision, Salvation Army (New South Wales) Property Trust v Commonwealth of Australia.  Her Honour was dealing with an application to strike out portions of a statement of claim on the basis that the Commonwealth, in providing ‘immigration processing services’ to Nauru and Papua New Guinea, could never have been carrying on a business for the purposes of section 2A of the Act.
Reviewing the relevant authorities, with particular emphasis on Emmett J’s decision in JS McMillan, her Honour concluded that there was insufficient information as to the nature of the relevant ‘immigration processing services’ provided so as to make clear whether or not the Commonwealth was carrying on a business. The scope of the services would depend upon the evidence: it would be wrong to assume ‘that the services were confined to determining a person’s immigration status and nothing more’.
Although her Honour was taken to Finkelstein J’s decision in Corrections Corporation she found that case distinguishable, having ‘a critical factual difference’; namely, that in Corrections Corporation, the ‘services’ included the provision of immigration detention and removal in Australia pursuant to the powers vested by the Migration Act.  These were clearly defined powers, a different situation to one involving statutes of Nauru and Papua New Guinea; that is, the Commonwealth ‘was not exercising any statutory function when it contracted with the Salvation Army for the provision of services at regional processing centres’.
Her Honour’s review of the statement of claim left apparent the gaps in the current test, particularly so where a carefully drafted pleading may describe government commercial activities in such a way as to avoid the TPA:
…it is plain from the statement of claim that the Commonwealth has contracted with providers such as the Salvation Army for the purpose of enabling the operation of the regional processing centres. As the Salvation Army submitted, while the Commonwealth contends that it is a purely or inherently governmental function for services to be provided by one nation state to another, the pleading certainly leaves open a different characterisation of the Commonwealth’s activities: namely, the Commonwealth acting as the head contractor, as well as operator and/or manager of the regional processing centres in circumstances where there is no governmental obligation for it to do so.
The review of the above cases indicates that, for the most part, the ‘carrying on a business’ test is uncertain and, as Dr Seddon and many others have noted, ill-equipped to deal with an increasing amount of government commercial activity; in particular, government procurement.
Harper Report: Overview and Background
As part of its election platform in 2013, and following its victory, the Liberal Party promised a ‘roots and branch’ review of competition policy in Australia.  It promised that the review would ‘help identify microeconomic reforms and long-term improvements to build strong foundations for a more productive and competitive 21st century Australian economy’.  
The reviewing panel consisted of Peter Anderson, former Chief Executive of the Australian Chamber of Commerce and Industry; Su McCluskey, CEO of the Regional Australia Institute; and Michael O’Bryan QC, of the Victorian Bar. Chair and namesake of the review was Professor Ian Harper, a partner of Deloitte and an Emeritus Professor of the University of Melbourne. 
A draft report was released on 22 September 2014 and the final report (the Harper Report) on 31 March 2015. Around 950 submissions were received.
The overarching theme of the Harper Report is the changing nature of the global and national economies since the Hilmer Report in the mid-1990s. Major shifts pointed out by the Harper Report included the rapid onslaught of globalisation; an increasingly aging population and the so-called ‘digital revolution’, as well as the dominance of the ‘Asian century’. The importance of improving productivity was stressed.  
A section of the Harper Report considered the application of the CCA to government activities.  The Harper Report noted:
There are many circumstances in which the Crown (whether as a department or an authority) undertakes commercial transactions but does not carry on a business. This is particularly the case in procurement, whether for delivering large infrastructure projects or the regular requirements of the health or education systems.
Through commercial transactions entered into with market participants, the Crown (whether in right of the Commonwealth, state, territory or local governments) has the potential to harm competition.,..  The Panel considers that the Hilmer reforms should be carried a step further, with the Crown subject to the competition law insofar as it undertakes activity in trade or commerce.
(Emphasis added.)
Included within the Report were a series of model legislative provisions to reflect this change, including:
	2A Application of Act to Commonwealth and Commonwealth authorities
(1)	Subject to this section and sections 44AC, 44E and 95D, this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth engages in trade or commerce, either directly or by an authority of the Commonwealth.  
Proposed section 2B, which applies to the States and Territories, would have a significantly less expansive effect than proposed section 2A and its application to the Commonwealth (see also proposed s 2BA which would have Part IV apply to a local government body only to the extent that it engages in trade or commerce, either directly or by an incorporated company in which it has a controlling interest).  If implemented, section 2B would result in certain provisions of the CCA (i.e. Parts IV (restrictive trade practices) and XIB (telecommunications industry) and related provisions) applying to activities carried out in trade or commerce by those levels of government, but not the substantive provisions of the ACL.  Consequently, unless appropriate consequential legislative steps are taken at those levels of government, Commonwealth procurement activities and the leasing of Commonwealth owned infrastructure will be subject to regulation by provisions in the ACL such as section 18 (misleading or deceptive conduct) and sections 20-22 (unconscionability), but similar activities conducted at the other levels of government would not.  This would be most unsatisfactory.  
The proposed section 2C replicates its ‘carrying on a business’ counterpart in the current CCA and substitutes the phrase for ‘in trade or commerce’, such that the imposing or collecting of taxes and levies as well as the granting or refusal to grant a licence will not constitute an activity ‘in trade or commerce’.  
It should also be noted that various State and Territory Governments raised a number of concerns during the submissions process of the Harper inquiry, including:
•	the wider application of competition law to government commercial activity runs the risk of compromising the policy functions of government, with the ACCC or the courts potentially (and inappropriately) adjudicating on government policy decisions;
•	full competition in many markets in which governments compete is not always necessary to achieve the greatest public benefit; and  
•	the legal test of ‘in trade or commerce’ is not easy to apply in a government context and there are constitutional constraints on the Commonwealth’s ability to enter the CCA to state and local government activities, absent referral laws.
Local government warned of:
•	the impracticality of applying competition laws to local government activities in remote rural areas where activities are often delivered on a ‘provider of last resort’ basis; 
•	procurement practice compliance requirements increasing; and
•	a lack of skills set in-house in the local government sector to adhere to more stringent policy requirements in procurement.
The Review went on to recommend that government procurement ‘should be designed with competition principles in mind’.  This included the basic purchase of goods and services through the public-private partnerships, an increasingly common feature of the current Australian commercial landscape, and privatisation. For the Report’s panel:
Competition policy plays an important role in improving government performance in sectors such as human services by promoting user choice and encouraging a diversity of providers. Choice and diversity have the potential to improve outcomes for users, especially, but not only by stimulating innovation.
The Report continued to endorse the public interest test as a tenet of competition policy.
Harper Report: Recommendations and Implementation
The Panel made the following recommendations in respect of government commercial activity
	Recommendation 1 – Competition Principles
•	Government business activities that compete with private provision, whether for-profit or not-for-profit, should compete with competitive neutrality principles to ensure they do not enjoy a net competitive advantage simply as a result of government ownership.
Recommendation 15 – Competitive neutrality policy
•	All Australian governments should review their competitive neutrality policies. Specific matters to be considered include: guidelines on the application of competitive neutrality during the state up stages of government businesses; the period of time over which start up government businesses should earn a commercial rate of return; and threshold tests for identifying significant business activities.

Recommendation 18 – Government procurement and other commercial arrangements

•	All Australian governments should review their policies governing commercial arrangements with the private sector and non-government organisations, including procurement policies, commissioning, public-private partnerships and privatisation guidelines and processes. 

Recommendation 24 – Application of the law to government entities

•	Sections 2A, 2B and 2BA of the CCA should be amended so that the competition law provisions apply to the Crown in right of the Commonwealth and the States and Territories (including local government) insofar as they undertake activity in trade or commerce, but subject to a list of exceptions as set out in proposed s 2C.  
As explained above, despite the wording of Recommendation 24, the Panel’s proposed legislative amendments make clear that, unless appropriate steps are taken by the States and Territories, the ACL will not apply to their activities in trade or commerce.  
Finally, the Harper Report recommended the dissolution of the National Competition Council and the establishment, in its place, of the Australian Council for Competition Policy (ACCP).  The Report recommended that this body be established under legislation by one State and then by application to all other State and Territory Governments with funding split between the Commonwealth and the States. One of the proposed roles for the ACCP is the identification of potential areas of competition reform across all areas of government. The ACCC would retain its regulatory functions, although its strengthening by the addition of a board was recommended.
The Panel recommended that the Commonwealth Government discuss the final Harper Report with the State and Territory Governments ‘as soon as practicable to enable all governments to make considered responses’, particularly with respect to any collaborative efforts.  The Report added that:
The proposed Australian Council for Competition Policy (ACCP) should provide a formal mechanism for encouraging and assisting co-operative and collaborative reform effort. Early establishment of the ACCP would catalyse the reform agenda.
The Commonwealth Government published its response to the Harper Recommendations on 24 November 2015.  In respect of Recommendation 24, the Commonwealth Government said that it supported this recommendation in principle and that it would consult further with the States and Territories on the implications of extending the CCA to apply to government activities in trade or commerce.  
COAG met on 11 December 2015 and published a communique which recorded an agreement to develop a new competition reform agreement, drawing on the Harper Competition Policy Review for consideration in 2016.  
The only State Government publicly to respond so far to the Harper Recommendations relating to procurement appears to be the Queensland Government.  In response to Recommendation 18, the Queensland Government said that it supported the recommendation in-principle but it noted that the Government should not be held accountable for non-compliance if the commercial arrangements are not “activity in trade or commerce”.  It made a cross-reference to its response to Recommendation 24.  
With specific reference to Recommendation 24, the Queensland Government said as follows:
	The Queensland Government does not support the recommendation.  The application of competition law to procurement and other government activities needs to be carefully considered.  Its application in service delivery in particular – which could fall into the definition of “activity in trade or commerce” may increase the costs of government service delivery and reduce policy flexibility with little or no economic benefit.  If the Commonwealth wishes to further explore this recommendation, the Queensland Government recommends that the Commonwealth identifies the particular government activities it wishes to target and the Queensland Government would be able to undertake a meaningful review of its activities to determine the implications for the State and undertake a full cost-benefit analysis followed by further consultation between Commonwealth, States and Territories (including local government).  
Trade or Commerce
The primary appeal of the proposal to replace the concept of ’carrying on a business’ with that of engaging in ‘trade or commerce’ in the application of the CCA to government activity lies in the fact that Commonwealth of government procurement or other related activities will be placed on a level playing field with activities carried out by private sector bodies when it comes to misleading or deceptive conduct and unconscionability.  Putting that significant aspect of the recommendation to one side, however, there is little reason to believe that the concept of ‘in trade or commence’ is more certain and predictable than is the case with the concept of ‘carrying on a business’.  Both concepts have given rise to extensive litigation.  The former concept is already present in the CCA.  For example, that concept is present in both section 18 (misleading or deceptive conduct) and section 20 (unconscionability) of the ACL in the application of those provisions to the non-public sector.  The concept of ‘in trade or commence’ is defined in section 4 of the CCA and has been the subject of extensive litigation.  In broad terms, it is now established that the phrase is to be given a broad meaning, which is wider than the concept of ‘carrying on a business’.  For example, in Re Ku-ring-gai Co-Op Building Society (No 12) Limited, Bowen CJ emphasised the breadth of the concept:
The terms “trade” and “commerce” are ordinary terms which describe all the mutual communings, the negotiations verbal and by correspondence, the bargain, the transport and the delivery which comprise commercial arrangements. The word “trade” is used with its accepted English meaning: traffic by way of sale or exchange or commercial dealing. The commercial character of trade was mentioned more recently by Lord Reid…[who] said: “… Leaving aside obsolete or rare usage it is sometimes used to denote any mercantile operation but is commonly used to denote operations of a commercial character by which the trader provides to customers for reward some kind of goods or services”.  Moreover, the word covers intangibles, such as banking transactions, as well as the movement of goods and persons, for historically its use as founded upon the element of use, regularity and course of conduct.
In the same decision, Deane J said:
The terms “trade” and “commerce” are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phrases of development of trade, commerce and commercial communication, the terms are clearly of the widest import. They are not restricted to dealings or communications which can properly be described as being at arm's length in the sense that they are within open markets or between strangers or have a dominant objective of profit-making. They are apt to include commercial or business dealings in finance between a company and its members which are not within the mainstream of ordinary commercial activities and which, while being commercial in character, are marked by a degree of altruism which is not compatible with a dominant objective of profit-making. 
In Smolonogov v O’Brien (reversed on appeal), Ellicott J said that the words ‘in trade or commerce’ do not require that what is done must be done in the course of carrying on a business and that the phrase is one of ‘wide import and should not be given a narrow meaning’.  
It might be expected that if the relevant Harper recommendation is adopted the breadth of the concept of ‘trade or commence’ will be tested by reference to a wide range of activities carried out by Government authorities.  Existing jurisprudence suggests, however, that the courts will be vigilant to draw a distinction between activities of government in trade or commerce, as opposed to other mainstream governmental activities.  That is illustrated by cases such as Unilan Holdings Pty Ltd v Kerin, where a TPA section 52 claim against the Minister for Primary Industry and Energy arising from a speech he made at an international conference which allegedly affected the wool price was struck out on the basis that the speech was not made in trade or commerce.  Similarly, in Tobacco Institute of Australia v Woodward, a case brought under the Fair Trading Act 1987 (NSW) in relation to public statements made on behalf of a lobby group which was opposed to tobacco, was held not to have been made in trade or commerce.  And, the High Court held in Concrete Constructions (NSW) Pty Ltd v Nelson, that misleading information given by a foreman of a construction company to a construction employee as to the condition of the work site in which the employee was working was not conduct in trade or commerce.  The High Court held that section 52 of the TPA was concerned with the conduct of the corporation towards persons, be they consumers or not, with whom it had or might have dealings in the course of those activities which, of their nature, bore a trading or commercial character.  
A similar regime is in place in New Zealand (the words ‘engages in trade’ are the trans-Tasman equivalent). Under New Zealand’s Fair Trading Act 1986, the Crown (including Crown corporations) is bound (see section 4(1)) insofar as it ‘engages in trade’ and ‘trade’ is defined in section 2(1) to mean:
any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land.  
If the Crown is exercising an administrative or regulatory function, it is immune from the relevant anticompetitive provisions.  Nor are interconnected bodies corporate subject to the prohibition against anticompetitive mergers or agreements where arrangements are solely between subsidiaries and/or the parent company.  
The limitations of the phrase ‘engages in trade’ are illustrated by the decision of the Court of Appeal of New Zealand in Glaxo New Zealand Limited v Attorney-General.  That case raised the question whether the Minister of Health was engaging in trade in deciding, in the exercise of legislative power, in what circumstances sale of a certain antibiotic drug should be subsidised by the Department of Health.  Justice Casey stated:
It is clear that the Minister was not engaged in trade as such, or in any business, industry, profession or occupation.  Nor…could her decision-making process be described as “an activity of commerce”.
…
However, we do not think that the word “undertaking” – broad as it may be – is apt to describe the Minister’s actions in deciding whether or not to specify a drug and impose conditions under s 99.  That word reflects the idea of settled activity or enterprise.  The fact that there is procedure for reference to a specialist committee for advice, and incorporation of her decision into the established Drug Tariff, does not convert the need for the Minister to make a series of separate decisions into “an undertaking” within the definition of trade.  Moreover, having regard to the overall tenor of that definition and the general purpose of the Commerce Act, we consider that this word is meant to cover activity of a commercial nature only.  It is not apt to describe the regulatory action for welfare purposes expected of her under s 99.  
In the United Kingdom, public bodies are subject to prohibitions imposed by both UK and European Union competition law when carrying out their functions.  The prohibitions are to be found in the UK Competition Act 1998 (Competition Act) and the Treaty on the Functioning of the European Union (TFEU) and they apply to the conduct of all ‘undertakings’.  Undertakings are defined as bodies which are engaged in ‘economic activity’.  A body can qualify as an undertaking in respect of some of its functions and not others.  Conduct amounts to economic activity where the body is:
(a)	supplying a good or service; and
(b)	that supply is of a commercial nature.  
According to the Guide published by the UK Office of Fair Trading in December 2011 and entitled “Public bodies and competition law”, the prohibitions under both the Competition Act and the TFEU have been interpreted as not applying to the exercise of various ‘public powers’.  Hence, some ‘core’ government activities, such as the provision of a national military or the administration justice are regarded as involving the exercise of essential functions of the State and, therefore, not to involve the offer of supply of goods or services.  Similarly, certain functions relating to air traffic control, environmental protection and tax collection on behalf of the State have been found to involve ‘public powers’.  
This can give rise to some nice distinctions.  For example, it has been held that a body which acts in a purely administrative capacity and regulates the provision of goods and services in a market does not itself offer or supply such goods or services and it makes no difference if the administrative activities are undertaken in exchange for a fee.  However, to the extent that the body also participates in the market, such participation may constitute an economic activity (see MOTOE v Elliniko Dimosio [2008] ECR 1-4863). 
Caselaw in the UK also establishes that the relevant prohibitions do not apply where a public body offers or supplies goods or services which are of an exclusively ‘social nature’.  In such cases, the carrying out of such a ‘social activity’, as well as the relevant entity’s purchase of goods or services for the purpose of conducting that activity, will not generally be regarded as an economic activity.  As the Guide indicates, however, at [2.21], no clear definition has emerged from that caselaw as to when an activity will be considered to be ‘social’.  The following principles provide some broad guidance as to whether or not a public body is undertaking a social activity such as to render it exempt from the prohibitions:
(a)	the activity must be exclusively social, such that an activity that is fundamentally ‘commercial’ but also pursues some public service objectives may still be an economic activity;
(b)	activities which by their very nature could not be carried out for profit without State support have been regarded as ‘exclusively social’; and
(c)	in the context of social security and insurance schemes, the operation of a scheme according to certain wholly ‘uncommercial’ and redistributive principles has been regarded as an exclusively social activity.  
It should also be noted that even where a public body qualifies as an ‘undertaking’, there are certain specific exclusions from the prohibitions imposed under both the Competition Act and the TFEU.  For example, a specific exclusion applies under both UK and EU law in respect of undertakings that are entrusted with providing ‘services of general economic interest’ (Sch 3, para 4 of the Competition Act) or are ‘revenue-producing monopolies’ (Art 106(2) of the TFEU).  Furthermore, under the Competition Act the prohibitions do not apply to any agreement that an undertaking must enter into, or conduct that it must engage in, in order for it to comply with a ‘legal requirement’ (such as an agreement which is entered into as a result of a formal order issued by a sector regulator).  Under UK law, the Secretary of State also has an express power to issue an order which has the effect of excluding certain categories of agreement from the prohibitions imposed by that Act (Sch 3, para 7).  
Activities excluded from the concept of ‘in trade or commerce’
Recommendation 24 by the Harper Panel proposes that a list of activities be excluded from the concept of engaging in trade or commerce (largely reflecting the current exceptions in section 2C.  They include:
•	imposing or collecting taxes, levies or fees for licences;
•	granting, refusing to grant, revoking, suspending or varying licences;
•	a transaction involving only persons who are all acting for the Crown in the same right and none of whom is an authority of the Commonwealth or a State or Territory;
•	a transaction involving only persons who are all acting for the same authority of the Commonwealth or for the same authority of a State or Territory;
•	a transaction involving only the Crown in right of the Commonwealth (or in either a State or Territory) and one or more non-commercial authorities of the Commonwealth (or of that State or Territory respectively); and
•	only non-commercial authorities of the Commonwealth (or the same State or Territory).  
Also excluded is the acquisition of primary products by a government body under legislation unless the acquisition occurs because the body chooses to acquire the products or it has not exercised a discretion that it has under the legislation that would allow it not to acquire the products. 
It is also proposed that, for the purposes of section 2C, an authority of the Commonwealth or an authority of a State or Territory is ‘non-commercial’ if it is constituted by only one person and it is neither a trading corporation nor a financial corporation.  
Concluding comments
It remains unclear what the Commonwealth, State and Territory governments will ultimately make of the relevant Harper Report’s recommendations. The proposed changes to sections 2A, 2B and 2BA are significant and would widen the application of the CCA to a broader range of Commonwealth commercial activities (as well as State and local government activities if the reforms are also adopted at those levels).  The Harper Report is a more substantial document than its predecessor.  Its Chair has observed:
While the Hilmer reforms drove competition into sectors like electricity, telecommunications and rail, we recommend driving competition across the economy and deeper into services sectors. Many of our recommendations - regarding infrastructure, intellectual property and planning and zoning - will cascade through the economy, providing material and measureable improvements.
Reaction to date to the Harper Report has been mixed.  One commercial law firm has predicted that future negotiations between Commonwealth and State Governments regarding implementation of the recommendations ‘may well be protracted’. Another firm has suggested that the Federal Government may adopt a cautious response to the Committee’s recommendations. The Business Council of Australia was more positive, however, heralding the Report as providing ‘clear directions for governments to improve economy-lifting competition through better competitive neutrality policies and government procurement’. 
The arguments in favour of increasing accountability and transparency in public procurement and other similar related activities are strong, particularly if appropriate exemptions are made to ensure that public regulatory activities, including those already covered in section 2C, are protected but remain amenable to other forms of review.  The New Zealand experience suggests that the skies will not fall if these aspects of the Harper Report recommendations are implemented.

Justice John Griffiths