A compelling case for regulatory intervention
The Australian Government has reaffirmed its commitment to a rigorous system for assessing the impact of regulatory proposals and alternative options. The Government's Regulatory Impact Analysis requirements promote well designed regulation by:
- requiring a case to be established for acting in response to a perceived policy problem, including addressing whether regulatory action is required;
- assessing the impact of a range of alternative options to achieve the policy objective;
- encouraging transparent, timely and meaningful consultation with affected parties;
- assisting decision makers to understand the full range of costs and benefits of their decision, at the time they are making their decision; and
- making the information available to government decision–makers publicly available.
This is an internationally recognised framework, and has been strongly commended in a recent review by the OECD.
Applying this framework to industry codes, the most obvious alternative to a mandatory industry code is a voluntary code of conduct that is administered by the participants in an industry. In most cases, the net benefit of effective self regulation will exceed that of government intervention. This is the case for a number of reasons, including:
- Industry participants are usually better placed to tailor codes of practice to the business conditions and other circumstances facing an industry.
- Self regulation will often impose lower compliance costs on business than government regulation.
- Self regulation is more flexible, as voluntary codes of conduct can be amended by industry participants as required, independent of governmental and parliamentary processes.
- Self regulation does not impose costs on government in terms of implementation, compliance monitoring and enforcement action.
Accordingly, codes of conduct which can be effectively developed, implemented and enforced by the participants in an industry are generally to be preferred over the prescription of industry codes in law. An industry will generally only be subject to government intervention where there is a demonstrable problem affecting other participants or consumers which the market cannot or will not overcome.
The process for initiating a proposal for prescription of an industry code
Responsibility for prescribing an industry code lies with the Minister with responsibility for Part IVB of the CCA, who is the Parliamentary Secretary to the Treasurer.
In this document, a reference to the Minister or the responsible Minister is a reference to the Parliamentary Secretary to the Treasurer, who has responsibility for matters that arise under Part IVB of the CCA, along with other provisions of the CCA that relate to competition or consumer affairs.
Other Ministers may have policy responsibility for areas covered by, or proposed to be covered by, prescribed industry codes. For example, the Minister for Resources and Energy has policy responsibility for matters that are dealt with by the Oil Code. In such cases, a proposal to prescribe an industry code may be raised by the responsible Minister.
Regulations to prescribe an industry code or to make amendments to a prescribed industry code would be made by the Minister. Such authority would be required at two stages, first for the policy being proposed prior to a process of public consultation being initiated on the proposal and secondly, for the text of any regulations to be made to prescribe an industry code.
Industry participants or other persons affected by conduct occurring within a particular industry may bring proposals for the prescription of an industry code to the attention of the Government. They may do so by either raising the relevant matter with the Minister with policy responsibility over a particular area of activity, or by raising it with the Parliamentary Secretary to the Treasurer. In either case, the relevant Minister and the Parliamentary Secretary to the Treasurer will consult each other before deciding to commence a process that might lead to the prescription of an industry code.
Is a prescribed industry code the appropriate mechanism?
Industry codes are co–regulatory measures, designed to achieve minimum standards of conduct in an industry where there is an identifiable problem to address. Industry codes can be used as an alternative to primary legislation in instances where a market failure has been identified. A prescribed industry code will not be considered if another regulatory regime applies to a particular industry.
Other regulatory regimes
Many areas of business activity are regulated under industry–specific legislation that applies at State, Territory or Commonwealth level. As a general principle, the Minister would not propose prescription of industry codes that apply to industries regulated under other legislation. Examples include:
- in the telecommunications industry, the Telecommunications Act 1997 provides for the registration and enforcement of industry codes of conduct by the Australian Communications and Media Authority;
- the Therapeutic Goods Administration can mandate product standards and manufacturing principles for drugs and other health products under the Therapeutic Goods Act 1989;
- the financial sector is regulated under the Australian Securities and Investments Commission Act 2001; and
- States and Territories have mandated various industry codes under their respective fair trading laws.