Competition Policy and
Stephen P. King
In 1993 the Independent Committee of Inquiry on National Competition Policy released its final report (Hilmer 1993).The report and subsequent government policies led to a wave of Australian economic research on competition policy and regulation.This chapter surveys that research.
For many types of markets, economists view competitive conduct as desirable.When consumers can choose between actively competing suppliers, those suppliers can only profit by producing high-quality products that satisfy consumers' needs, using costefficient production, and then selling these products at prices that match or undercut their competitors. Competition leads to a socially desirable mix of goods and services being produced efficiently and sold to those consumers who most value the products. In economic parlance, competition promotes technical, productive and allocative efficiency.
Competition need not be desirable in all circumstances and need not naturally arise in markets. Competition policy and regulation involves laws, rules and institutional structures that deal with firms' behaviour in markets where competition is either limited or absent.
The Trade Practices Act 1974 is Australia's pre-eminent legislative instrument for dealing with competition issues. 1 First enacted in August 1974, the act replaced earlier ineffective laws.The act covers consumer protection and competition laws.
The Independent Committee of Inquiry on National Competition Policy (the Hilmer Committee) was established by the Keating Labor government in 1992, primarily to review the competition provisions of the Trade Practices Act.The inquiry followed so-called microeconomic reform and deregulation in the financial sector and airlines (Forsyth 1992a; Quiggin 1996), and the political and economic forces underlying this reform also motivated the Hilmer inquiry.
One motivation was the perceived poor performance of the Australian economy.The Industry Commission (1990) argued that Australia's productivity growth in the late 1980s was low compared to other OECD countries. It estimated that reforms in transport, utilities and industry assistance could lead to a 6.5 per cent increase in real GDP in the