Competition Policy Review Threatens NFP Mission

The Not for Profit sector has been warned that a review of competition policy in Australia could have a significant effect on the future uniqueness of the social economy – but few organisations are engaging in the review process.

Sector leader and Executive Director of the Brotherhood of St Laurence, Tony Nicholson, said the implications of the current Harper Review into Competition Policy was drawing little attention from the Not for Profit sector despite its implications being far reaching.

“The review is looking at the application of competition policy to sectors of the economy with ‘significant government participation’,” he said.

“This includes the provision of community and welfare services and unfortunately this is getting little attention from the community welfare sector (CWS).”

The Federal Government first released an Issues Paper on April 14, 2014 and the review was open for submissions until June 10, 2014.

Some 297 non-confidential submissions have been made to the review committee. Only a handful appear to be from Not for Profit organisations.

At the same time Australian Not for Profits were asked to respond to the McClure Welfare Interim Review Report, comment on the  Options Paper for the replacement of the ACNC, consult on the model for a new National Centre for Excellence and apply for welfare funding for 2104-15 under the new Federal Government grants system.

In releasing the Competition Policy Issues Paper, the Chair of the independent Panel Professor Ian Harper said the review was “an ambitious and wide-ranging review of Australia’s competition laws and policy. Its success will depend on deep and extensive stakeholder engagement”.

Prof Harper said the review was not just about competition law, but about the broader Australian economy – it was about improving Australia’s standard of living, by driving competition across the entire economy.

“The key focus is how to introduce competition more broadly across all sectors of the Australian economy, what institutional arrangements can best support an ongoing reform agenda and are the current competition laws ‘fit for purpose’ and the regulators as effective as possible,” he said.

BSL’s Tony Nicholson said much of his concern centred on the Government purporting to contract the community welfare sector for its mission – its ability to harness community contribution and facilitate the expression of virtue – but failed to reflect this in contracts.

In particular, he said, the so called "compositional" effects of competition, where more efficient organisations prosper at the expense of the less efficient.

“For the  community and welfare sector as a whole this is not a welcome prospect,” Nicholson said.

“Those parts of their activities that are subject to competitive pressures are unlikely to constitute the whole of their purpose, and yet their ability to contribute across all their activities may depend on the health of the whole.  It seems most unlikely that a thinning of the CWS driven by economic competition would necessarily be a good outcome for social welfare.”

He said competition encouraged each organisations to weed out inefficiencies by cutting costs and reallocating internal resources to improve productivity.  

“The search for efficiency in the CWS is of course not necessarily a bad thing. However, the focus of contracts (with government) and what gets measured from the point of view of efficiency may not capture the wider benefits that the CWS brings to their mission,” Nicholson said.  

“What Governments may see as externalities are often central to the CWS mission. The narrower the contract the more the pressure for efficiency is likely to leave aside such wider benefits.”

For example, he said, the ability to harness community altruism and to leverage community contributions.

“The concern is that the uniqueness of the community sector could now be reflected in the regime of competition,” Nicholson said.

“Competition is said to drive innovation, but the CWS contracts with government tend to be quite specific, inhibiting new ways of meeting needs, and certainly constraining the creation of new services in pursuit of an outcome. Public servants try to design innovation through contract specification.”

The National Disability Service in its submission to the Review has asked whether cooperation and collaboration, particularly in relation to community development and the production of social capital, would be valued under the broader application of competition policy.

“While we anticipate that a fair application of competition principles in the disability sector will enhance effective and efficient service provision, the potential for unintended consequences should be carefully monitored,” the submission said.

“In particular, there is a risk of weakening the Not for Profit sector’s production of social capital (including volunteering, community building and public fundraising) and the collaborative culture that has traditionally underpinned it.

“If competition diminished this social capital production, it would lessen the NDIS’s benefits and ultimately increase the financial cost of the Scheme. Any code of conduct regulating competition in the disability sector must be designed to protect diversity in the market, including participation by small support service providers, without preventing collaborative approaches to service development or contestability.”

Tony Nicholson said thinking broadly about the relevance of the economic competition framework to the CWS, it was worth appreciating the complexity of the circumstances of the disadvantaged.  

“The theory suggests overall welfare is enhanced by competitive organisations seeking to meet the needs of well informed consumers with price signals mediating supply and demand responses.  But many of the disadvantaged are less able to participate in using the market, being less well resourced and less practised in making market decisions,” he said.  

“In any case, for government service contracts with the CWS there is generally no final price faced by consumers to signal choices and priorities. And where contracts are specific, there is little capacity for the CWS to adapt services to manage complex and bundled needs.

“These challenges suggest there are somewhat different complexities in this area which need careful exploration. That exploration needs to take into account the considerable amount of accumulated evidence about the application of competition policy in the sector being fraught with negative ‘unintended consequences’.”

Two animal welfare Not for Profits, the RSPCA and Voiceless made submissions to the Review taking a different approach saying changes to competition law could be a threat to consumer awareness campaigns as well.

In the same vein, the Australian Lawyers for Human Rights (ALHR) submission said it was concerned at recent proposals by government and industry figures to remove existing protections for individuals or groups engaged in campaigns for environmental or consumer protection.

The ALHR submitted that the anti-boycott provisions of the Competition and Consumer Act 2010 (Cth) place unjustifiable limits on free expression and go further than is necessary to achieve the purpose of promoting efficient and competitive markets.

Tony Nicholson said he would be taking part in a round-table discussion with the Review Panel and would express his concerns regarding the effects on the Not for Profit sector.

The Competition Policy Review is being conducted by an Independent Panel Chaired by Professor Ian Harper, with members Peter Anderson, Su McCluskey and Michael O’Bryan SC.