EXPLANATORY STATEMENT
Subject Guidelines relating to deferral of arbitrations and backdating of determinations under Part IIIA of the Trade Practices Act 1974
Purpose
Under Part IIIA of the Trade Practices Act 1974 (the Act), the Australian Competition and Consumer Commission (ACCC) must, among other tasks, arbitrate access disputes for declared services and assess access undertakings and access codes.
Effective from 1 October 2006 the Trade Practices Amendment (National Access Regime) Act 2006 amended Part IIIA by, among other things, providing the ACCC with mechanisms to:
- defer arbitration of an access dispute where it is also considering an access undertaking on related issues [s. 44ZZCB]
- backdate a final determination and apply payment of interest [s. 44ZO].
The amendments also require that the ACCC must, by legislative instrument, determine guidelines within six months of commencement of the legislation and to have regard to these guidelines when making decisions under Part IIIA [ss. 44ZZCB (5) (6)(7), 44ZO(7)(8)(9)].
Consistent with this requirement, the purpose of the guidelines is to explain how the ACCC may apply the provisions on deferral of arbitrations and backdating of final determinations and application of the payment of interest.
Description
Section 1 of the guidelines explains the legislative background and relevant provisions of the Act.
Section 2 explains the ACCC’s likely approach in deciding whether or not to suspend either an undertaking or arbitration process, if an undertaking is lodged after an arbitration has commenced.
Deferring access disputes or access undertakings
It is possible that the ACCC may be required to assess an access undertaking at the same time that it is arbitrating an access dispute in relation to the same matter(s). To allow for this possibility, the ACCC, when arbitrating an access dispute now has the discretion under section 44ZZCB of the Act to decide whether or not to suspend either an undertaking or arbitration process, if an undertaking is lodged after an arbitration has commenced. The guidelines outline relevant considerations by the ACCC when deciding to defer one or more arbitrations while considering an undertaking that relates to the same matter. These include:
- effect of the undertaking—the ACCC must consider the fact that an undertaking, if accepted, will apply generally to all access seekers
- the access undertaking process may enable the ACCC to deal with issues that are common to multiple arbitrations.
The guidelines also outline the circumstances where it may be appropriate for the ACCC to continue with arbitrations, namely where:
- matters covered by the proposed undertaking have already been substantively considered in arbitrations
- the arbitrations deal with issues separate or additional to those covered in the undertaking and/or
- consideration of the undertaking is likely to involve a long time frame
- outstanding access issues are likely to be dealt with more effectively by arbitration.
The guidelines deal with other matters that the ACCC may be required to consider when conducting parallel processes, such as the use of confidential information and its approach to coordination of decision-making.
Backdating of final determinations
Section 3 of the guidelines explains the ACCC’s approach to backdating a final determination and the application of payment of interest. Given that the backdating provision is intended to remove an incentive for either party to delay the negotiate/arbitrate process, the ACCC will, in general, be inclined to backdate determinations and award interest.
The guidelines provide information as to how the ACCC may calculate the rate of interest. The rate of interest should reflect the opportunity cost of the overpayment (or the underpayment, as the case may be)—that is, the opportunities that the person making the payment has foregone by being deprived of that overpaid (or underpaid amount). Where the parties have reached agreement on an interest rate, the ACCC may have regard to this rate as evidence of the parties’ estimate of the opportunity cost. Where such agreement is not reached, the ACCC may base its calculation on the rate that would have been paid to raise the amounts by means of debt financing. In this circumstance, the ACCC’s generally preferred approach will be to adopt the variable indicator rate for large businesses that is published by the RBA. The ACCC may also decide to invite or direct parties to make written submissions.
Consultation
On 21 December 2006, the ACCC publicly released a draft version of the guidelines and issued a media release inviting public comments. A small number of submissions were received which are available on the ACCC’s website. Industry submissions generally supported the ACCC’s approach and the ACCC responded by clarifying in the guidelines (1) the limits to which determinations may be backdated and (2) that the ACCC will abide by matters of procedural fairness where it seeks to use information obtained outside an arbitration process for the purposes of an arbitration and, where appropriate, will provide an opportunity for parties to be heard in relation to the use of such information prior to the ACCC issuing its final determination.
Commencement
The Trade Practices Amendment (National Access Regime) Act 2006 commenced from 1 October 2006. The ACCC’s guidelines in relation to the deferral and backdating provisions will be publicly available on its website from 30 March 2007.