Sourced from Australian Conservation Foundation - Forestry and National Competition Policy
12 April, 2001. Marsden Jacob Associates, Camberwell, Victoria.

5.7. AGREEMENT ACTS

Agreement Acts are Acts of Parliament that provide "legislative backing to contractual agreements entered into by Governments with the private sector." These acts have been used in many business areas.

Agreement Acts are not immune from NCP consideration. The Victorian State Government's Timetable for Review of Legislative Restrictions on Competition states:

By their nature these Acts often restrict entry to particular markets for the period of the agreements. As such, they will involve a legislative restriction on competition which falls within the requirement for review under the Competition Principles Agreement.

To balance the requirement for review against the limitation imposed by existing private right and obligations, reviews will initially need to identify the scope for change while preserving existing private rights and obligations and, where there is scope for change, proceed within those parameters. 96

In Western Australia, where there are a proportionately large number of Agreement Acts (particularly related to mining), the NCC has agreed with the Western Australian Government's proposal to review an accepted sample of these Acts for their impact on competition. This approach may be taken with forestry.

Forestry Agreement Acts typically specify the amount, and conditions under which, the Government will supply timber to a particular company. Acts related to the supply of native hardwoods raise a number of issues worthy of further attention. 97

First, the Agreements can extend for much longer than other forest licences. This gives the company named in the Agreement a significant advantage over other competitors who do not enjoy the same resource security. For example, the Forestry (Wood Pulp Agreement) Act 1996, which sets an agreement between the State Government of Victoria and AMCOR Ltd for the supply of pulpwood, extends to the year 2030, whereas ordinary logging licences in Victoria only extend for 15 years at the most.

Second, while the Agreements do not provide an exclusive right of access to a particular Forest Area, they nonetheless restrict competition across the entire State since they entitle the named company to a significant proportion of the overall volume of timber available for felling in a particular year. Other companies are therefore unable to compete for this timber. For example, under the Forestry (Wood Pulp Agreement) Act 1996, AMCOR's guarantee supply of pulpwood accounts for nearly 25% of the total volume of timber logged in Victoria each year. 98 This effectively means that other companies must compete for the remaining 75% of the resource, while AMCOR does not have to compete at all, a problem that would come to the fore if Victorian yields proved to be unsustainable.

Third, the Agreements sometimes include provisions that waive the payment of licence fees which, to the best of our knowledge, all other companies have to pay. For example under Forestry (Wood Pulp Agreement) Act 1996, payment of licence fees by AMCOR is waived. 99

In addition to these more generic concerns with Agreement Acts, there are some specific concerns in relation to the Forestry (Wood Pulp Agreement) Act 1996 that are worth examining. First, the Act explicitly requires that:

In using its powers and applying its discretions whether under this Agreement of the Act or the Forests Act the Minister and the Secretary shall give full recognition to the fact that the Company is engaged in a competitive business and so far as the interests of forest management allow the Secretary ... shall so act in every reasonable way as to enable the Company to carry on the industry in an economic manner.

Thus the Act appears to provide for substantial competitive benefits to be conferred on the company on the basis of ministerial discretion.

Of further interest is the timing of the Act in relation to two other important processes that were occurring at the time. The first of these is the CPA and the subsidiary legislation review process: the second, the Regional Forest Agreement process.

In relation to the National Competition Policy process, the timing of the Act is of concern given the Government's above-mentioned acknowledgement that Agreement Acts constitute a legislative restriction on competition and therefore need to be included in the NCP legislation review process. This issue should therefore have been at the forefront of the Government's mind when dealing with AMCOR about the Act. It appears however, that the issue was not dealt with, and ergo that the Act was not subject to the benefits test associated - which, if true, constitutes a breach of CPA. This can be inferred from the fact that the Act along with all other Victorian forestry Agreement Acts were scheduled for review either by 1 December 1999 for those relating to the provision of hardwoods. Of further concern is that all forestry Agreement Acts have since been withdrawn from review, as they cannot be amended without the consent of both parties. If this is the case, then the Victorian State Government, with respect to the AMCOR agreement, has put itself in a position where it need not have been.

In relation to the RFA process, the timing of the Act is also of concern given that in 1996, the Victorian State Government and native forest timber industry were deeply involved in the RFA process, a process which was intended to provide, amongst other things, resource security for the native timber industry. For some reason, however, the State Government chose to negotiate seperately with AMCOR and to provide it with an agreement that would extend its resource security longer than that of any other company in the State which would be subject to the 20 year RFAs. This situation therefore appears to conflict with the NCP directive at Clause 5(1) that legislation should not restrict competition unless it can be demonstrated that the objectives of the legislation can only be achieved by restricting competition, as there was clearly another process which was designed to achieve this resource security. Of further concern is the fact that whereas the RFAs were based on quite extensive research and public consultation, the Agreement with AMCOR had an unknown, but likely lesser amount of the former, and definately none of the latter.

96 Victorian Government (1996) Victorian Timetable for Review of Legislative Restrictions on Competition, June, s.10.

97 It is beyond the scope of this review to examine all Agreements Acts. The Victorian Forests (Wood Pulp Agreement) Act 1996 is therefore discussed as a case study in relation to these issues.

98 In 1998/99, 2.1m3 of timber was taken from Victoria's native forests. Of this, 500,000m3 was supplied to AMCOR under the Forests (Wood Pulp Agreement) Act 1996.

99 Section 6 states: A licence fee may be waived in whole or in part in accordance with the Agreement despite anything to the contrary in the Forests