On 27 July 2010 the Department of Planning released the Draft State Environmental Planning Policy (Competition) 2010 (Draft Competition SEPP) for consultation. The exhibition period ends on 26 August 2010. The stated objectives of the Draft Competition SEPP are to:
- promote economic growth and competition, and
- remove anti-competitive barriers in environmental planning and assessment.
How will this affect you?
In summary. the Draft SEPP seeks to:
- clarify that competition / loss of trade will not be a relevant planning consideration for development applications for commercial development
- clarify that the consent authority is not to consider the commercial viability of a proposed development when assessing such development applications
- state that a restriction in an environmental planning instrument or development control plan on the number of a particular type of retail premises in an area, has no effect, and
- state that a restriction in an environmental planning instrument or development control plan on the proximity of a particular type of retail premises to other retail premises does not have effect.
Also, the Draft Competition SEPP will need to be considered by local planning authorities with respect to the assessment of development applications under Part 4 of the Environmental Planning and Assessment Act 1979 (EPA Act).
The Draft Competition SEPP is based on recommendations from a review undertaken by the Department of Planning and the Better Regulation Office into how economic growth and competition were impacted by the planning system. The recommendations were published in a Final Report in April 2010 after more than forty businesses, industry groups, Councils and individuals made submissions.
The Final Report acknowledged that it is the Australian Consumer and Competition Commission's role to deal with competition matters at a national level; however, the recommendations are intended to ensure that the planning process does not unreasonably restrict competition by creating barriers to entry or by preventing innovative forms of development and change to emerge.
Two key themes of the Final Report are that:
- there should not be any advantage or protection provided to existing businesses, and
- there should be no need for planners to make assessments regarding the commercial viability of a development proposal, as this is a commercial decision to be made by the business itself based on its own assessment of market demand.
Competition and planning
The Final Report considered competition in the context of the assessment of development applications under Part 4 of the EPA Act and in particular section 79C of the EPA Act. Section 79C provides that a consent authority must take into account the following matters when determining a development application:
- the provisions of a relevant environmental planning instrument, any relevant development control plan, any planning agreement or matter in the regulations relating to the particular type of development
- the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impact in the locality
- the suitability of the site for the development
- any submissions, and
- the public interest
The Final Report referred to the High Court decision in Kentucky Fried Chicken v Gantidis1 as establishing the principle that the loss of trade for existing businesses is not in itself a valid planning consideration however, the overall economic impact of a development on the locality may be a relevant planning consideration. The Final Report did not, however, discuss a number of subsequent NSW cases considering economic impact. The Final Report recommended that a Competition SEPP be developed to clarify that competition between individual businesses is not in itself a relevant planning consideration.
Scope of application of the SEPP
Although much of the discussion in the Final Report is concerned with retail developments, in fact the Draft Competition SEPP will apply more broadly, to development applications concerning commercial development. The draft SEPP defines 'commercial development' to mean development for the purposes of, or including any combination of,
- retail premises
- business premises
- office premises.
It is important to note that the competition provisions in clause 9 of the Draft SEPP apply to development applications only, and not to Part 3A major project applications.
Relevance of impact assessment in the development application process
The Draft Competition SEPP provides that when determining a development application under Part 4 of the EPA Act:
- the consent authority (usually the local council) may not take
- the commercial viability of a proposed commercial development, or
- the likely impact of a proposed commercial development on the commercial viability of other businesses.
- however, the likely impact of the proposed commercial development of other businesses may be taken into account if the proposed commercial development is likely to have an overall adverse impact on local community services and facilities, taking into account those to be provided by the proposed development itself.
The Draft Competition SEPP specifically provides that likely impacts include likely loss of trade.
No further guidance is provided in the Draft Competition SEPP as to what constitutes 'overall adverse impact on local community services and facilities'.
The Final Report considered submissions that commercial competitors seek to use the development application process to frustrate new businesses entering their markets, by objecting to development applications and in some cases by taking proceedings against approved developments. Whilst the Final Report acknowledges that evidence exists that the development application process is used in this way, no additional statutory amendments were proposed in this regard. Accordingly the Draft Competition SEPP is silent on this issue. However, the Final Report does recommend that guidance be provided as to how to consider third party objections when assessing development proposals.
Removal of restrictions
The Final Report acknowledges that some environmental planning instruments contain restrictions on the proximity of certain retail premises to each other, or on the number of certain retail types of premises in a given area. The Final Report stated that these types of restrictive provisions may result in barriers to entry and prevent effective competition between businesses.
To address this, the Draft Competition SEPP provides that the following certain restrictions in an environmental planning instrument or DCP do not have any affect:
- a restriction on the number of a particular type of retail premises in any commercial development, or in any particular area, and
- a restriction on proximity of particular types of retail premises to other retail premises of that type.
This will apply both to restrictions imposed expressly and those by necessary implication, however, these provisions will not apply to restrictions arising as a result of development controls relating to the scale of development or any other aspect of development that is not merely the number or proximity of particular types of premises. The NSW Department of Planning has confirmed that the Draft Competition SEPP would not overturn any current restrictions imposed by Councils on locations or distances of brothels and restricted premises such as sex shops.
Suspension of covenants, agreement and instruments
The Draft Competition SEPP provides that, for the purpose of enabling development to be carried out in accordance with the Draft Competition SEPP or with a development consent granted under the EPA Act any agreement, covenant or other similar instrument that restricts the carrying out of the development will not apply to the extent necessary to enable development.
Some parties have expressed concern that the Draft Competition SEPP will be in conflict with the NSW Metropolitan Strategy. Whilst the Draft SEPP deals with inconsistency with other environmental planning instruments (for example, clause 6 confirms that, to the extent that there are any inconsistencies with other environmental planning instruments, the Competition SEPP will prevail), it is less clear how the Draft Competition SEPP will interact with other strategic documents such as the Metropolitan Strategy. The relationship between the Metropolitan Strategy and the draft SEPP may be clarified in the final wording of the SEPP.
Also, some observers have suggested that the application of the Draft Competition SEPP should be broadened so that it applies both to applications under Part 3A, as well as to development applications under Part 4.
Finally, it is still unclear how consent authorities are to deal with objections which are made to development on the basis of anticipated economic impact. Whilst the Final Report recommends that guidance be provided on this topic, and that such guidance "should include advice on prioritising issues to be addressed and information on recourse available to seek losses from vexatious objectors", no additional material has yet been released. However, representatives of the Department of Planning have recently indicated that the Department intends to issue guidance on the proper consideration to third party submissions lodged in respect of development applications by competitors, and on the appropriate weight to be given to these submissions.
The Draft Competition SEPP is on exhibition until 26 August 2010. Please contact us if you would like further information about the Draft Competition SEPP.
1.  140 CLR 675
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