National Competition Policy and the Professions

Can the Professions survive under a National Competition Policy?

This is a timely and significant conference and one with which the Australian Council of Professions is very pleased to be associated.

The title of the conference is challenging: the short answer to the question posed must be ‘yes’. The Australian Council of Professions has, over the years, been closely involved in the public processes, culminating in the Hilmer Report, which have addressed the position of the professions in the context of national competition policy. Generally, the Council has always accepted the Hilmer proposition that the Trade Practices Act should have universal coverage, including the professions — this position was acknowledged in the Hilmer Report itself. ACP Policy

In its submission to the Hilmer Inquiry, however, the ACP said that it endorses the principle of competition on the basis of merit for the provision of any specific service. In fact, the Council supports the removal of unnecessary barriers to competition, but the key word is ‘unnecessary’. We must not abandon those barriers which, whilst perhaps appearing to be anti-competitive, can be shown to be in the public interest. The ACP submission also said that “The public interest and the protection of consumers should be the paramount criteria in assessing the need for any change.” Uncertainty in the Professions

This remains the ACP’s basic policy stance but there is a pronounced degree of uncertainty existing within the professions about the evolving processes of implementation of the Hilmer recommendations in respect to professional practice.

This uncertainty is compounded by the fact that there are many players participating in the implementation processes:

    nine governments are the custodians of change and a multiplicity of semi-governmental authorities have a critical interest in outcomes;
    regulatory bureaucracies at Commonwealth, State and Territory levels come increasingly into focus and constitute one of the few growth areas in the public sector;
    peak business councils opine on the categorical imperatives driving competition reform while less prestigious business associations address the day-to-day realities;
    the Industry Commission in its latest manifestation as the Productivity Commission continues its work with extreme rationality of thought;
    while academia continues to find much to claim its attention in respect of both the theory and practice of bringing about a more competitive Australia.


At the national level, the Australian Competition and Consumer Commission is of pre-eminent importance to the processes of implementation. Some professions have had a long association with the ACCC (and the antecedent Trade Practices Commission) in addressing the issue of compliance of their respective codes with the provisions of the Trade Practices Act. I must at this point commend Professor Fels, his fellow Commissioners and the ACCC staff for their efforts in establishing consultative mechanisms in which the professions can participate in pursuit of this vital dialogue. We welcome our membership of the ACCC’s Consultative Committee and the more recently established Small Business Advisory Group, as we do the ACCC’s co-sponsorship of this conference.

These avenues for consultation allow us to keep before the ACCC our views on the need, in the public interest, to measure the provision of professional services on grounds significantly broader than price. Our concern is that competition policy outcomes measured solely or predominantly in terms of price would undermine professional standards and the quality of professional services provided to the community. In that context, I was interested to learn from the evidence given recently by Professor Fels to the House of Representatives Standing Committee on Financial Institutions and Public Administration that the Commission is having another look at its approach to pricing arrangements in professional practice. Considering the enormous volume of business which the ACCC will have to review it is important that it does not waste its time over professional association matters which are conceivably anti-competitive but quite internal and have no effect at all on the public interest. Penalties

As the sponsors of this conference have pointed out, non-compliance by professional practitioners with the provisions of the Trade Practices Act could give rise to heavy penalties.

An underlying issue is whether the present penalty provisions in the Act, which were formulated in an earlier and different context, are appropriate when applied to the professions. I am pleased to note that the ACCC is aware of this issue and I can indicate our support for their activities which will hopefully lead to a review by the Government based on the recommendations of a report prepared by the Australian Law Reform Commission a couple of years ago.NCC

Also at the national level, the National Competition Council has its role to play but that role is not as clearly discernible as that of the ACCC, at least in respect of its impact on the professions. Apart from its designated functions, any work undertaken by the NCC must be agreed by a majority of Australian governments. In a comment on its work program last October, the NCC suggested that a matter that would benefit from examination would be “restrictions on the provision of various professional services”. The NCC does not currently have a work program identified by Australian governments but I understand from remarks made recently by a senior NCC official that, if the NCC were to receive a remit relating to the professions, it is likely that a public inquiry would be mounted. I would have thought that there has already been a surfeit of public inquiries into the issue of the professions and competition policy. Admittedly, this is no more than a straw in the wind at this stage but it is of potential concern given the processes already in place with the ACCC to which I have already referred.

There is also a question mark over the role of the NCC in the legislative review processes, with particular reference to the determination of public interest.

When looking at the roles of the two regulatory bodies following on the Competition Principles Agreement endorsed by governments some two years ago, a question remains:

“Do the processes of the NCC and ACCC overlap and, if so, what are the likely consequences for the professions?”


Under the Competition Principles Agreement, Australian governments are committed to reviewing by the turn of the century some 1,800 pieces of legislation (including subordinate legislation) to identify and assess ‘anti-competitive’ provisions — there is a lot riding on the outcome of this review process:

    State and Territory governments will receive significant financial rewards if, in the opinion of the NCC, they undertake their reviews in an appropriate way;
    what constitutes ‘appropriateness’, however, is arguable and inevitably raises the issue of public interest;
    there is inherent difficulty in factoring public interest into a proper cost/benefit analysis but to rely simply on economic efficiency criteria (which seems to be the stance of the Industry Commission) would be to initiate, by default, a major de-regulation exercise on an extremely suspect basis;
    already there is evidence that at least one State has devised a methodology in which an objective base has been clearly established to ascertain economic outcomes, whilst only a minimal and subjective base has been established to ascertain the public benefit outcomes;
    with different authorities in nine jurisdictions each doing their own thing, the professions are particularly concerned that an ill-founded outcome in one jurisdiction could, in effect, prejudice a profession nationally — this would occur through the operation of the mutual recognition regime which requires that individuals able to practise in one jurisdiction are automatically able to practise in any other;
    on the evidence to date, we are concerned about the divergence in approach among the different jurisdictions, the form, substance and effect of ‘national reviews’ that can be set in train by any of the parties, and the lack of terms of reference and consultation in some cases.

Uncertainty in Government

I mentioned earlier that the professions are suffering from a great deal of uncertainty. It is obvious that all nine governments are also suffering from this uncertainty. It follows that the ACP, its constituent bodies and the 200,000 plus professional practitioners they represent will be looking to governments to pay due heed to the legislative review process with a view to enhancing the level of consultation and, in so doing, to assist in bringing about a necessary degree of consistency among jurisdictions.

All of which brings me back to where I started: in answer to the question, – ‘Can the professions survive under competition policy?’, I gave the answer, “yes”. There is, however, a more important question to which I don’t know the answer. That question is ‘Can “professionalism” survive under competition policy?’. I believe that the great majority of the members of the professions strive to practise in a professional manner. The Australian community looks for and is entitled to demand the highest professional service. I would claim that the level of professionalism we enjoy is a national asset which, while not lending itself to quantitative measurement, is a critical component in the processes necessary to preserve social cohesion. Professionalism is difficult to define and yet it is the essential difference between the professions on the one hand and business and commerce on the other. History with your indulgence I would like to recall the history of theof the development of the professions which provides an important perspective on their functions in society.

The early meaning of the word “profession” was a declaration or promise or vow made by a person entering a religious order. By the late middle ages, its meaning had changed to identify that class of persons who professed knowledge of some department of learning or science and used that professed knowledge in application to the affairs of others.

In particular, it came to refer to the three learned professions of those days – divinity, law and medicine and also to the military profession.

With the development of that “professionalism”, associations of such persons formed together for the purposes of controlling the conduct and standard of behaviour of those persons professing to provide and providing those services. As society became more complex, the numbers of such professions and associations increased.

The elevated position of professionals in the community did not occur by accident. It was because of the function of individual professionals in banding together and agreeing amongst themselves to adopt high standards of entry and to observe high standards of performance that the community came to respect and trust persons providing those services.

Self regulation and autonomy were an integral part of the development of those standards and it was in the interest of the members of the professions that those standards be maintained. From the point of view of the community it helped to ensure the quality of the services being provided.

The public interest in maintaining the highest standards in the provision of professional services and in the behaviour of those professionals was given effect to by statutes empowering professional associations, or in some cases licensing boards consisting mainly of the professionals, to set criteria for entry, to control conduct of members and, where appropriate, to exclude from professional practice those whose standards fall below acceptable levels.

It is an unfortunate development that the word “profession” has over the last two or three centuries come to have several meanings apart from the ones I have just mentioned. It can now be used to describe any calling or occupation by which a person habitually earns his or her living and, as we all know, that covers a multitude of things which have nothing to do with learning.

It is, I believe, a more fortunate change that has brought about the inclusion of a number of other occupations into the ranks of the professions as we define them through their adopting the high standards and ideals of professionalism.

Within the ACP, a profession is defined as:

    a disciplined group of individuals who adhere to high ethical standards and uphold themselves to, and are accepted by, the public as possessing special knowledge and skills in a widely recognised, organised body of learning derived from education and training at a high level, and who are prepared to exercise this knowledge and these skills in the interest of others; and
    inherent in this definition is the concept that the responsibility for the welfare, health and safety of the community shall take precedence over other considerations.

Effect of CPA

The application of pure competition principles to the professions may very well take away the professional commitment to the welfare of the client and the community, and replace it with a commitment to business principles and profit.

A great difficulty with the provision of services is that the members of the community are generally not in a position to assess the quality of the service, or for that matter, the qualifications of the providers. Professional services are often extremely complex and the assessments are often made according to the provider’s manner, presentation, advertising claims and prices without an awareness of their knowledge, skill and judgement.

Provision of a licensing or regulation process provides some degree of protection for members of the public. Deregulation removes it and must be introduced only after very careful assessment and consultation with all stakeholders.

These problems also exist at government level. I am aware that in the engineering profession there is a great concern that governments’ outsourcing policies have led to a situation where government departments no longer have the expertise to make good or informed decisions when awarding government contracts.

Both government and individuals must rely on the professionalism of our members and that professionalism must be encouraged. I don’t believe that competition policy is doing this.

I was pleased to note that the NCC in its publication “Considering the Public Interest under the National Competition Policy” states that subclause 1(3) of the Competition Principles Agreement is “not about maximising competition per se, but about using competition to improve the community’s living standards….”, and it further states that it recognises the public benefit to include….”improvements in the quality and safety of goods and services….”. I hope that the many authorities involved will recognise this.

Professional people respond well to the trust placed in them by the community to provide quality and safety in their service. To do this they must be able to charge a commensurate fee. If, however, they are forced to compete, especially in regard to price, quality and safety will be diminished. That trust and the response to that trust will also be diminished. Professional standards involve many criteria apart from price.

The provision of services is quite different to the provision of goods. The quality of a service can readily be changed to match the price and this is not in the public interest. I believe Michael Peck, who will be speaking after me, will be illustrating this in his address in regard to the construction industry. He will be showing how the consultants’ fees have been reduced dramatically but their incomes have not declined proportionately. In other words, services and standards are being adjusted to meet the market.

In my own case I can speak with some personal knowledge of my practice of dentistry. Virtually every service which I provide to my patients on a daily basis could be done by me in half the time if I chose, but, need I say, it would not be in the public interest. Post operative complications would increase only marginally but long term failure (with accompanying increase in permanent damage and costs) would increase markedly. By that time my patient would in most cases have no idea whether it was my work which was at fault.

Under pressure of price competition, it is relatively easy to manipulate (falsify) item numbers so that the cost to the patient is minimised through increased health fund rebates. As I currently work, I need do none of these dubious practices and in fact there are many occasions where patients request treatment which may or may not be expensive and I persuade them not to have it where I believe it to be inappropriate. There is no price competition or profit motive involved in this type of service, there is “professionalism” and the freedom to charge what the service is worth. I believe this is in the public interest. Thank goodness I am not answerable to an outside owner of my practice.

There are hundreds of thousands of professionals in this country who are providing this kind of service. The cynics among us in government and in the community will not believe this statement and will point to the small minority of so-called professionals who are only profit motivated. The introduction of a third party into the provider-client relationship such as we see with Medicare, bulk billing and the health funds unfortunately tends to encourage profit-motivated unprofessional behaviour. We all regret that this exists and I believe that the importance of service to the community and ethical behaviour should be emphasised continually in all undergraduate courses and by all professional organisations.Professional Associations.

I mentioned earlier that professional associations formed together in the late middle ages for the purposes of controlling the conduct and standards of their members. Their priorities were quite different to the merchant guilds. Today, professional associations still work to promote high standards among their members and, through this and various other ways in their areas of expertise, to promote the welfare of the community as a whole. There is still a tradition or a requirement among members of these associations to share all knowledge, research and new techniques. This is quite different to commerce and business where new ideas are kept secret or patented in order to maximise profits. This sharing for the benefit of all is also part of our professionalism. Professionalism may be at risk under competition policy. It is a valuable community asset and, if it is lost, then that will not be in the public interest.

Dr John Southwick
President – Australian Council of Professions

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