NSW Government to promote competition in the retail sector by revamping planning laws

By Claire Smith, Kirsten Webb and Andrew Poulos.

Key Points:
Anyone in the retail sector in NSW will be affected by the proposed Competition State Environmental Planning Policy.

Competition in the retail sector has been on the national agenda for a few years now. The NSW Government has led the way in increasing competition in the retail sector by announcing it would be the first State to deal with the issue of protected retail zones and strip back planning requirements that could lead to anti-competitive behaviour.

The Government intends to do this by implementing the following seven recommendations of a Department of Planning and Better Regulation Office review on Promoting Economic Growth and Competition through the Planning System released in April 2010:

• A Competition State Environmental Planning Policy (Competition SEPP) will be developed to clarify that competition between individual businesses is not in itself a relevant planning consideration. In particular, the Competition SEPP should specify that the loss of trade for an existing business is not normally a relevant planning consideration. The SEPP should also specify that a planning authority should not consider the commercial viability of a proposed development.
• The Competition SEPP should clarify that any restrictions on the number of a particular type of retail store contained in any Council LEP or DCP is invalid.
• The Competition SEPP should specify that any proximity restrictions on particular types of retail stores contained in any Council LEP or DCPs are invalid.
• Most retail development in NSW is located in activity centres or in regional towns, on main streets. Activity centres need to be able to accommodate growth, and as appropriate, opportunities must be made for new centres to emerge.
  
  The NSW Government has prepared a draft Activity Centres Policy to outline a set of principles to better provide for a network of activity centres that cater for the needs of business and are places where individuals want to live, work and shop. The Report recommends that the final Activity Centres Policy should consider ways to increase opportunities for competition by allowing more types of shops into centres that currently only permit neighbourhood shops.

• The Minister for Planning should issue a direction to councils requiring them to consider applications that depart from the floor space ratios in the DCP on their merits.
• Guidance to be provided on how to consider third party objections when assessing development proposals including how to seek recourse from vexatious objectors.
• The Minister issuing a direction to councils under section 117 of the Environmental Planning and Assessment Act 1979 (NSW) to ensure that planning policies and instruments cannot apply retrospectively, unless it can be justified on sound planning grounds, such as for environmental protection reasons.

It is unclear how such a direction would operate in practice. As a general rule, only policies and instruments in place at the time of lodgement of the application should be considered when assessing a development proposal.

The Report recognises that it is the ACCC's role through the Trade Practices Act to deal with competition issues at a national level, but says that its seven recommendations will help to ensure that the planning process does not unreasonably restrict competition by inadvertently creating barriers to entry, or by discouraging innovative forms of development to emerge.

The changes are intended to facilitate the entry of a broader range of supermarkets into local areas, including independent supermarkets, which is expected to lower prices and bring more variety for consumers.

Supermarkets not the only ones affected by the Competition SEPP

It is important to note that, however, that the Competition SEPP is not limited to supermarkets and will have implications for all retail businesses.

It will take some time for the impacts of the SEPP to emerge and to see whether new and smaller retailers may find it easier to secure quality retail space as a result of fewer planning restrictions.

There may be other consequences such as whether major chain or "quick service" competitors may also find it easier under the new SEPP to establish new stores in regional or country areas where previously they may have faced more restrictions due to concerns about impacts on local established businesses.

Other retailers may consider the removal of the proximity restrictions and any steps to remove retail protection zones anti-competitive unless similar standards are imposed for all. Currently retail developments are generally confined to retail zoned land, which is more highly priced. Shopping centre owners argue that they must comply with tough standards for infrastructure within correctly zoned land and that factory outlets on industrial land do not, giving them an unfair price advantage.

Retailers will need to carefully consider the Competition SEPP and the final Activity Centres Policy and Competition Policy (when released) in the context of any future development applications or objections.

Victorian developments

In 2008 the Victorian Government released a Retail Policy Review Discussion Paper for public comment, partly in response to the issues raised in the ACCC's inquiry into the grocery sector and the Productivity Commission’s inquiry into the market for retail tenancy leases in Australia.

A key principle of the Discussion Paper is that planning policies and controls in Victoria should not limit retail competition or innovation, or distinguish between or favour particular forms of retailing unless there is a clear public policy case for doing so.

The Victorian Government's response is yet to be released. It is expected that any response will include a recognition of the role of strategic planning in identifying and supporting opportunities across the sector and help increase competition in the market.

Submissions on the draft Planning and Environment (Amendment) Bill are also being considered by the Government, with the final Bill expected to be tabled in Parliament later this year. A number of the amendments proposed in the draft Bill are geared towards improving the efficiency of the planning system in Victoria which should have the effect of reducing barriers for business and thus facilitating increased competition.

While some steps are being taken in Victoria to respond to the issues relating to competition in the retail sector as identified by the ACCC and the Productivity Commission, the NSW approach appears to be more targeted and far-reaching than that in Victoria.

For further information, please contact Claire Smith, Kirsten Webb and Andrew Poulos.