Danger of extending competitive neutrality to not-for-profits, CCA Submission - 22 May 2015

Submission on the Competition Policy Review's recommendations for Australia's Competition and Consumer Policy 2010

This submission seeks to highlight CCA’s concerns with recommendations from the Competition Policy Review report, particularly regarding how the principle of competitive neutrality might be applied across the charities and not-for-profit sector.  

Not-for-profit organisations have the same issue with competition policy as many small businesses in certain areas, but there are also a number of important ways, not-for-profits are completely different. The fundamental difference between a commercial and a not-for-profit organisation is purpose. All charities and not-for-profits are driven by a purpose that has to be about providing a real public benefit. Most commercial entities are primarily about making money.  

Small scale, local commercial activity for a charitable purpose is typical of the vast majority of commercial activities by charities and not-for-profits. These activities may in some instances have an impact on local businesses operating in the same area, but there are real benefits for the community if the profits from these activities are applied to public benefit rather than individual wealth. Even when such activities are larger, more sustained commercial operations, the same fundamental distinction applies. Charities must use profits for their purpose rather than individual wealth.
The public benefit of successful commercial activities within charities is a gain for governments and communities. 

In an ideal world many more services currently provided through government funding would be driven by consumers of those services in a more open market place where charities and not-for-profits had enough certainty to be able to offer quality services at competitive prices. We do not operate in this world yet. There is a lot of work to do to increase productivity and drive improvements in effectiveness for the charities and not-for-profit sector. 

Improving access to capital, creating greater certainty in government funding, streamlining government processes, empowering consumers and ending pointless micro management are all ways to improve the performance of the charities and not-for-profit sector.  If there is to be role for competition policy in this process, it should be about competing to better serve the needs of communities, not simply to generate private wealth.

Although this submission makes no formal recommendations, it calls on government to both review and implement recommendations from four reviews and inquiries conducted into the not-for-profit sector over the past six years.

View more on the Competition Policy Review here.