Legal Framework
12. Sections 52 to 57 of the Commerce Act, read in conjunction with the Minister's request of 25 July 2001, require that the Commission address three key issues.
13. The first is to assess whether competition is limited or is likely to be lessened in markets in which airfield activities are supplied, as required by section 52(a) and paragraph `a' of the Minister's letter. This requires an assessment of both structural and behavioural considerations within the context of the relevant markets.
14. The second issue is whether control is necessary or desirable in the interests of acquirers of airfield activities, as required by section 52(b) and paragraph `a' of the Minister's letter. The focus here is on the benefits of control for the acquirers of airfield activities (both direct and indirect acquirers). This has involved an analysis of what would happen if the status quo were to continue (the counterfactual), contrasted with the potential benefits and detriments to acquirers if control were to be imposed.
15. In order to consider whether control is necessary or desirable, the Commission has examined the pricing behaviour of the airport companies, and compared this to what it considers to be appropriate pricing principles. An examination of the pricing of airfield activities requires the Commission to consider issues such as asset valuation, weighted average cost of capital (WACC) and cost allocation. Any effects that other airport activities may have on the pricing of airfield activities are considered in the analysis where appropriate.
16. The third issue is to make a recommendation on whether market conditions are such that the Minister should recommend control. In this assessment, the Commission addresses such discretionary considerations as may be relevant. It is for the Minister to consider whether to recommend to the Governor-General to declare control. The Minister has a broad discretion and can take into account a range of factors.
17. The framework for control of goods and services under Part IV of the Commerce Act is discussed in detail in Chapter 2.
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