Competitive neutrality is the principle that public sector businesses should compete with private sector businesses on an equal (competitively neutral) basis, and that public sector businesses should not have a competitive advantage (or disadvantage) over the private sector solely due to their government ownership.
Why is competitive neutrality important?
Competitive neutrality is important to ensure effective competition between public sector and private sector businesses. In the absence of competitive neutrality, resource allocation may be distorted, as prices charged by government businesses may not fully reflect resource costs. When prices do not reflect costs, production and consumption decisions may not be efficient. Inefficient pricing can also distort investment and other decisions of private sector competitors.
Competitive neutrality is intended to make the true costs and level of performance of government businesses transparent. It can facilitate better decisions regarding the business’s operation. Competitive neutrality can also promote productivity gains, which will flow to consumers and industry in the form of better services and lower prices.
We are responsible for:
- advising government agencies about complying with the principle of competitive neutrality
- receiving, investigating and reporting on complaints about the alleged failures of government agencies to comply with the principle of competitive neutrality.
We can investigate competitive neutrality complaints relating to relevant state and local government businesses. More information about competitive neutrality, including how to make a complaint, appears on our competitive neutrality page.