ACCC to appeal Newcastle container port case loss

By: Rob McKay

Hunter region container haulage hopes yet to be extinguished

ACCC to appeal Newcastle container port case loss
Rod Sims


The possibility of a Newcastle container haulage sector growing within operators’ lifetimes gained a new spark of life with an Australian Competition and Consumer Commission (ACCC) appeal.

The ACCC has lodged the appeal against the Federal Court’s decision to dismiss its proceedings against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd – together under the banner of NSW Ports.

The ACCC is also appealing from the court’s decision that the prohibition on agreements with an anti-competitive purpose or effect did not apply to the State of NSW and NSW Ports making agreements, known as the port commitment deeds (PCDs), on the basis of ‘Crown immunity’ and ‘derivative Crown immunity’. 

It is challenging the court’s finding that the competition law did not apply because the state was not carrying on a business when it entered into the PCDs, as well as the findings made by the Court that NSW Ports benefited from ‘derivative Crown immunity’.

The court also found that compensation provisions in the PCDs – set at the Port Botany wharfage rate, presently of $100 a container, and covering the government for privatisation-agreed payments to NSW Ports for each Newcastle container above 30,000 TEU – did not have an anti-competitive purpose or effect.

"We are appealing from this decision because we consider that the purpose and likely effect of the compensation provisions entered into at the time the NSW government privatised the Ports of Botany and Kembla was anti-competitive," ACCC chair Rod Sims said.

"Agreements entered into when existing state-owned monopoly businesses are being privatised, which seek to maximise profit from the sale by protecting that monopoly from competition in the future, are inherently anti-competitive."

"We remain concerned that the Port Commitment Deeds will effectively hinder or prevent the development of a competing container terminal at the Port of Newcastle for 50 years. This is a matter of significance for the Australian economy," Sims said.

The 50-year PCDs, entered into as part of the privatisation of Port Botany and Port Kembla in May 2013, oblige NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a specified cap.

Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatised, required the Port of Newcastle to reimburse any compensation the government paid to operators of Port Botany and Port Kembla under the Botany and Kembla PCDs. This reimbursement would significantly increase the cost of moving a container at the Port of Newcastle.

The ACCC argued that the Botany and Kembla port commitment deeds had an anti-competitive purpose and likely effect because they were intended, and were likely, to hinder or prevent the development of a competing container terminal at the Port of Newcastle.

"We will argue that the court made an error in finding that the port commitment deeds didn’t have an anti-competitive purpose, even though the court found that the purpose of the deeds was to secure a higher sale price for the state from selling the existing monopoly of Port Botany, and ensure that NSW Ports would retain the full value of that monopoly," Sims said.

The court found that the 50-year term of the PCDs was not relevant when assessing whether they have an anti-competitive effect, because the development of a container terminal at the Port of Newcastle was "fanciful" or a "speculative possibility" when the agreements were made.

"The ACCC’s case is that there was always a meaningful possibility that some time over the 50-year period a container terminal would be developed at the Port of Newcastle, if not for the compensation provisions," Sims said.

"These provisions in the Port Commitment Deeds increased the barriers to the development of such a terminal, and this is anti-competitive."

The court also found that, at the time the compensation provisions were agreed, it was speculative whether there would be a future change in state policy to favour the development of a container terminal at the Port of Newcastle, and took this into account in finding that the provisions were not likely to have the effect of substantially lessening competition.

"State governments, and their policies, change regularly and are likely to change during the 50-year term of the port commitment deeds," Sims said.

"We will submit that there was a meaningful prospect that there would be a change in state policy to favour the development of a container terminal at the Port of Newcastle at some time in the future."

Read about the Federal Court judges reasoning in the case, here

Port operator Port of Newcastle gave the move its thumb-up.

"Port of Newcastle welcomes the ACCC’s decision to appeal the ACCC v NSW Ports case following the Federal Court’s recent judgment," Port of Newcastle CEO Craig Carmody said.

"Development of another container terminal in NSW, even whilst Port Botany still has capacity, would provide a viable alternative and more cost-effective export routes for regional NSW farmers and manufacturers.

"Such competition would increase regional NSW global competitiveness and allow these suppliers to avoid congested supply chains. 

"Port of Newcastle is confident that it has the ability to compete in the same market as Port Botany. 

"Port of Newcastle continues to monitor the progress of the Federal Court proceedings with a keen interest and awaits the outcome of the appeal."

The International Forwarders and Customs Brokers Association of Australia (IFCBAA) also backed the move.

"IFCBAA supports the expansion of container handling facilities at Port of Newcastle and Port Kembla to reduce congestion at Port Botany, to provide port options for shipping lines and to support regional NSW exporters and importers," IFCBAA said.

"IFCBAA awaits with interest the outcome of the ACCC's appeal against the Federal Court decision."

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