ACCC confirms Viterra’s Switzerland-based buyer will follow through on ironing out port allocation bugs for wheat exporters in South Australia
By Anna Game-Lopata | June 8, 2012
Australia’s Competition and Consumer Commission (ACCC) confirms Viterra’s buyer will follow through on ironing out port allocation bugs for wheat exporters in South Australia
A spokesperson for the ACCC tells SupplyChain Review
the successful merger discussions between Glencore International and grain handler Viterra were conditional on the Swiss company’s acceptance of the existing legislative framework and associated undertakings
in Australia.
In April, the ACCC issued Viterra with an Auction Objection Notice, which compelled
it
to improve its proposed auction system for port allocation to grain exporters by May 2012.
However following calls from the Grain Producers of South Australia to monitor access and pricing across the wheat export supply chain and
problems associated with a similar auction system in Western Australia, the timeframe was extended to November.
The ACCC yesterday announced it would not oppose Glencore’s proposed acquisition of Viterra, despite concerns raised by the industry during its consultation process about Viterra’s market power in South Australia beyond the deal.
Currently Viterra monopolises grain supply chain services in South Australia owning and operating approximately 95 percent of the state’s storage and all of its port terminal capacity.
“The ACCC looked closely at the issues raised by market participants,” says ACCC Chairman Rod Simms.
“However, the investigation reveals the proposed acquisition
is unlikely to have a material impact on Viterra’s existing market position in South Australia.”
Sims adds a number of interested parties suggested the ACCC should impose conditions on its approval of the acquisition
such as gaining a
commitment from Glencore to divest some of the merged firm’s up-country storage sites and grain port terminals in South Australia.
However
the ACCC finds it
is not appropriate to impose conditions.
“In this case, the transaction itself was not the cause of the
industry concerns raised with the ACCC, but rather the market structure in South Australia,” Simms says.
“The legal test under section 50 of the Competition and Consumer Act, applied by the ACCC, only focuses on the likely effect of the proposed acquisition on competition.
“Section 50 cannot address issues arising from existing market power.”
Simms says the ACCC
believes Glencore’s acquisition of Viterra is unlikely
to depress prices paid to growers for grain or raise prices of grain to domestic customers.
The ACCC has also determined the merger is unlikely to
give the new entity an increased incentive or the ability to foreclose rival grain traders’ access to its up-country grain storage and handling services and bulk grain port terminal services or provide access on discriminatory terms.
“In respect of access to the port services, the merged firm will still be required to comply with the ACCC approved Port Terminal Services Access Undertaking until September 2014,” the spokesperson says.
After that time, either a voluntary code of conduct will be introduced or the arrangements requiring an ACCC approved Access Undertaking will continue to operate in its current form.
The variations to the access undertaking provide that in the event that an auction system is not ready by August, Viterra will accept bookings on a first-in, first served basis for shipping capacity between 1 October 2012 and 31 January 2013.
Glencore’s acquisition of Viterra has already been approved by Canada’s competition authority, the court
and Viterra shareholders.
Viterra expects the deal to be in place by the end of July 2012.
It is still subject to approval by the Australian Foreign Investment Review Board and clearance under the Investment Canada Act.