Port of Melbourne lease proposals get ACCC nod

Sims convinced that neither acquisition will substantially lessen competition

Port of Melbourne lease proposals get ACCC nod
ACCC chairman Rod Sims


The Australian Competition and Consumer Commission (ACCC) has decided that it will not oppose two separate proposals by consortia to acquire the 50-year lease of the Port of Melbourne.

ACCC chairman Rod Sims had earlier expressed his frustration at how privatisation was damaging the Australian economy and suggested a need for the government to review its 'asset recycling' policy.

However, following ACCC’s review of both the IFM Consortium and QIC Consortium proposals from potential cross-ownership interests and vertical relationship prospective, Sims is convinced that neither acquisition will result in a substantial lessening of competition among port users and stakeholders at various levels of the supply chain.

"While there are a small group of exporters in southern NSW, particularly in the Riverina region, who have the option of using Port Botany or the Port of Melbourne, the vast majority of port users have no choice, for them the Port of Melbourne is a monopoly asset," Sims says. 

The ACCC says it explored potential vertical issues that could arise from some consortium members having interests, or managing interests on behalf of clients, in port users, including DP World Australia and ANZ Terminals, in relation to the IFM Consortium; and DP World Australia and Pacific National, in relation to the QIC Consortium.

"The ACCC identified several constraints on the consortium members' ability to discriminate in favour of these downstream port services providers or to share commercially sensitive information regarding rivals of these providers," Sims says. 

"Further, no single consortium member will control the port, or has a controlling stake in other ports or vertically related businesses.

"The existence of other significant shareholders in each business limits any potential competitive detriment."

The ACCC says the proposed regulatory regime is largely a separate matter to this competition assessment.

The regime to apply at the Port of Melbourne will be overseen by the Victorian Essential Services Commission and will cap many fees and prices for port users at CPI for the first 15 years of the lease. 

"The regulation of monopoly infrastructure assets raises a whole range of separate issues that can’t be dealt with under the section 50 test applied to merger reviews," Sims says.

"However, the ACCC did note that the proposed regulatory regime at the Port of Melbourne provides for stronger pricing oversight than applies at most other ports following privatisation."

The ACCC also explored whether the potential cross-ownership issues would give the ports an increased ability to raise rents further than would otherwise be the case, due to knowledge of rents being charged at other ports and information about a port user’s willingness to pay.

The Commission notes that benchmarking already occurs, rents and other charges are typically known to an extent across the industry and that, even if the port operator gained some additional knowledge about rents or willingness to pay, this is unlikely to significantly increase their bargaining power in rent negotiations with tenants.

You can also follow our updates by joining our LinkedIn group or liking us on Facebook