Sims reiterates call for effective port regulation


ACCC chairman says current price monitoring regimes have no impact on monopoly pricing

Sims reiterates call for effective port regulation
ACCC chairman Rod Sims questions the moves by governments to attract port buyers by making arrangements that ensure little to no prospect of future competition.

 

Speaking at the Ports Australia Conference in Melbourne this week, Australian Competition and Consumer Commission chairman Rod Sims is calling for governments to ensure proper regulation frameworks of privatised port assets to benefit the economy.

Sims says the government’s penchant to implement price monitoring regimes fails to ensure there is an effective constraint on monopoly pricing at Australian ports.

"Take for example the Port of Newcastle. This is the world’s largest coal export port, and it was privatised in 2014 with a sale price of $1.75 billion," he says.

"Less than a year later, the new owner revalued its port assets to $2.4 billion and increased navigation charges by over 40 per cent.

"There is no effective regulatory regime to constrain monopoly pricing at this port.

"Instead, there is simply a price monitoring regime.

"As you may expect, this regime has had no visible impact in dealing with this price increase."

Sims supports a "negotiate-arbitrate framework" to effectively regulate monopolising infrastructure.

"This approach doesn’t impose upfront requirements on the infrastructure owner, so the regulatory burden is minimal. It allows robust commercial negotiations to take place."

Sims once again questions the moves by governments to attract potential port buyers by making arrangements that ensure little to no prospect of future competition.

He had earlier expressed similar views during the Melbourne Economic Forum, where he criticised governments for seeking to maximise returns at the expense of creating private monopolies, dispensing with proper regulation and lowering productivity and efficiency.

His views were backed by international commodities trader Glencore, which has been opposed to the privatisation of the Port of Newcastle over a hike in shipping channel fees.

Sims reiterates his earlier arguments stating: "To date we have expressed concern about the initial proposal by the WA Government to offer the new owner of the Port of Fremantle the first right to develop a new port south of Fremantle in the future.

"Allowing the owner of the existing facility the right to develop a new port forecloses the potential for future competition between two Fremantle ports.

"This limits the competitive constraint on the privatised port operator, to the detriment of users." 

Sims says the main objective of privatising assets is to boost income, adding "this is fine if there is a competitive market, or there are sound regulatory arrangements in place to curb monopoly pricing and protect the long term interests of consumers.

"But as I’ve noted, the ACCC has been concerned that this has not been the case with many privatised port assets."

However, Sims notes that Victorian and WA governments have made efforts to implement improved regulatory regimes following privatisation of state-based ports.

"We saw some positive results from our engagement with the Victorian Government last year, with important improvements to the regulatory regime applying to the Port of Melbourne.

"An even more pleasing result has been our recent engagement with the WA Government on the proposed privatisation of the Utah Point Bulk Handling Facility [Port Hedland].

"After the ACCC pointed out the limits of price monitoring to constrain pricing, the WA Government now proposes to replace the monitoring regime with a negotiate-arbitrate framework.

"We consider that this will provide a credible constraint on monopoly pricing, while still allowing users to commercially negotiate terms of access."

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