Selling its Intermodal business could raise prices and barriers to entry: ACCC
Aurizon’s plan to sell its intermodal freight haulage business and the terminal at Acacia Ridge, outside Brisbane, could be in trouble – with the Australian Competition and Consumer Commission (ACCC) saying it has “strong concerns” about the plan.
The completion of the deal, which would see Aurizon sell its Queensland intermodal business to a consortium of Linfox and Pacific National, hinges on the approval of the ACCC and the Foreign Investment Review Board.
Aurizon stands to make about $220 million should the sale proceed, with the company having already closed its intermodal operations outside Queensland.
ACCC chairman Rod Sims said the ACCC was concerned about the impact of the sale on the freight industry, noting that Pacific National and Aurizon are currently the only providers of intermodal rail linehaul services in Queensland.
“Aurizon’s decision to sell its Queensland intermodal operations and the Acacia Ridge Terminal to its closest competitor, while shutting down its remaining intermodal business, will fundamentally change this market,” he said.
“We are concerned the proposed acquisitions would lead to increased prices and reduced service for freight hauled between Brisbane and Far North Queensland,” Mr Sims said.
The ACCC said it had received feedback from many parties who say there is no close alternative to rail for many types of freight, particularly to and from FNQ.
“Although freight services company SCT Logistics will remain on interstate rail routes, it is vertically integrated with freight forwarding and does not generally haul many containers for other freight forwarders,” the ACCC said.
Sims said that the separate proposal to sell Acacia Ridge to Pacific National could also make it more difficult for other rail companies to enter the market.
“The Acacia Ridge Terminal is an important infrastructure asset, and would be a key component in the strategy of any potential supplier of intermodal rail freight that wants to compete with Pacific National.”
Even an undertaking by Pacific National not to discriminate in providing access to the Acacia Ridge Terminal might not be enough, he added.
“The ACCC’s preliminary view is that a section 87B undertaking won’t resolve the concerns arising from the dominant provider of intermodal rail linehaul services nationally also owning the Acacia Ridge Terminal,” Mr Sims said.
The deal was first announced in August last year, when Aurizon CEO Andrew Harding noted the company had been making “significant financial losses… year on year”.
“The business has not been able to establish significant scale and a customer base to support a profitable business in such a highly competitive market,” he said at the time.
The ACCC, which is yet to make a final decision on the proposal, will accept new submissions from interested parties through to 3 April, with the ACCC expected to announce its final decision on 24 May.