Logistics News

ACCC tests NSW port privatisation in Federal Court

It's alleged that lease-holders agreed to anti-competitive Newcastle container fee

 

The New South Wales government’s ports strategy is now under serious pressure with the Australian Competition and Consumer Commission (ACCC) taking the Port Botany and Port Kembla lease-owner to the Federal Court.

In question is a ceiling in container numbers above which the Port of Newcastle would face a fee paid to its competitor ports.

Though this is seen as a NSW government policy sweetener to gain the best price for the lease as possible, the focus is on the operating companies as the ACCC’s powers related to governments are constrained.

The ACCC’s proceedings against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries, Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd, are for making agreements with the NSW that the ACCC alleges had “an anti-competitive purpose and effect”.

“We are alleging that making these agreements containing provisions which would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal, is anti-competitive and illegal,” ACCC chair Rod Sims says.

The NSW government ‘privatised’ Port Botany and Port Kembla in May 2013 and the agreements, known as Port Commitment Deeds, were entered into as part of the privatisation process, for 50 years.

The Botany and Kembla Port Commitment Deeds oblige the NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.


Read about the NSW parliamentary inquiry into the lease deals, here


The ACCC alleges that entering into each of the Botany and Kembla Port Commitment Deeds was “likely to prevent or hinder the development of a container terminal at the Port of Newcastle, and had the purpose, or was likely to have the effect of, substantially lessening competition”.

Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatised, requires the Port of Newcastle to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds.

The ACCC alleges that the reimbursement provision in the Port of Newcastle Deed is an anti-competitive consequence of the Botany and Kembla Port Commitment Deeds, and that it makes the development of a container terminal at Newcastle uneconomic.

“The compensation and reimbursement provisions effectively mean that the Port of Newcastle would be financially punished for sending or receiving container cargo above a minimal level if Port Botany and Port Kembla have spare capacity,” Sims says.

“This makes development of a container terminal at the Port of Newcastle uneconomic. 

“We are taking legal action to remove a barrier to competition in an important market, the supply of port services, which has significant implications for the cost of goods across the economy, not just in New South Wales.

“The impact of any lessening of competition is ultimately borne by consumers.”

“If a competing container terminal cannot be developed at the Port of Newcastle, NSW Ports will remain the only major supplier of port services for container cargo in NSW for 50 years.”

“I have long voiced concerns about the short-term thinking of state governments when privatising assets and making decisions primarily to boost sales proceeds, at the expense of creating a long-term competitive market,” Sims says.

“These anti-competitive decisions ultimately cost consumers in those states and impact the wider economy in the long term.”

The ACCC seeks declarations that the compensation provisions in the 2013 Port Commitment Deeds contravene the Competition and Consumer Act 2010 (CCA), injunctions restraining the operators of Port Botany and Port Kembla from seeking compensation under these provisions, pecuniary penalties and costs.

The CCA only applies to the conduct of state governments in certain limited circumstances. The State of NSW is not currently a party to the ACCC’s proceedings and the ACCC is not seeking orders against the state.

NSW Ports makes plain that it will stand its ground.

“NSW Ports firmly believes that the agreements (including provisions of the 2013 Port Commitment Deeds) signed with the NSW Government, to lease its assets at Port Botany and Port Kembla, operate in the best interests of all stakeholders, the economy and people of NSW,” it says in a statement.

“Having paid a consideration of $5.1 billion to the NSW Government in 2013 based on the full contractual terms contained in the agreements, NSW Ports will be vigorously defending the proceedings.

“NSW Ports is 80 percent owned by Australian superannuation funds investing on behalf of more than six million individual Australians. 

“The success of Port Botany and Port Kembla is in the national interest.”

 

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