New legal round in Acacia Ridge Terminal sale bout


Doubting competition pledge, ACCC appeals to full bench of Federal Court

New legal round in Acacia Ridge Terminal sale bout
Acacia Ridge Terminal

 

The Australian Competition and Consumer Commission (ACCC) will appeal its Federal Court loss on Pacific National’s acquisition of Aurizon’s Acacia Ridge Terminal (ART) to the court’s full bench.

The move will be seen as a test of the nation’s company-merger regulation system, as this is an area where the ACCC finds it has less success.

The ACCC brought proceedings in July alleging that Pacific National’s acquisition of the Acacia Ridge Terminal, south of Brisbane, would substantially lessen competition by raising the barriers to entry for potential new rail operators.

In May, in a move that surprised many observers, the Federal Court the court concluded the competition issues would be resolved by an access undertaking offered unconditionally by Pacific National on the final afternoon of the hearing.

However, it indicated that, if an undertaking had not been offered, it would have found that the acquisition was likely to substantially lessen competition.

The ACCC views this as a too low a threshold for such a decision.


Read how the ACCC first viewed the Acacia Ridge Terminal sale, here


"Our appeal will focus on the ability of courts to accept undertakings in these circumstances," ACCC chair Rod Sims says.

"Among other things, we will argue that the Court made an error by accepting the undertaking, and then using it as a relevant fact when determining whether there was likely to be a substantial lessening of competition."

"This appeal is crucial to Australia's merger regime because acceptance of undertakings of this kind by the Court means that anti-competitive mergers could be approved, and this has the potential to damage the Australian economy.

"The ACCC, along with competition regulators around the world, has concerns about the ability of access undertakings to resolve competition issues arising from a merger.

"In this case, the ACCC remains concerned that if Pacific National is allowed to acquire the Acacia Ridge Terminal, it will have the ability and incentive to discriminate against competitors.

"There are many subtle ways in which it could disadvantage a competitor in their day-to-day operations, regardless of any commitments it makes in an undertaking.

"Potential new entrants will be well aware of this risk, and, in our opinion, this may mean companies are less likely to enter what is already a highly concentrated market.

"This is the primary reason we rejected a similar undertaking offered by Pacific National during our merger review."

Aurizon, which is keen on the sale for strategic and financial reasons, disagrees.

"Aurizon does not accept this assertion and is of the view this matter was fully considered by the Federal Court and the decision handed down in May 2019 was clear and comprehensive," the company says.

"If the ACCC appeal proceeds it means the sale will not be settled until the matter is heard and finalised before the Full Bench of the Federal Court.

"In the interim Aurizon will continue to operate the Acacia Ridge Terminal as per current arrangements."

It says the proposed terminal sale is part of its "three-stage exit from its loss-making Intermodal business", comprising:

  • closure of the Interstate Intermodal business (outside of Queensland) in December 2017
  • sale of the Queensland Intermodal business to Linfox which was completed on January 31  for $7.3 million
  • proposed sale of the ART to Pacific National  for $205 million.

At the time of the initial ruling, Pacific National was trenchant in its defence of its 2017 volunteered common-user access undertakings while taking a swipe at the ACCC.

"This judgment paves the way for Pacific National to add the Acacia Ridge terminal to its network of efficient freight terminals and to continue to provide important rail freight services for the Australian people," it said. 

"Pacific National is actively working to ensure the benefits of rail freight are considered in Australia’s growing freight task, to reduce emissions, ease traffic congestion and improve road safety.

 "Pacific National is particularly pleased that baseless and reputationally damaging claims relating to alleged understandings entered into by the company and individuals were withdrawn by the ACCC. 

"We have continuously refuted these allegations and it is important to note that the ACCC did not proceed with these claims as any part of its final case."

These included:

  • common user access
  • agreeing to an annual independent price review of all price increases
  • capacity expansion mechanism –" if we were to undertake capacity works at Acacia Ridge Terminal, we need to consult on the time that the work would take, and the impact on other terminal users"
  • no increase in prices before July 1, 2019.

It was even less impressed by the ACCC’s move today.

"Pacific National believes the Federal Court judgement created a pro-competitive outcome for freight in Australia by guaranteeing access for new entrants to get freight from road to rail," a spokesperson says.

"It’s important to remember the undertakings we’ve committed to did not previously exist at Acacia Ridge Terminal and any assertion that we would somehow subtly work to discriminate against other users is simply wrong. 

"We’ll continue to argue our case in court but look forward to getting on with moving goods for the benefit of all Australians.

"This court action by the ACCC has been an expensive and reputationally damaging exercise."

 

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