Australia’s consumer watchdog has launched legal action against NSW Ports, arguing its deal with the NSW government to compensate Port Botany and Port Kembla if Newcastle develops a container terminal is both illegal and anti-competitive.
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The Australian Competition and Consumer Commission (ACCC) instituted proceedings in the Federal Court on Monday morning against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd “for making agreements with the State of 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 said.
The state leased out Port Botany and Port Kembla in May 2013 under 50-year deeds which oblige the government to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.
The ACCC alleges that entering into each of the Botany and Kembla deeds was likely to prevent or hinder the development of a Newcastle container terminal 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 government for any compensation paid to operators of Port Botany and Port Kembla.
The ACCC alleges that the reimbursement provision in the Port of Newcastle deed is an anti-competitive consequence of the Botany and Kembla 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. This makes development of a container terminal at the Port of Newcastle uneconomic,” Mr Sims said.
“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 NSW.
“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.”
Mr Sims said he had “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”.
“These anti-competitive decisions ultimately cost consumers in those states and impact the wider economy in the long term.”
The ACCC is seeking declarations that the compensation provisions in the 2013 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 applies only to the conduct of state governments in certain limited circumstances.
The NSW government is not currently a party to the ACCC’s proceedings and the ACCC is not seeking orders against the state.