Australian competition authority acts against “anti-competitive and illegal” NSW Ports agreement

The Australian Competition and Consumer Commission (ACCC) has instituted proceedings against NSW Ports for “anti-competitive and illegal” agreement provisions likely to hinder the Newcastle container terminal development.

As part of the privatisation of Port Botany and Port Kembla, the New South Wales (NSW) government in 2013 entered into port commitment deeds for a term of 50 years.

As part of these deeds, the state of NSW is required to compensate the operators of the two ports if container traffic at the Port of Newcastle is above a minimal specified cap.

The ACCC has claimed that this 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.

Under its own 50-year deed the Port of Newcastle, privatised in May 2014, is required to reimburse the state of NSW for any compensation paid to NSW Ports due to the 2013 port commitment deeds.

The commission has claimed that this will make the development of a container terminal at the Port of Newcastle uneconomic and it is taking legal action to remove the barrier of competition.

ACCC chair, Rod Sims, said: “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 explained that if a competing container terminal cannot be developed, NSW Ports will remain the only major supplier of port services for container cargo in NSW for 50 years.

In response to the ACCC’s allegations, NSW Ports has said that it “will be vigorously defending the proceedings” as it paid a consideration of US$5.1bn to the NSW Government.

It explained that, as NSW Ports is 80% owned by Australian superannuation funds that invest on behalf of more than 6m Australians, it believes the success of Port Botany and Port Kembla is in the national interest.

The Port of Newcastle has plans to develop a fully automated container terminal which can handle 13,500+ teu vessels along with 11 quay cranes and integrated intermodal links and warehousing.

This container terminal would add US$6bn to the NSW economy by 2050 and lower prices at Port Botany due to competitive pressure, according to a report commissioned by the Port of Newcastle.

It explained that the pressure would save Sydney and Southern NSW US$1.2bn in freight costs and save businesses and consumers in Northern NSW US$2.8bn.

A new container terminal would remove 750,000 truck trips from Sydney’s roads, cut the distance freight travels over land by 40% and save US$130m in congestion and pollution costs, it added.

The study is based off of a scenario where the current restriction is lifted in order to understand the potential economic impact for the state.