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ACCC appeals Federal Court’s findings in NSW Ports competition case

ACCC appeals Federal Court’s findings in NSW Ports competition case
ACCC Chair Rod Sims

The Australian Competition and Consumer Commission (ACCC) has appealed the Federal Court’s decision to dismiss its proceedings against NSW Ports Operations in favour of Port of Newcastle’s aim to develop a container terminal.

Currently, the port’s ambitions of diversifying away from coal are impeded by laws that limit container movements in Newcastle, which it claims were put in place by the NSW government to enhance the sale of Port Botany and Port Kembla.

The ACCC launched proceedings in the Federal Court on the grounds that such restrictions are illegal and anti-competitive.

However, on June 29, 2021, the court found that competition laws did not apply to NSW Ports when it entered into certain agreements, known as the Port Commitment Deeds, because NSW Ports had ‘derivative crown immunity’.

The court also found that compensation provisions in the Port Commitment Deeds did not have an anti-competitive purpose or effect.

ACCC chair Rod Sims said: “Agreements entered into when existing state-owned monopoly businesses are being privatised, which seek to maximise profit from the sale by protecting that monopoly from competition in the future, are inherently anti-competitive.

“We remain concerned that the Port Commitment Deeds will effectively hinder or prevent the development of a competing container terminal at the Port of Newcastle for 50 years. This is a matter of significance for the Australian economy.”

The Port Commitment Deeds, part of the privatisation of Port Botany and Port Kembla in 2013, for a term of 50 years, oblige the state of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a specific cap.

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 two ports’ commitment deeds.

This reimbursement would significantly increase the cost of moving a container at the Port of Newcastle.

The ACCC has argued that the Botany and Kembla Port Commitment Deeds had an anti-competitive purpose and likely effect because they were intended, and were likely, to hinder or prevent the development of a competing container terminal at the Port of Newcastle.

“We will argue that the court made an error in finding the Port Commitment Deeds didn’t have an anti-competitive purpose, even though the court found that the purpose of the deeds was to secure a higher sale price for the state from selling the existing monopoly of Port Botany, and ensure that NSW Ports would retain the full value of that monopoly,” Sims said.

The court found that the 50-year term of the Port Commitment Deeds was not relevant when assessing whether they have an anti-competitive effect because the development of a container terminal at the Port of Newcastle was “fanciful” or “speculative possibility” when the agreements were made.

Sims added: “The ACCC’s case is that there was always a meaningful possibility that some time over the 50-year period a container terminal would be developed at the Port of Newcastle, if not for the compensation provisions.

“These provisions in the Port Commitment Deeds increased the barriers to development of such a terminal, and this is anti-competitive.”

Port of Newcastle has welcomed the ACCC’s decision to appeal and will monitor the progress of the Federal Court proceedings with a keen interest.

Craig Carmody, CEO of Port of Newcastle, said: “Development of another container terminal in NSW, even whilst Port Botany still has capacity, would provide a viable alternative and more cost-effective export routes for regional NSW farmers and manufacturers.

“Such competition would increase regional NSW global competitiveness and allow these suppliers to avoid congested supply chains. Port Newcastle is confident it has the ability to compete in the same market as Port Botany.”

The ACCC is challenging the court’s finding that the competition law did not apply because the state was not carrying on a business when it entered into the Port Commitment Deeds, as well as the findings made by the court that NSW Ports benefited from derivative Crown immunity.