ACCC concerned by NCC’s draft recommendation on Port of Newcastle

The ACCC is extremely concerned about the potential removal of regulation of the shipping channel service at the Port of Newcastle following the release of the National Competition Council’s (NCC’s) preliminary view to recommend that the Treasurer revoke declaration of the service.

The port provides the only commercially viable means of exporting coal from the Hunter Valley region in New South Wales. The port was privatised in 2014 via a 98-year lease to Port of Newcastle Operations.

The NCC’s preliminary view that the declaration should be revoked would mean the terms and conditions of access to the Port would be unregulated.

Since June 2016, the ACCC has been able to independently arbitrate pricing disputes between the Port and its users, if parties cannot agree on terms.

“Removal of regulation of the port would be an extremely disappointing outcome and would have significant implications for all users of monopoly infrastructure,” ACCC Chair Rod Sims said.

“Should the declaration be revoked, the Port of Newcastle will be an unregulated monopolist that is able to determine the terms and conditions of its access with little constraint.”

“It would be reasonable to expect that, without regulation, further price increases at the port would follow and this would be a bad outcome for users and the economy, particularly given the history here,” Mr Sims said.

“I have repeatedly stated my concerns about privatisations by state governments that have boosted proceeds at the expense of appropriate regulation and competition. Users and consumers ultimately bear the cost of such decisions.”

“It is important that the bar for regulation is not unduly raised,” Mr Sims said.

The NCC’s recommendation follows an application from the port’s owner, Port of Newcastle Operations, that the declaration of the shipping channel be revoked. The ACCC made two submissions to the NCC on the correct interpretation of the test for declaration under the Act.

In October 2018, after an application by port user Glencore, the ACCC determined the port should reduce its charge for the shipping channel service by about 20 per cent.

Background

The Port of Newcastle was privatised in 2014. In January 2015, Port of Newcastle Operations increased the charge for coal ships entering the port by around 40 per cent to $0.69 per GT.

In May 2015, in response to a large price increase, Glencore sought declaration of the shipping channel service under Part IIIA. The recommendation of the NCC, which the Treasurer accepted, was to not declare the shipping channel service.

In June 2016, the Australian Competition Tribunal overturned the decision and declared the port’s shipping channel service. The Tribunal’s declaration meant the ACCC could arbitrate the terms of access where access seekers and the Port could not agree.

Port of Newcastle Operations applied for judicial review of the Tribunal’s decision in July 2016 but its appeal was dismissed. A subsequent application for special leave to appeal to the High Court was dismissed in March 2018.

Running in parallel the appeal process, Glencore notified the ACCC of a dispute with PNO about the price increase and requested the ACCC to arbitrate. PNO also further increased the charge to its current 2018 price of $0.76 per GT. The ACCC determined that PNO should reduce its current charge by around 20 per cent to $0.61 per GT.

The declaration criteria in Part IIIA of the Competition and Consumer Act were changed in November 2017. This is the first consideration by the NCC of whether a service should be declared under the revised criteria. Once the NCC has formed a final view it will make a recommendation to the Treasurer who then makes a decision as to whether or not the declaration should be revoked.

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