TasPorts declared to have misused its market power

The Federal Court has declared by consent that Tasmanian Ports Corporation Pty Ltd engaged in conduct that had the likely effect of substantially lessening competition in the markets for towage and pilotage services in northern Tasmania, in proceedings brought by the ACCC.

The Court declared that TasPorts had breached section 46 of the Competition and Consumer Act (CCA) by imposing a new port access charge on one of its customers, Grange Resources Ltd, after Grange notified TasPorts that it was going to switch to Engage Marine Tasmania Pty Ltd, a new provider of towage and pilotage services.

TasPorts did not have a legal right to impose the new port charge, and sought to impose the charge without conducting a full assessment of the cost of providing access services to Grange. There was a real commercial likelihood that if Grange agreed to pay the port charge, this would have the effect of raising Grange’s future costs of acquiring services from Engage Marine.

“This is an important decision because port services play a pivotal role for the Tasmanian economy, and this is the first time a corporation has been declared to have breached the revised misuse of market power law,” ACCC Chair Rod Sims said.

TasPorts has also provided the ACCC with a court-enforceable undertaking, requiring it to ensure that Engage Marine has access to berth space for tug boats at Inspection Head in northern Tasmania on reasonable commercial terms, and that charges imposed by TasPorts on Grange for regulatory functions at Port Latta are reasonable. Importantly, the undertaking also provides that TasPorts will spend at least $1 million on the wharf infrastructure at Inspection Head.

In the circumstances, the ACCC agreed not to press for a penalty order.

“Accepting this consent outcome ensures towage customers in northern Tasmania will receive the benefits from competition quickly. This competition should make a real difference at Tasmanian ports, ultimately to the benefit of consumers,” Mr Sims said.

“Businesses with substantial market power have a special responsibility when deciding how to respond to competitive threats. If they respond in a competitive way, for example by offering customers better products at better prices, they will not face the risk of enforcement action. However, when they hinder a competitor from competing on its merits, the ACCC will not hesitate to take enforcement action,” Mr Sims said.

The Court also ordered TasPorts to pay a contribution to the ACCC’s costs.

TasPorts’ undertaking is available at Tasmanian Ports Corporation Pty Limited.

Background

TasPorts is a corporation wholly owned by the State of Tasmania. It owns and operates the majority of ports in Tasmania and performs a range of port and marine operations at ports around Tasmania. Before Engage Marine entered the market, TasPorts was the sole supplier of pilotage and towage services at all major ports in Tasmania.

Grange is a publicly listed mining company which operates the Savage River iron ore mine and exports iron ore from Port Latta in northern Tasmania. Grange owns and operates the port infrastructure at Port Latta.

Engage Marine is a marine services company based in Western Australia. Engage Marine provides marine services, primarily towage services, in a number of ports around Australia, including Port Latta in northern Tasmania.

The ACCC instituted proceedings against TasPorts in December 2019.

Note

This is the first finding of a contravention of section 46 of the CCA since it was amended in 2017 in response to the Harper Review of Australia’s competition laws.

The previous law specified that a firm with substantial market power could not take advantage of that power for certain specific anti-competitive purposes. The new law focusses instead on the impact of a firm’s conduct on the competitive process. It prohibits a firm with substantial market power from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition.

Further details on how the ACCC considers section 46 operates are set out in the ACCC’s Guidelines on Misuse of Market Power.

When businesses are concerned that their proposed conduct may give rise to a breach of the competition provisions of the CCA, but they consider their conduct would result in public benefit, they can seek authorisation from the ACCC. Authorisation provides protection against legal action for future conduct that might breach the competition provisions of the CCA, including section 46 which prohibits misuse of market power.

Before it can grant an authorisation, the ACCC must be satisfied that the proposed conduct is not likely to substantially lessen competition or is likely to result in a net public benefit.

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