CBH defends ACCC decision appeal

28 Jul, 2011 04:00 AM
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Bullfinch grower and CBH shareholder, John Roberts believes Grain Express is of significant importance to WA.
Bullfinch grower and CBH shareholder, John Roberts believes Grain Express is of significant importance to WA.

CBH'S acting chief executive officer David Woolfe has hit back at claims by the Pastoralists and Graziers Association's (PGA) Western Graingrowers chairman John Snooke over Grain Express.

After CBH lodged its appeal to the Australian Competition and Consumer Commission (ACCC) tribunal last Tuesday in a bid to restore the exclusive dealing notification for Grain Express, Mr Snooke said by its very nature Grain Express only protected the interest of CBH and the appeal was misleading to growers.

But Mr Woolfe said CBH had grown increasingly frustrated by the PGA's inability to recognise that CBH was a WA grower company.

The PGA openly criticised the decision by CBH to appeal the final decision by the ACCC to revoke the exclusive dealing notification for Grain Express and labelled it an attempt to protect its monopoly to the detriment of WA grain producers.

Mr Snooke said CBH chairman Neil Wandel's claims that "Grain Express in its current form provided WA growers, the grain industry and the community with the most efficient grain logistics system possible without substantially lessening competition in the market for grain transportation services" was misleading to all parties, especially growers.

He said the decision by the ACCC to revoke the exclusive dealing notification for Grain Express was made following the review of numerous submissions and supporting evidence provided by CBH over the past 12 months and it was clear that the ACCC found that by allowing Grain Express to operate under a regulatory exemption significantly lessened competition, provided limited benefits to growers and only protected the interests of CBH.

"Previous claims by CBH that the introduction of competition would lead to increased operating costs, lesser efficiencies, and lower value delivery to growers shows that Grain Express is not able to compete in a deregulated market," Mr Snooke said.

"Competition in the grain freight task will lower operating costs, provide a least cost, efficient pathway to port which increases grower profitability and improves the reputation of the WA grains industry.

"Competition establishes the true value of any service.

"The ACCC needs to ensure that this frivolous appeal is immediately expedited and that its ruling which will allow for competition in the transport of grain stands in order to ensure an efficient and best value haulage system for the benefit of all."

Mr Snooke said CBH had continually stated that with or without the authorisation Grain Express would offer the most competitive grain storage, handling and transport system to growers and industry.

"If this is so true, then why spend hundreds of thousands of dollars of grower's funds fighting to retain an authorisation, which by their own previous statements, is not needed," he said.

"The PGA has its own view of life but the important thing about retaining Grain Express is not about protecting an inefficient system or avoiding competition for grain transport because we genuinely believe the current system gives the most efficiencies and benefits to growers and industry," Mr Woolfe said.

"There has to be a far more efficient supply chain.

"If we're able to centrally co-ordinate transport movements of all the grain CBH has in storage it is simply more efficient.

"It's not about trying to restrict competition, it's about trying to maintain the cheapest, most efficient, most effective supply chain that we can for WA.

"We've said it before, even in a voluntary system CBH believes it will be able to offer the most efficient, effective, cheapest service."

Mr Woolfe said CBH was confident that growers would, by and large, use its transport services regardless of the ACCC's findings but the mere fact there would be the potential for tonne "leakage" to competitor transport systems meant CBH would face increased operating costs.

"The fact that CBH is able to negotiate road and rail transport contracts under Grain Express with the security that CBH can go to a rail transport provider and a road transport provider and say, CBH has guaranteed volume of grain that needs to be moved gives CBH the ability to negotiate hard to keep transport costs as low as possible," he said.

"If we are then trying to negotiate low transport costs with rail and road providers in a voluntary environment, even if CBH does believe it's going to get majority share of the grain, we can't then guarantee that in our negotiations.

"The PGA has missed the point and presumes that we're not confident in our case.

"It's not that at all, we are appealing because the ACCC's decision weakens our ability to negotiate with certainty of volume to enable us to get the best deal for our growers in terms of their transport costs."

Australia's largest rail freight provider, QR National was also less than impressed by CBH's decision to appeal the ACCC's findings on the exclusive dealing notification.

In a statement, QR National expressed its disappointment that CBH had chosen to challenge the ruling by the ACCC.

"The ACCC had listened to the marketers, transport companies and most importantly, the growers of WA in making its decision," it said.

"QR National will be making a submission rigorously supporting the merits of the ACCC decision.

"We're concerned that the legal process of the CBH appeal may delay the opportunity for growers and other marketers of grain to access the benefits of an open and competitive rail freight market in WA."

But Mr Woolfe quickly put those concerns to rest.

"The majority of growers in WA are in fact CBH shareholders and were pro-Grain Express, no question," he said.

"From a grower's perspective we genuinely believe the current bundled system gives great efficiency to growers and to the industry, far more than having multiple marketers trying to co-ordinate grain transport from our country receival sites to our ports.

"It's not for me to attribute motives to others but perhaps other organisations, rail transporters and marketers are acting in their own interests rather than in the growers' interest.

"As for the timing of the appeal, that's now in the hands of the ACCC so I don't really know the answer to that and I wouldn't like to speculate about how long that process will take."

But like everything in life, nothing comes for free.

"There will be a cost involved with appealing and those costs will include things such as legal representation," Mr Woolfe said.

"But the cost of appealing will be far outweighed by the benefits the Grain Express system provides to growers and we believe it's our responsibility to champion the best interests of WA growers.

"If the appeal is lost then we will need to revise the system.

"We will still offer a bundled service and we believe that in a voluntary environment we will still offer the most efficient, effective transport system that growers will continue to use.

"But the uncertainty that's created by the potential leakage to competing transport systems will simply mean increased operating costs.

"For us to gear up for multiple user access to our sites will lessen the overall efficiencies of the supply chain, it'll lessen the value we can deliver to growers, it'll mean that we will have to open up our stacks and sites on numerous occasions rather than clearing grain in one movement, there will be increased handling costs, increased fumigation costs and increased equipment costs."

But Mr Woolfe also said that grower charges wouldn't rise as a direct result of the appeals process.

"Our charges are getting reviewed in the ordinary course but there is nothing about the appeal that will effect charges to growers," he said.

"The appeal will be funded out of our normal, general revenue."

The ACCC's decision, even if it were to be upheld on appeal, only comes into effect on May 1, 2012 so no disruptions, logistical or otherwise, are expected for this harvest.

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READER COMMENTS

Dear me
29/07/2011 7:40:20 AM, on Farm Weekly

I repeat my previous question - will the PGA cover the additional costs associated with running 2 systems and loss of dollars from our pockets if this appeal is not upheld? Mr Woolfe hit the nail on the head when he said the PGA has missed the point. In fact they are so for out of touch they have kicked it out on the full at the other end of the ground! Given their stance on this issue and the fact that we WILL be out of pocket with 2 systems in place, one must ask whether they being bankrolled by one or more of the east coast traders?
Deregul8
28/10/2012 7:45:06 AM, on Farm Weekly

CBH should be focussed on addressing the issue of returning equity to growers. Many growers do not understand that the current structure of CBH allows for an agressive takeover to occur at values below that which the company is likely worth. An offer can arrive by mail for your $2 share and it may be for $50,000. There would be possbily 20% of the current shareholder base that would take that offer because they are probably in financial pain or about to exit or both. PGA represents the best interest of growers just as they did with the Single Desk.

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