CBH fends off competition concerns

26 Oct, 2016 01:00 AM
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Australian Competition and Consumer Commission chairman Rod Sims has welcomed CBH's offer to resolve the matter without court proceedings.  Photo: Dominic Lorrimer.
Australian Competition and Consumer Commission chairman Rod Sims has welcomed CBH's offer to resolve the matter without court proceedings. Photo: Dominic Lorrimer.

A COURT-enforceable undertaking by CBH Group on two services offered to growers this harvest has resolved competition concerns arising from a service no longer offered and avoided legal action.

The Australian Competition and Consumer Commission (ACCC) and CBH last week reached agreement on the undertaking which covers CBH Site Select and CBH Integrated Services - both announced in June - for the current harvest and the next three harvest seasons.

CBH Site Select allows marketers to buy grain delivered to CBH sites, with site storage entitlements maintained, while co-ordinating transport from the sites to port or domestic clients independently of CBH's supply chain.

Alternatively, CBH Integrated offers a fully-integrated storage and freight service managed by CBH from receival point to export or domestic market.

The ACCC previously raised competition concerns with CBH over its Non Grains Express and Grains Express services which were replaced by Site Select and Integrated Service products.

It considered a fee structure differential favouring in-house Grains Express, a seven-day only "opt out" window after delivery to transfer from Grains Express across to Non Grains Express and 30 receival sites not offering the Non Grains Express option to be "exclusive dealing" and anti-competitive conduct.

CBH incorporated changes to those aspects when it introduced the services and submitted the changes, and comparative fee schedules for the current harvest, in the undertaking to avoid the ACCC initiating court proceedings against it.

The undertaking was signed by directors John Hassell and Vern Dempster on behalf of CBH and was accepted by the ACCC to bring its investigation to a negotiated end.

CBH also undertook to notify the ACCC of any proposed changes to price schedules, time frames and services availability brought about by changing market conditions.

The approved fees schedules peg CBH's standard supply chain charges using its integrated service - excluding freight and site entitlement fees - at a total of $30.50 per tonne for wheat.

The equivalent fee for outturn wheat volumes greater than 2000 tonnes per site per day leaving by road under the site select service is identical, while all grains railed out under site select incur a 90 cents upcountry rail weighing fee, which takes the total fee to $31.40.

For site select outturn volumes less than 2000t but greater than 1250t, the fee is $31 per tonne to road transport and $31.90 to rail.

For volumes between 1250 and 750t per day, the outturn to road fee is $31.50 and $32.40 to rail.

CBH maintained it would incur additional handling costs in outturning grain outside of its own road and rail transport supply chain.

Receival fees under either service are identical per tonne at $10.80 for wheat, $12.20 for barley, oats, triticale, cereal rye and lentils, $14.40 for field peas, chick peas and faba beans and $17.70 for canola.

Growers have until February 1 to notify CBH if they want to transfer to site select that is available at all but 11 integrated service only sites.

Those are CBH's Kwinana, Geraldton, Albany and Esperance port complex depots and associated receival sites and Mingenew, Kellerberrin, Merredin, York, Brookton, Cranbrook and Lake Grace sites.

While acknowledging the ACCC's concerns, in the preamble to its undertaking CBH informed the ACCC it "does not agree that its previous conduct in the 2013-14, 2014-15 and 2015-16 harvest seasons... has had or would have had any adverse competitive effect in any relevant market".

"CBH has given this undertaking to address the ACCC's concerns outlined in clauses 2.7 and 2.8 of this undertaking, and the ACCC has agreed to accept this undertaking to resolve those concerns without court proceedings," it said.

Chairman Rod Simms last week said the ACCC "welcomes CBH's offer of this undertaking to resolve this matter without the need for court proceedings".

"The new services and the undertaking offered by CBH will facilitate increased competition between grain transport service providers to the benefit of grain growers and marketers and other participants in the WA grain supply chain," he said.

Mr Simms said the CBH undertaking was provided following extensive negotiations between the ACCC and CBH at the conclusion of the ACCC's investigation into the Non Grains Express and Grains Express services.

The ACCC's interest in CBH supply chain services goes back to the time of grain export deregulation in 2008-09.

When CBH introduced Grain Express in 2008 it lodged an exclusive dealing notification with the ACCC as it was required to do under the then Trade Practices Act 1974.

It was offering to supply grain storage and handling services on the condition growers or marketers also acquired supply chain co-ordination services and transport services from CBH.

The ACCC allowed this notified conduct to continue until June 2011 when it issued CBH with a final notice revoking the notification.

CBH appealed unsuccessfully to the Australian Competition Tribunal and in 2013 launched Non Grain Express, an unbundled supply chain service, in response to the tribunal's finding supporting the ACCC's view that the Grains Express service was likely to substantially lessen competition in grain transport services.

The ACCC's subsequent investigation of the Non Grain Express service resulted in last week's undertaking and agreement.

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READER COMMENTS

RETRAC
28/10/2016 11:30:04 AM, on Farm Weekly

What a load of bull. Just look at the oats desk, they deliberately push one of these products over another.

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