Port sale needs scrutiny says watchdog

Port sale needs scrutiny says watchdog


AN extra six months should be added to any timeline for the proposed sale of Fremantle Port to allow for consumer watchdog scrutiny.


AN extra six months should be added to any timeline for the proposed sale of Fremantle Port to allow for consumer watchdog scrutiny.

That is the advice the Australian Competition and Consumer Commission (ACCC) has given the State Government.

A minimum of eight weeks should also be allowed if it decides a public review of any bid is necessary, the ACCC has advised Treasurer Mike Nahan.

It has recommended the government make ACCC approval a mandatory requirement of any bid.

Documents tabled in parliament by Dr Nahan in relation to the proposed sale - expected to be a long-term lease rather than outright sale - of Fremantle Port to a private operator, revealed the ACCC has made two attempts to "engage" on the issue.

Chairman Rod Simms wrote to Premier Colin Barnett on April 29, 2014, flagging the ACCC had three concerns that might apply to the port sale.

They were "worsening or entrenching" a "not sufficiently competitive" market structure, a bidder with "upstream or downstream interests" gaining control without appropriate measures to protect access, and selling a "monopoly or near-monopoly asset" without sufficient price controls in place.

Those concerns were reiterated in a letter to Dr Nahan on September 7 last year by ACCC executive general manager merger and authorisation review Rami Greiss.

"While we recognise that the exact nature of the rights to be sold and the bidding process may not yet be settled, we want to engage with you at this early stage to discuss the open access regime that the Western Australian Government is proposing for the port post-privatisation," Mr Greiss wrote.

"These issues should ideally be considered and addressed well before a government seeks bids for a privatisation," he wrote.

"Where an asset has monopoly characteristics, it is important that it be operated on an open access and non-discriminatory basis, and that there are sufficient pricing controls in place.

"Without these, a lessee or operator will have the ability and incentive to use their market power to raise prices above efficient levels, reduce service standards and/or reduce the quality of other aspects of their offering.

"These costs would be passed down the supply chain, inflating costs in downstream markets and ultimately resulting in higher prices for end consumers."

Mr Greiss's comments echo concerns expressed previously by WAFarmers which last month called for the ACCC to become involved in the port sale process without realising it had twice already attempted to do so.

Mr Greiss advised Dr Nahan the ACCC did not consider contractual access arrangements embedded in a sale contract as an effective way to regulate price or access.

A sale or lease contract was an agreement between parties and was "not necessarily competition-focused" and would require the government to "devote substantial resources" to ensure long-term compliance.

Access, pricing and any other potentially anti-competitive behaviour would be better addressed via an amended regulatory regime under the WA Port Authorities Act 1999 or part IIIA of the Competition and Consumer Act 2010, Mr Greiss advised.

"Under part IIIA of the Act, it will take six months for the successful bidder to negotiate, and the ACCC to consult on, an access undertaking," he said

"This time should be built into the period after contracts are signed, but before the successful bidder starts to operate the Port of Fremantle and any other assets to be leased."

Bidders have three options to obtain ACCC clearance under section 50 of the Act which prohibits acquisitions which substantially lessen competition, Mr Greiss said.

Most common was an informal review, with the process outlined in detail by Mr Simms in the letter to Mr Barnett.

"Bidders should approach the ACCC as soon as possible in the sales process to allow us to fully consider any potential competition issues and undertake market inquiries where necessary," Mr Greiss said.

If public review of a bid is required, it is likely to take at least eight weeks and may take longer if complex or significant competition issues are raised or court-enforceable undertakings are offered to address competition concerns, he said.

If Foreigh Investment Review Board approval was also needed, it was ACCC practice to wait for that first before considering a bid.

Mr Greiss asked Dr Nahan to provide further specific information once the exact nature and timing of the port sale or lease was determined.

While the government had initially hoped to have the port offered for sale by the end of this year, Mr Barnett has conceded it may not happen before the State election was due on March 11 next year.

The Nationals WA politicians have declared they will not support moves to sell or lease Fremantle Port until more details of the proposal are made available.

Nationals Agriculture Region MLC Martin Aldridge said on Monday he was previously unaware of the ACCC's written concerns about the port sale and believed his colleagues were also not aware.

"We had asked the question about ACCC involvement and were told (by the Government) that there was negotiation with the ACCC and it was going well," Mr Aldridge said.

"We weren't told the ACCC had those concerns."

WAFarmers president Tony York said he was very pleased to see the ACCC advocating a "strong and robust assessment process" for the port sale.

He welcomed a suggestion last week by Dr Nahan that some of the proceeds of the sale could go towards establishing a new live export terminal in the outer harbour.


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