Port sale a risk to competition says ACCC

The Australian Competition and Consumer Commission (ACCC) also warned a lease of the port to a private operator for up to 99 years "may impact" on existing regulatory restraint of anti-competitive behaviour.

The potential for anti-competitive behaviour at Fremantle was flagged by the ACCC in a statement of issues on a proposed $9.05 billion buyout and breakup of rail haulage and ports operator Asciano.

The ACCC has previously written to Premier Colin Barnett and Treasurer Mike Nahan on its concerns plans to privatise the port to raise an estimated $2b or more to pay down State debt, could ultimately cost port users.

But the statement on Thursday last week was the first time the ACCC linked its concerns about leasing out Fremantle Port with the buyout and three-way split of Asciano's business.

Combined consortiums comprising Qube Holdings, Brookfield Infrastructure Partners and six international investment funds are behind the buyout bid.

A scheme of arrangements proposes to split Asciano's business into a new ports company, bulk and automotive port services (BAPS) company and rail company, with cross ownership amongst consortiums members.

It was designed to allay earlier ACCC concerns about Brookfield acquiring Asciano's extensive Pacific National rail business while a subsidiary, Brookfield Rail, operates WA's freight rail network with Pacific National as a customer.

The ACCC's preliminary view is vertical integration of Fremantle Port's major container stevedoring provider with its two major container park providers, under the proposed ports company, has potential to squeeze out competitors through a bundled services strategy.

Particularly without Fremantle Ports Authority oversight, this may lead to higher port costs for importers and exporters, the AAAC said.

Its preliminary view aligns with WAFarmers' position.

In April, when the ACCC first called for submissions on the proposed Qube and Brookfield consortiums' scheme of arrangements to split Asciano, WAFarmers argued the proposed commercial relationships, coupled with port privatisation, was "not in the best long-term interest of a competitive market".

On Friday, after the ACCC called for submissions by June 10 on its issues statement, a WAFarmers' spokeswoman confirmed it would make another submission reinforcing its view.

The issues statement identified proposed vertical integration of the Asciano-owned Patrick container terminal with existing Qube Logistics' and future half-Patrick-owned ACFS Logistics' container park operations at Fremantle as a competition concern.

It acknowledged similar concerns at Sydney's Port Botany and Brisbane and Melbourne ports, but singled Fremantle out for special mention because of the dominant market share the three businesses have there.

Qube Logistics and ACFS Logistics are Australia's largest suppliers of on-port and off-port container transport, container park and wharf cartage services and are currently competitors at Fremantle.

While Qube "controls a significant majority" of empty container parks at Fremantle, a new park scheduled to open next year is owned by ACFS, the ACCC noted.

Because a majority of containers leaving Australia are empty, access to empty container parks was "essential" for shipping companies, it noted.

Patrick container terminal has a much larger market share of stevedoring services at Fremantle than its sole competitor DP World, the ACCC said.

It said "market participants" had expressed concern vertical integration could allow Qube and Brookfield to offer bundled stevedoring and container park services, either just at Fremantle or nationally.

Either way, this would be to the detriment of competitors and reduce choice for shipping lines and agents because of lack of alternatives at Fremantle, it said.

There were also concerns, the ACCC said, of potential discrimination via higher costs or reduced service for Patrick customers who did not use Qube or ACFS container parks or access refused to container parks for non-Patrick customers.

"Fremantle Ports (Authority) oversees the non-discriminatory provision of services at on-port facilities, including container terminals and empty container parks," the ACCC said.

"Such oversight may constrain discriminatory behaviour.

"The proposed privatisation of the Port of Fremantle may impact these regulatory restraints."

Chairman Rod Sims said the ACCC had received "a very large number of submissions from industry stakeholders expressing a broad range of concerns" regarding the proposed acquisition and break up of Asciano.

"Market participants have expressed concerns about the vertical integration of Patrick container terminals with the two largest landside import-export container logistics providers in Australia, Qube and ACFS," Mr Sims said.

"The ACCC considers this to be a significantly greater degree of vertical integration than the current situation where Patrick is vertically integrated with only ACFS."

The issues statement indicated splitting Asciano's business into three overcame the ACCC's resistance to Brookfield controlling Pacific National.

Under the scheme of arrangements; due to be voted on by Asciano shareholders at a special meeting tomorrow; Brookfield will have no direct interest in the rail company.

Pacific National will be owned by a North American majority interest consortium of Canada Pension Plan Investment Board, New York-based Global Investment Partners, Chinese-backed CIC Capital Corporation, Singapore Government-backed GIC Private and British Columbia Investment Management Corporation.

But the ACCC has flagged concerns with vertical integration of Qube's rail container transport business and Patrick container terminal at Port Botany.

It said it had no concerns with the proposed new BAPS company.

Its final decision on the Asciano buy out and scheme of arrangements will be announced on July 21.

The Foreign Investment Review Board is scheduled to announce its decision the following day.

ACFS Port Logistics, which owns the other half of ACFS Logistics, has launched legal action in the NSW Supreme Court to establish its rights under the proposed scheme of arrangements.

Treasurer Mike Nahan has rejected ACCC concern privatisation of Fremantle Port could remove regulatory restriction on anti-competitive behaviour by stevedore and container service providers.

"The proposed privatisation of Fremantle Port will not impact the current regulatory restraints," Mr Nahan said in response to an ACCC issues statement.

"Currently, the FPA (Fremantle Port Authority) acts as a landlord, leasing sites on commercial terms while following transparent procurement processes.

"Privatisation is not expected to change this approach," he said.

A State Government policy decision will impose restrictions on bidders and vertical integration, he said.

"The two stevedores will be maintained to ensure the current level of competition remains at the port.

"Strong access and pricing regime provisions have also been made, including a number of protections designed to ensure continued fair access to relevant port facilities and services and to mitigate the risk of potential abuse of market power and unfair pricing."

Mr Nahan said the government was working with the ACCC throughout a detailed due diligence process for the port divestment.

"I am confident that all competition-related issues are being thoroughly considered and addressed through this process," he said.