ACCC allows joint venture between AWB and GrainCorp to coordinate movement of export grain from silo to port

The Australian Competition and Consumer Commission has today granted authorisation* to a joint venture between GrainCorp and the Australian Wheat Board (AWB).

"The decision to grant authorisation responds to industry calls to improve efficiencies in freight and logistics in the movement of grain from silo to port", ACCC Chairman, Mr Graeme Samuel, said today.  "The parties intend the joint venture, run through special purpose company Export Grain Logistics, to enhance co-ordination between the providers of storage and handling, transport and marketing services".

The ACCC had previously granted interim authorisation on 5 October 2004 so that the joint venture could begin operating for the 2004/5 harvest.  This authorisation will remain in force until 31 December 2009.

"The joint venture arrangements are likely to result in public benefit from improvements in economic efficiency by reducing export grain supply chain costs through better coordination of resources", Mr Samuel said.  "These benefits should result in increased returns to grain growers, reduction of demurrage costs and greater transparency in pricing, which will provide more appropriate signals for investment.

"In total, the potential public benefits arising from this authorisation are between $10 and $30 million per annum, depending on the size of the harvest".

The ACCC's extensive consultation with a wide range of interested paries including grain growers and their representative bodies, grain traders and exporters, rail operators and grain customers has generated a number of differing views on the joint venture.  Some industry participants have expressed concern that the joint venture may reduce incentives for GrainCorp and AWB to compete in grain storage and handling.  A further concern relates to the use of confidential information provided to the joint venture.

The ACCC has placed significant weight on commitments to and incentives for ongoing competition in grain storage and handling by both GrainCorp and AWB. Further, the ACCC noted that the focus of the joint venture is restricted to export grain.  The ACCC has made authorisation conditional on GrainCorp and AWB implementing measures designed to ensure that confidential information provided to Export Grain Logistics by third parties will not be provided to or used inappropriately by GrainCorp or AWB.

"Effective ring fencing arrangements will ensure that the benefits of these arrangements continue to outweigh any potential detriment", Mr Samuel said.

Background

* The ACCC has the function, through the authorisation process, of adjudicating on certain anti-competitive practices that would otherwise breach the Trade Practices Act 1974. Authorisation provides immunity from court action, and is granted where the ACCC is satisfied that the practice delivers a net public benefit.