ACCC not to oppose the acquisition of WA rail assets of Australian Railroad Group by QR and Babcock & Brown

The Australian Competition and Consumer Commission will not oppose the acquisition of certain rail assets, primarily in Western Australia, from the Australian Railroad Group by Queensland Rail and Babcock & Brown, ACCC Chairman, Mr Graeme Samuel, said today.

"Competition concerns focused on bulk rail freight", he said. "QR operates a bulk-freight business in Queensland and proposes to acquire ARG's Western Australian bulk-freight business. Despite some attempts, QR has never won a bulk rail freight tender in WA and ARG has never won a bulk-freight tender in Queensland. Further, there is limited evidence that bulk freight customers directly play QR and ARG off against each other in the tender process, particularly in recent years.

"This suggests that, in practice, competition between ARG and QR is very limited, and is likely to remain so in the future", Mr Samuel said.

"This conclusion, combined with evidence of continued competition from Pacific National, possible competition from new players for some bulk freight contracts, and the ability of larger customers to provide their own bulk freight in the event of a price increase, led to the ACCC forming the view that the transaction will not substantially lessen competition".

The ACCC considers that the transfer of ownership of ARG's Western Australian track and associated infrastructure to Babcock & Brown, which does not operate a rail business in Western Australia, is unlikely to substantially lessen competition.

The ACCC will issue a public competition assessment on this matter in due course.

Background

Under the proposal:

• QR will own and operate the above rail business (rail haulage) and associated infrastructure in Western Australia. The sale will also cover two contracted services, one in New South Wales and one from Melbourne to Adelaide; and
• Babcock & Brown will own and operate ARG's below rail business – essentially the track and associated infrastructure – in Western Australia. This infrastructure is leased from the Western Australian government, and the existing lease has 43 years to run.

ARG's South Australian freight services business, representing about 15 per cent of the existing business, will be owned by Genessee and Wyoming (which currently owns 50 per cent of ARG). Wesfarmers, which owns the other half of ARG, intends to sell its share to G&W.