ACCC decides not to oppose WA grain logistics system
The Australian Competition and Consumer Commission has issued a decision explaining why it will not oppose an exclusive dealing notification* lodged by Cooperative Bulk Handling Ltd (CBH) in relation to grain transport, storage and handling arrangements in Western Australia. The arrangements are known as 'Grain Express'.
Under Grain Express, CBH will offer to supply grain storage and handling services on condition that growers and marketers of grain acquire:
grain supply coordination services from CBH, and
transport services from CBH whilst their grain remains in CBH's custody.
"The ACCC believes there are likely to be significant efficiency benefits under Grain Express as a result of the central coordination of grain storage, handling and transportation in Western Australia," ACCC Chairman, Mr Graeme Samuel, said today.
"Following the recent deregulation of bulk wheat exports the number of accredited exporters attempting to make their own storage, handling and transport arrangements within the grain supply chain could substantially increase. This may create inefficiencies, placing additional costs on all participants in the Western Australian grain supply chain."
On the basis of information currently before it, the ACCC is satisfied that the introduction of Grain Express is not likely to lead to a substantial lessening of competition in relevant markets.
In reaching its decision the ACCC took into consideration the fact that Grain Express does not limit the ability of grain growers and grain marketers to make their own grain storage, handling or transport arrangements. Grain Express also does not foreclose potential competitors to CBH entering the market. Further, grain marketers will continue to be able to take advantage of niche marketing arrangements that provide extra financial value to grain growers.
The ACCC also considers that Grain Express may stimulate competition for CBH transport contracts by providing greater certainty in respect of transport volumes.
Significant concerns were expressed to the ACCC that under Grain Express, CBH would pass information to its trading subsidiaries, Grain Pool and AgraCorp, that could be used anti-competitively in the grain trading market. However, the ACCC is satisfied that CBH has taken necessary steps, through its amended Ring Fencing Policy, to limit the potential for commercially sensitive information being transferred to its trading subsidiaries.
During the ACCC's public consultation process, the Western Australian Government and the main Western Australian grain growing representative bodies expressed support for Grain Express.
The ACCC's decision will enable CBH to implement Grain Express in time for the commencement of the 2008 Western Australian grain harvest.
As with any notification, the ACCC may review the notification lodged by CBH at any time should any substantial concerns arise.
More information regarding the notification and a copy of the ACCC's Public Decision will be available from the ACCC's website, or by emailing the Adjudication Branch at adjudication@accc.gov.au.
*By lodging an exclusive dealing notification with the ACCC, a party obtains immunity from court action for that conduct. In this case, immunity is conferred automatically when the notification is lodged. The ACCC can review a notification at any time. In doing so, it reviews the purpose and effect of the notified conduct. If the ACCC forms the view that the conduct substantially lessens competition, and that it does not deliver a net public benefit, it may issue a draft notice proposing to revoke the notification. After considering any submissions from interested parties in response to the draft notice, and conducting a conference if any of the interested parties call for a conference, the ACCC must decide whether to issue a final notice.
