The Australian Competition and Consumer Commission today issued a notice revoking Co-operative Bulk Handling Limited's (CBH's) exclusive dealing notification.
The notification allows CBH to require Western Australian grain growers and marketers who use its 'up-country' storage facilities to also use its transport services to deliver grain to port for export.
CBH is a WA grower owned co-operative with about 4650 shareholders who grow grain in that state. CBH is the dominant provider of up-country storage facilities for bulk export grain in WA and over 90 per cent of the grain harvested in WA is stored in these facilities. CBH also owns and operates WA's four port grain export terminals.
"By virtue of the notified conduct CBH is the monopoly supplier of transport services for moving grain to port in WA," ACCC chairman Graeme Samuel said.
"The notified conduct allows CBH to leverage its substantial market power in up-country storage to insulate itself from any competition in the supply of grain transport services."
"The ACCC recognises that there are efficiencies in CBH offering a whole of supply chain receival, storage, handling and transport service. The ACCC's decision does not prevent CBH from continuing to offer this service and, importantly, any grower who wishes to continue to use CBH's bundled storage and transport service will remain free to do so."
"However, growers and marketers who consider that their transport requirements may be more efficiently met through alternative options to CBH will be free to explore such options," Mr Samuel said.
For example, a number of industry participants have expressed concerns that in periods of high congestion in the CBH supply chain they are required to continue to use CBH's transport services when other alternatives that would allow them to bypass this congestion are readily available.
"In this respect, forced acquisition of transport services from CBH not only prevents growers and marketers from exploring other transport options that may better suit their individual needs, it also insulates CBH from any competitive pressure in relation to the terms and conditions on which it supplies transport services," Mr Samuel said.
The ACCC considers that it is likely that CBH will continue to be the dominant provider of grain receival, storage and handling services and port terminal services for grain and at least a major provider of transport services. However, as is already the case with bulk storage and handling providers in other states, other suppliers will be able to compete with CBH to provide services to transport grain to port for export.
At the time the notification was lodged in June 2008 there was support for the arrangements in the grain industry from growers, freight companies and marketers. Many saw the arrangements as providing desirable certainty and stability, particularly in light of uncertainty about the market environment post the imminent deregulation of the industry.
However, over time a number of industry participants have become frustrated with the level of service offered by CBH and the restriction on their ability to seek alternative transport options.
The ACCC has decided to revoke the notification with effect from 1 May 2012. This will allow sufficient time for CBH and industry participants to adjust and put appropriate systems and processes in place and to take advantage of the opportunity afforded by potential competition in the provision of rail transport services for bulk export grain.
Businesses may obtain protection in relation to conduct that might be at risk of breaching the exclusive dealing provisions of the Competition and Consumer Act 2010 by lodging a notification with the ACCC. Once lodged, protection for the notified conduct begins automatically, or in the case of third line forcing, after 14 days.
The ACCC may revoke a notification if it is satisfied that the conduct has the purpose, effect or likely effect of substantially lessening competition and that it does not deliver a net public benefit.
A person dissatisfied with the giving of this Final Notice may apply to the Australian Competition Tribunal within 21 days of the Final Notice for review of the Final Notice.
