The Australian Competition and Consumer Commission has concluded its review of public comments made by Andrew Forrest, Chairman of Fortescue Metals Group Ltd (Fortescue) calling for a cap on iron ore production.
The ACCC commenced this review on the basis that the comments by Mr Forrest may raise concerns under the Competition and Consumer Act 2010 (the Act). Specifically, the comments could have been interpreted as an attempt by Mr Forrest to induce Fortescue’s competitors to agree to cap iron ore production, in contravention of the cartel conduct provisions of the Act.
Having reviewed the context and circumstances of this matter, the ACCC has decided not to take any further action.
“In deciding not to take further action on the comments that have been made, the ACCC has taken into account Fortescue’s position that Mr Forrest’s comments were made “off-the-cuff” in response to audience questions, were hypothetical and intended to encourage a policy debate about the long term future of the iron ore industry,” ACCC Chairman Rod Sims said.
“However, it is important that the business community understands that public statements calling for competitors to agree to limit production or to raise prices may constitute a serious cartel offence,” Mr Sims said.
The ACCC does not consider that the comments made by Mr Forrest would be protected by the export exemption in section 51(2)(g) of the Act. This exemption applies only to arrangements relating exclusively to the export of goods from Australia which are notified to the ACCC within 14 days of the arrangement being made. The ACCC does not consider that a provision capping production in Australia, which would impact both domestic and export supply of iron ore, would fall within this exemption.
The ACCC does not generally comment on its investigations, but considered it was appropriate in this case due to the public nature of the comments made by Mr Forrest. The ACCC will not comment further on this matter.
On 25 March 2015, the Australian Financial Review (external link) reported that Mr Forrest made comments at a business dinner in Shanghai on 24 March 2015 (later confirmed as an AustCham event), calling on iron ore producers to cap production in order to arrest declining iron ore prices. This article quoted Mr Forrest as saying:
…..he was "absolutely happy to cap my production right now" at 180 million tonnes
…..the other major players, Rio Tinto, BHP Billiton and Brazil's Vale should also cap their production "and we'll find the iron ore price goes straight back up to US$70, US$80, US$90"
"I'm happy to put that challenge out there, let's cap our production right here and start acting like grown-ups".