The Australian Competition and Consumer Commission seeks comment on a proposal to introduce competition into transport services in the Western Australian grain supply chain.
Cooperative Bulk Handling Ltd (CBH) has a notification in place with the ACCC that allows the company to require growers who store grain in its 'up-country' storage facilities to also use its transport services to move the grain to port for export. The ACCC proposes to revoke this notification.
CBH is a WA grower owned co-operative with about 4650 shareholders who grow grain in that state. CBH owns around 90 per cent of up-country storage facilities in WA and also owns and operates WA's four port export terminals.
"The ACCC considers that the notified conduct allows CBH to leverage its significant competitive advantage in supplying up-country receival, storage and handling services to foreclose any possibility of competition to supply transport services to customers who use its up-country storage facilities," ACCC chairman Graeme Samuel said.
"The ACCC recognises the potential benefits in CBH offering a whole of supply chain receival, storage, handling and transport service. However, the forced tying arrangement is not necessary to realise these benefits. To the extent that CBH's storage, handling and transport service is an efficient system, delivering benefits to growers, they will continue to use it without being forced to do so.
"Grain is transported efficiently and cost effectively to port in other states, often as a bundled service similar to CBH's arrangement, without forcing growers to acquire all relevant storage, handling and transport services from a single supplier.
"In this respect, most interested parties that have objected to CBH's arrangements have indicated that they would be likely to continue to use CBH even if they were not forced to do so, but that the opportunity to explore alternatives would put competitive pressure on the company.
"By leveraging its dominance of up-country storage to force growers to use its transport services CBH can insulate itself from competition."
For these reasons, the ACCC has issued a draft notice proposing to revoke the notification.
Revoking the notification will, for the first time since deregulation of wheat export marketing in 2008, provide WA growers who use CBH's up-country storage facilities with choice about who they use to move their grain to port.
"Importantly the ACCC's draft notice only relates to CBH's conduct in forcing growers who use its up-country storage and handling facilities to also use its transport services.
"If the ACCC revokes the notification CBH will still be able to offer a bundled receival, storage, handling and transport service. All that will change is that growers who store their grain with CBH will be free to choose whether to use CBH's transport services or organise their own."
CBH and interested parties now can comment on the draft notice before the ACCC makes a final decision about whether to revoke the notification.
The ACCC recognises that the timing of any revocation of the notification is important to ensure minimal disruption to the industry. Accordingly, the ACCC is also seeking interested parties views about when the most appropriate time for the revocation to take effect would be (for example, between harvests), if the ACCC does decide to revoke the notification.
More information regarding the notification, copies of the draft notice and information on how to make a submission concerning this notification are available from the ACCC's website www.accc.gov.au/ExclusiveDealingRegister or by emailing the Adjudication Branch at adjudication@accc.gov.au.
Businesses may obtain protection in relation to conduct that might be at risk of breaching the exclusive dealing provisions of the Trade Practices Act 1974 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. Before issuing a revocation notice, the ACCC must issue a draft notice setting out its reasons for proposing to revoke the notification.