The Australian Competition Tribunal has granted authorisation for Sea Swift Pty Ltd’s (Sea Swift) proposed acquisition of the Northern Territory and Far North Queensland marine freight assets of Toll Marine Logistics Australia (Toll)
The Tribunal has granted the authorisation subject to conditions imposing a cap on future prices and requiring Sea Swift to continue to operate scheduled services to remote communities for up to 5 years, and providing for access by other marine freight firms to the roll-on roll-off ramp at Gove (Nhulunbuy).
While the Tribunal has yet to release its reasons, in order to grant authorisation it must be satisfied that the proposed acquisition would result in such a benefit to the public that it should be allowed to occur.
The ACCC had previously opposed the proposed acquisition by Sea Swift because the ACCC considered that it was likely to have the effect of substantially lessening competition. The ACCC’s merger clearance decisions consider only whether a proposed acquisition would be likely to substantially lessen competition, whereas the Tribunal applies a different test in which it also assesses the likely public benefits and is required to balance these against likely competitive detriment.
ACCC Commissioner Roger Featherston said “We are disappointed that the Tribunal has authorised the acquisition, as the ACCC remains of the view that the acquisition is likely to have significant implications for future competition in scheduled marine freight services in the Northern Territory and far north Queensland, ultimately to the detriment of the communities reliant on these services.”
“The acquisition follows a price war between Sea Swift and Toll, and will result in a near monopoly position for Sea Swift in the supply of scheduled marine freight services in both the NT and FNQ,” Mr Featherston said.
“Customers in remote communities rely on scheduled services for essential deliveries including fuel and fresh food. The ACCC understands that the Tribunal was concerned that these communities would face uncertainty as to whether deliveries would continue if the transaction was not authorised. The ACCC’s view remains that competition between providers is the best way to ensure acceptable prices and service levels for these communities in the longer term,” Mr Featherston said.
“The ACCC will continue to oppose acquisitions which it considers are likely to substantially lessen competition. The Tribunal’s decision in this matter is unlikely to apply to many other transactions, as the matter involved the unique circumstance that the scheduled marine freight services in question are essential services for the remote communities that they service,” Mr Featherston said.
Background
On 9 July 2015, the ACCC decided it would oppose the proposed acquisition by Sea Swift of Toll’s Northern Territory and Far North Queensland marine freight assets under section 50 of the Competition and Consumer Act 2010 (Cth) (the Act), which prohibits acquisitions which would be likely to have the effect of substantially lessening competition.
The ACCC considered the proposed acquisition was likely to result in a substantial lessening of competition for the supply of scheduled marine freight services in the Northern Territory and far north Queensland.
On 4 April 2016, Sea Swift made an application to the Tribunal under section 95AT of the Act, seeking authorisation for the proposed acquisition, subject to behavioural conditions relating to pricing and service levels to remote communities in the NT and FNQ.
Pursuant to section 95AT, the Tribunal must be satisfied in all the circumstances that the proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to occur. This requires the Tribunal to conduct a balancing exercise to weigh the public benefits that are likely to result from the proposed acquisition against the detriment arising from any lessening of competition.
The role of the ACCC is to assist the Tribunal. This includes making inquiries, calling and examining witnesses, making submissions to the Tribunal, and preparing a report for the Tribunal.
Sea Swift’s application was heard by the Tribunal in Melbourne for nine days between 6 and 17 June 2016.
There is no merits appeal available from the Tribunal’s decision to authorise a merger, although there are limited grounds of appeal based on error of law.
Sea Swift is a subsidiary of Sea Swift Holdings Pty Limited. It is majority owned by private equity firms CHAMP Ventures and HarbourVest Partners.
Toll Marine Logistics Australia is a division of Toll Holdings Limited, whose ultimate owner is Japan Post.