The dangers of monopolists without constraint

30 September 2019

The Port of Newcastle is at risk of becoming a monopolist without constraint, said ACCC Chair Rod Sims.

Mr Sims was speaking at the Australasian Transport Research Forum on the ACCC’s perspectives on a number of transport issues.

Mr Sims noted the NCC’s recent recommendation to revoke the declaration of the shipping channel service at the Port of Newcastle, which has now occurred.

“A monopolist that controls this type of bottleneck infrastructure, operating without any regulation, has a clear incentive to maximise profits by raising prices even if this means reduced volumes or less use of their service,” ACCC Chair, Rod Sims said.

“It is bad for the economy when bottleneck infrastructure, at the end of a crucial value chain, is in the hands of a company with unfettered market power.”

“How is it that Australia, much more so than other countries we compare ourselves to, allows this?”

“We are deeply concerned about what this means for users of the service, as it will cause companies to limit investment in related markets as a result. In contrast, a declaration would constrain monopoly pricing and promote investment by providing a credible threat of arbitration,” Mr Sims said.

“Just as under the Part IIIA access regime the test for vertically integrated monopolies is one
of harm to upstream or downstream competition, for non-vertically integrated infrastructure we may need a “market power” test.”

“The ACCC has been considering the need for such a “Part IIIB” provision for some time. The reasonable alternative is bespoke regulation as we have for electricity networks and gas pipelines, both of which are not vertically integrated. Either can work. Why regulate energy monopolies but not transport monopolies?”

“Just as we do not want vertically integrated monopolies denying access to their competitors, we do not want non vertically integrated infrastructure exercising their market power to raise prices to users and so damage the economy,” Mr Sims said.

Mr Sims’ speech covered a range of transport issues including the reform of roads funding, protection of shipping lines coordinating their behaviour, high profile transport mergers that raise competition issues, and monopoly airport charges.


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