06 Feb 2020

ACCC brings case under new misuse of market power provision

By Paul Burton

The proceedings will not only be the first application of the new effects test under the misuse of market power provisions, but also signal the ACCC's heightened interest in the dealings of port operators

On 6 December 2019, the ACCC filed proceedings in the Federal Court against Tasmanian Ports Corporation Pty Ltd (TasPorts), the first such proceeding commenced by the ACCC under the new misuse of market power provision, and the first proper consideration of the new effects test generally, and how it applies to port services specifically.

TasPorts' provision of towage and pilotage services

TasPorts, a Tasmanian government owned corporation, owns all but one port in Northern Tasmania.

The ACCC alleges that TasPorts misused its market power in breach of section 46 of the Competition and Consumer Act 2010 (Cth) (CCA) by seeking to deny the entry of a competitor, Engage Marine Tasmania Pty Ltd, into relevant markets to supply towage and pilotage services at Port Latta and/or other Tasmanian ports.

Engage Marine provides towage and pilotage services to Grange Resources Limited (its sole customer), who owns and operates Port Latta in northern Tasmania. These services were previously supplied to Grange by TasPorts, and continue to be supplied at all other Tasmanian ports by TasPorts.

The ACCC alleges that after Engage Marine secured the Grange contract, TasPorts engaged in the following conduct:

  • imposed on Grange a new "marine precinct tonnage charge" (MPTC) (totalling $750,000) for vessels calling at Port Latta;
  • offered to reduce the MPTC if Grange agreed to enter into a new contract with TasPorts for the supply of pilotage services at Port Latta (in place of Engage Marine);
  • introduced a new "minimum lay-up charge" to apply to Engage Marine's tug boats, making it uneconomical for Engage Marine to use TasPort's temporary berths at Port Latta;
  • refused to provide any pilot training to Engage Marine (which is necessary for Engage Marine to supply pilotage services);
  • refused to provide any long-term berths for Engage Marine's tug boats in northern Tasmania; and
  • refused to provide shipping schedules to Engage Marine.

As a result of this conduct, the ACCC alleges that Engage Marine has been prevented from providing towage services to any other Tasmanian port (outside of Port Latta) as well as being prevented from providing pilotage services to Grange at Port Latta, which it had to sub-contract to TasPorts to provide.

The ACCC further alleges that TasPorts' conduct:

  • was engaged in for the purpose of preventing or hindering Engage Marine from competing in the supply of towage and pilotage services in relevant markets; and
  • had the effect, or was likely to have the effect, of substantially lessening competition in the relevant markets.

The case's importance for the amended misuse of market power provision – and beyond

This case is significant as it is the first time the ACCC has commenced proceedings alleging breaches of the amended misuse of market power provision (amended in late 2017).

Section 46 will be contravened if the conduct of the firm (that has market power) has the purpose or has or is likely to have the effect of substantially lessening competition in a market in which the firm supplies or acquires goods or services.

It seems likely that TasPorts would be found to possess a substantial degree of market power in a relevant market. It is a vertically integrated port operator that not only owns and operates most of Tasmania's ports, but also supplies marine services including pilotage and towage services.

The allegation is that TasPort's conduct targeted both Grange (for appointing Engage Marine as its provider of towage and pilotage services) and Engage Marine. It sought to do so allegedly by discriminating against Grange through imposing the MPTC solely with respect to Port Latta and not any other ports, as well as refusing to provide pilot training, access to long term berths and shipping schedules to Engage Marine.

The ACCC has sought declarations, injunctions, pecuniary penalties and costs against TasPorts. A case management hearing is scheduled for 7 February 2020.

The proceedings also signal the ACCC's heightened interest in the dealings of port operators. In December 2018 the ACCC commenced proceedings against Port Botany Operations Pty Ltd (the operator of Port Botany) and Port Kembla Operations Pty Ltd (the operator of Port Kembla) for allegedly entering into anticompetitive agreements with the State of New South Wales at the time each port was privatised. More recently, the ACCC has raised its concerns with the Australian Competition Tribunal's decision on the price which the Port of Newcastle could charge ships (or their agents) for the provision of navigation services.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.