Pacific National and Aurizon come under ACCC fire of monopoly allegations
Written on the 19 July 2018 by David Simmons
The Australian Competition and Consumer Commission (ACCC) has taken action against freighting companies Pacific National and Aurizon for allegedly breaching competition rules.
The action is in relation to a deal struck between Aurizon and Pacific National in July 2017 that the ACCC alleges would have lessened competition in the supply of intermodal and steel rail linehaul services.
"The ACCC alleges that in July 2017 Pacific National and Aurizon reached an understanding that would lead to Aurizon exiting its intermodal business through a combination of closure and transactions with Pacific National," says ACCC chairman Rod Sims.
"The effect of the understanding was that Aurizon would stop competing with Pacific National to supply intermodal and steel rail linehaul services throughout Australia."
The consumer watchdog also alleges that Pacific National's proposed acquisition of Aurizon's Queensland intermodal business and the Acacia Ridge Terminal, as well as an agreement for Pacific National to operate the interstate side of the Acacia Ridge Terminal, would separately each have the likely effect of substantially lessening competition.
As detailed by the ACCC, the allegations arise from a sale process engaged by Aurizon to sell its intermodal business.
In July 2017, Aurizon and Pacific National entered into an understanding that involved Pacific National becoming the exclusive bidder for Aurizon's Queensland intermodal business. The ACCC alleges that if Pacific National did not acquire that business then Aurizon was going to close it.
Following the alleged agreement, Aurizon announced it would close its Queensland intermodal business if the ACCC opposed the acquisition by Pacific National.
As such, the ACCC alleges that the closure of the interstate intermodal business and the planned closure of the Queensland intermodal business is a direct and expected consequence of the understanding reached with Pacific National.
"Pacific National and Aurizon are the only providers of intermodal linehaul on the North Coast Line servicing northern Queensland," says Sims.
"The ACCC alleges that the understanding, the proposed acquisitions by Pacific National and the agreement appointing Pacific National as operator of the Acacia Ridge Terminal would have the effect of creating a monopoly on that route."
"Further, Pacific National and Aurizon were, at the time of understanding, two of only three competitors on interstate routes. We consider that Aurizon's closure of its interstate intermodal business substantially lessened competition on those interstate routes."
"At all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive. The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon's entire remaining intermodal business."
"However, the evidence makes it clear that it was more lucrative for Aurizon to agree to sell parts of its intermodal business to its closest competitor, and close other parts of that business, than it was to sell the whole intermodal business to a potential new entrant."
"Given Aurizon's announcement that it will close its Queensland intermodal business if the Pacific National acquisition is opposed by the ACCC, in circumstances where there is at least one alternative purchaser, the ACCC is seeking an interlocutory injunction to prevent Aurizon from closing this business until the matter is determined by the Court."
The ACCC is seeking declarations, pecuniary penalties, orders restraining Pacific National from acquiring the Acacia Ridge Terminal and Aurizon's Queensland intermodal business, and costs.
The ACCC has already applied for an injunction to prevent Aurizon from closing its Queensland intermodal business while the case is being determined.
Business News Australia
Author: David Simmons