The competition regulator, the ACCC sent chills through the Australian business community yesterday, days after its chair, Rod Sims made a speech where he singled out a spate of cases where the Commission had sprung companies engaging in bad behaviour.
His speech focused on breaches of competition laws and not decisions where the Commission had found there might be deals that limit competition – such as the decision in early 2017 denying outdoor ad majors, APN Outdoor and Oooh! Media from merging on the basis that the end result would restrict competition in what was the only growth area left in the Australian media.
The Commission has also let through some deals that on the face of it do restrict competition – the approval of News Corp’s purchase of the regional daily papers owned by APN News and Media comes to mind.
Yesterday the Commission delayed a decision on a deal the NSW government wants badly to occur – the $16.8 billion sale of its WestConnexx motorway project to a consortium led by toll road giant, Transurban.
And an hour or so before that announcement the Commission announced that it was taking two rail giants – Aurizon and Pacific National – to court over claims that an “understanding” between the two companies that would have monopolised a crucial haulage route and substantially damaged competition on others.
The Transurban story is the more urgent. The ACCC was due to make a decision on yesterday but has now extended its review to September 6.
The Commission is concerned about the “incumbency advantages” (and their possible anti competitive impact) that Transurban enjoys from owning 15 of 19 toll road concessions in Australia, and seven of nine concessions in NSW,
Final bids on WestConnex were due next week on July 23 – they will now be delayed until after September 6, a decision that won’t plese a desperate NSW government which wants to get the financing of the huge project off its books as quickly as possible.
“WestConnex is an unusually large tollroad project and we are dealing with unusually complex competition issues that we simply require more time to consider,” Mr Sims in the Commission’s statement on Thursday.
“Since our statement of issues, we have been conducting a thorough analysis of the likely impact on competition from the proposed acquisition. We set ourselves a very tight nine-week review period after the statement of issues, to meet the state’s sale process timeline. However this has not been possible despite our best efforts,” Mr Sims said.
“We recognise that the decision to extend the timeline for our decision may have flow-on impacts for the WestConnex sale process, so we do not do this lightly. However the reality is that this is a major transaction in the context of NSW toll roads, arguably the most significant in Australia in the foreseeable future,” Mr Sims said.
“We continue to have competition concerns, with many complex elements requiring analysis, and we need to get to the bottom of them before we make a decision,” mr Sims said. That last sentence would be a worry for Transurban and for the NSW Government.
It’s the second time the Commission has delayed delivering its findings on this application. Its initial decision date was to be in April but the timeline was extended after more information was requested from Transurban.
“The reality is that this is a major transaction in the context of NSW toll roads, arguably the most significant in Australia in the foreseeable future,” Mr Sims said.
In May, the Commission identified a number of preliminary concerns with the sale – including the impact Transurban’s acquisition could have on future bids for other toll roads.
Transurban shares fell half a per cent to $11.92.
The other case is less time constrained, but raises questions on competition on the nation’s railways.
The ACCC is alleging that the Aurizon and Pacific National had reached an “understanding” to close some parts of Aurizon’s intermodal freight business and sell other parts to Pacific National, which had the purpose or likely effect of lessening competition in the sector.
‘The effect of the understanding was that Aurizon would stop competing with Pacific National to supply intermodal and steel rail linehaul services throughout Australia,” ACCC chairman Rod Sims said in Thursday’s statement.
The Commission wants the Federal Court to block the sale and issue penalties and claims that Aurizon could have sold its intermodal business to another party, which 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,” Mr Sims said on Thursday.
“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.”
Aurizon put its intermodal business – consisting of several components, including its Acacia Ridge Terminal – on the market in the first half of 2017, but terminated talks with other bidders after reaching the “understanding" with Pacific National in July that year, the ACCC alleged.
That understanding involved Pacific National either buying the Acacia Ridge Terminal, or being awarded a long-term contract to operate the terminal if the ACCC blocked the sale, the watchdog alleges.
Pacific National would also become the exclusive bidder for Aurizon’s Queensland intermodal business, and that Aurizon would close that business if a sale was not completed, it says.
Aurizon said publicly earlier this year that it would close the Queensland business if the ACCC blocked its sale, and closed its interstate intermodal business in December last year.
These closures were the direct result of the “understanding” between Aurizon and Pacific National, according to the ACCC, which is seeking an interlocutory injunction to stop Aurizon closing the Queensland business until the matter is determined by the court.
Aurizon said a statement that it “strongly refutes the ACCC allegations….and will vigorously defend the proceedings commenced by the ACCC”.
The total consideration for the sales was $225 million, Aurizon said yesterday. Aurizon shares fell 1.8% to $4.29.
