Federal court dismisses ACCC case against NSW Ports

The Federal Court has dismissed the Australian Competition and Consumer Commission’s (ACCC) proceedings against NSW Ports Operations Hold Co and its subsidiaries Port Botany Operations and Port Kembla Operations.

The proceedings concerned agreements, known as Port Commitment Deeds, which were entered into as part of the privatisation of Port Botany and Port Kembla by the NSW Government in May 2013, for a term of 50 years.

The Botany and Kembla Port Commitment Deeds oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.

Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatised, requires the Port of Newcastle to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds. The ACCC said this reimbursement would effectively double the cost of moving a container at the Port of Newcastle.

“This judgment provides an enormous hurdle for the Port of Newcastle to develop a container terminal to compete with Port Botany and Port Kembla, because of financial consequences arising from the Deeds,” remarked ACCC Chair Rod Sims. “Less competition usually results in higher charges for businesses and consumers.”

The ACCC had argued that the Port Commitment Deeds, made when Port Botany and Port Kembla were privatised in 2013, had an anti-competitive purpose and effect. The ACCC had also argued that the 2014 Port of Newcastle Deed was the anti-competitive result of the Port Commitment Deeds, which made the development of a container terminal at the Port of Newcastle uneconomic.

The court dismissed these claims.

At this stage the judgment has been made available only to the parties’ lawyers, on a restricted basis, pending resolution of confidentiality issues. Accordingly, the ACCC cannot yet discuss the reasons for the decision.

“We alleged that making these agreements containing provisions which would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal, was anti-competitive and illegal,” Mr Sims said.

“Absent new entry, NSW Ports will have an effective monopoly in moving containers in NSW for 50 years.

“We took this action to remove a barrier to competition in an important market, the supply of port services, which has a significant impact on the cost of goods paid by Australian consumers. Such barriers damage Australia’s productivity performance.

“We will carefully consider the judgment.”

Background

In December 2018, the ACCC instituted proceedings against NSW Ports. In 2019, NSW Ports made a cross claim against the State of New South Wales and the Port of Newcastle entities, joining them to the ACCC’s proceedings.
NSW Ports operates Port Botany and Port Kembla under 99-year leases from the State of NSW Ports.

The compensation to be paid by the State of New South Wales under the Port Commitment Deeds to the operators of Port Botany and Port Kembla is equivalent to the wharfage fee the port operators would receive if they handled the containers.

The ACCC said that container traffic at the Port of Newcastle has not yet exceeded the specified cap, and therefore no payments have been made by the State of New South Wales under the 2013 Port Commitment Deeds.