ACCC launches Pacific National High Court bid

 
  james.au Minister for Railways

Location: Sydney, NSW
https://www.afr.com/companies/transport/accc-launches-pacific-national-high-court-bid-20200626-p556gl

The competition watchdog has asked for special leave to appear in the High Court to challenge Pacific National's $205 million acquisition of the Acacia Ridge intermodal terminal from rival Aurizon.

The Australian Competition and Consumer Commission's request escalates chairman Rod Sims' opposition to the sale of the terminal in Brisbane's southern suburbs.

If the ACCC is granted special leave to appeal it would be the first time the High Court has considered Australia's mergers laws.
AFR

I get the impression that the ACCC has been looking for a test case for the merger laws in Aus and might have found one.  Agencies dont ask for leave unless there reasonably sure of getting it too.

This has nothing to do with the rail industry and everything to do with the legislation.

Will be very interesting to watch if they do get leave to appeal.

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  bevans Site Admin

Location: Melbourne, Australia
You are probably right about the test case however the sale to PN is not in the best interests of the industry especially given the way PN has collapsed rail businesses in other states.  I think the assets need to go to someone else and there are operators who could do it.
  Sulla1 Chief Commissioner

You are probably right about the test case however the sale to PN is not in the best interests of the industry especially given the way PN has collapsed rail businesses in other states.  I think the assets need to go to someone else and there are operators who could do it.
bevans

Ultimately the ACCC will need evidence to quantify that PN's ownership of Acacia Ridge is restricting trade and rail traffic entering or leaving Queensland - and it will have a very hard time finding it.

The ACCC's arguement ignores the existance of the SCT terminal at Bromleton, a dual gauge container terminal at the Port of Brisbane and the convertibility of all of PN's intermodal traffic to road (the ultimate competitor). If PN was to price leverage its "monopoly" its customers will shift to road, or to SCT.

Meanwhile, Linfox - the primary narrow gauge user of Acacia Ridge - is showing no signs of suffering at the hands of PN ownership of the terminal. Linfox intermodal services have grown in size during 2019 and 2020, and extra services have been added during 2020 - despite the economic ructions of the Covid Crisis.

Regardless of what barrow the ACCC is trying to push to the High Court, if it's asked to prove its allegations in regards to Acacia Ridge, it will have only evidence to the contrary.
  james.au Minister for Railways

Location: Sydney, NSW
You are probably right about the test case however the sale to PN is not in the best interests of the industry especially given the way PN has collapsed rail businesses in other states.  I think the assets need to go to someone else and there are operators who could do it.

Ultimately the ACCC will need evidence to quantify that PN's ownership of Acacia Ridge is restricting trade and rail traffic entering or leaving Queensland - and it will have a very hard time finding it.

The ACCC's arguement ignores the existance of the SCT terminal at Bromleton, a dual gauge container terminal at the Port of Brisbane and the convertibility of all of PN's intermodal traffic to road (the ultimate competitor). If PN was to price leverage its "monopoly" its customers will shift to road, or to SCT.

Meanwhile, Linfox - the primary narrow gauge user of Acacia Ridge - is showing no signs of suffering at the hands of PN ownership of the terminal. Linfox intermodal services have grown in size during 2019 and 2020, and extra services have been added during 2020 - despite the economic ructions of the Covid Crisis.

Regardless of what barrow the ACCC is trying to push to the High Court, if it's asked to prove its allegations in regards to Acacia Ridge, it will have only evidence to the contrary.
Sulla1

1. The case is about Acacia Ridge being a gateway to Northern Queensland.  SCT is not able to facilitate this and the port is perhaps challenged by other factors, which make both of these terminals quite imperfect substitutes for the traffic needs of NQ.  The Federal Court used a timeframe of 5 years and said by then Inland will be running and will provide commercial investment incentive for another terminal, however i think a key part of the ACCC point is that this conclusion makes too many assumptions and these may be too aggressive, and that with assumptions like the Inland takes 10 years etc, the Fed Court might have found differently.

2. Re road being the ultimate competitor.  Ive been thinking about this argument.  Road is a substitute but not a perfect one for rail and I think that this argument is flawed.

In a perfectly competitive world, rail is said to have lower costs over volume than road.

In the absence of competition, the rail price will trend towards road as it is otherwise unconstraned, increasing costs to producers, and monopoly (or duopoly) rent will accrue to the operators.  Any actions taken by operators to make it hard for operators to create a monopoly might be construed to be actions to enable them to use market power to change higher prices.

Being pushed to road is seen as a second best solution caused by market power imbalance in the rail market.

3.  The Linfox volume growth is perhaps proof that the ACCC action in that part of the Aurizon sale was the right thing to do.  It has kept a second operator on the line, instead of allowed a monopoly to form under PN, which by your account seems to have increased volumes.
  Sulla1 Chief Commissioner

You are probably right about the test case however the sale to PN is not in the best interests of the industry especially given the way PN has collapsed rail businesses in other states.  I think the assets need to go to someone else and there are operators who could do it.

Ultimately the ACCC will need evidence to quantify that PN's ownership of Acacia Ridge is restricting trade and rail traffic entering or leaving Queensland - and it will have a very hard time finding it.

The ACCC's arguement ignores the existance of the SCT terminal at Bromleton, a dual gauge container terminal at the Port of Brisbane and the convertibility of all of PN's intermodal traffic to road (the ultimate competitor). If PN was to price leverage its "monopoly" its customers will shift to road, or to SCT.

Meanwhile, Linfox - the primary narrow gauge user of Acacia Ridge - is showing no signs of suffering at the hands of PN ownership of the terminal. Linfox intermodal services have grown in size during 2019 and 2020, and extra services have been added during 2020 - despite the economic ructions of the Covid Crisis.

Regardless of what barrow the ACCC is trying to push to the High Court, if it's asked to prove its allegations in regards to Acacia Ridge, it will have only evidence to the contrary.

1. The case is about Acacia Ridge being a gateway to Northern Queensland.  SCT is not able to facilitate this and the port is perhaps challenged by other factors, which make both of these terminals quite imperfect substitutes for the traffic needs of NQ.  The Federal Court used a timeframe of 5 years and said by then Inland will be running and will provide commercial investment incentive for another terminal, however i think a key part of the ACCC point is that this conclusion makes too many assumptions and these may be too aggressive, and that with assumptions like the Inland takes 10 years etc, the Fed Court might have found differently.

2. Re road being the ultimate competitor.  Ive been thinking about this argument.  Road is a substitute but not a perfect one for rail and I think that this argument is flawed.

In a perfectly competitive world, rail is said to have lower costs over volume than road.

In the absence of competition, the rail price will trend towards road as it is otherwise unconstraned, increasing costs to producers, and monopoly (or duopoly) rent will accrue to the operators.  Any actions taken by operators to make it hard for operators to create a monopoly might be construed to be actions to enable them to use market power to change higher prices.

Being pushed to road is seen as a second best solution caused by market power imbalance in the rail market.

3.  The Linfox volume growth is perhaps proof that the ACCC action in that part of the Aurizon sale was the right thing to do.  It has kept a second operator on the line, instead of allowed a monopoly to form under PN, which by your account seems to have increased volumes.
james.au

The Port of Brisbane is already a gateway container terminal to North Queensland, with five weekly container trains in each direction from there to Rockhampton and Mackay, all of them Linfox.

Pacific National's Moolabin terminal originates or terminates up to 42 trains per week using road and rail transfers from Acacia Ridge and Bromelton, while Linfox originates or terminates up to 48 trains per week from Acacia Ridge.

SCT is a key provider in the North Queensland transport mix, feeding both Linfox and Pacific National contracts through direct road transfers from Bromelton to Acacia Ridge and Moolabin, or through repackaging and warehousing, so ignoring its presence in the North Queensland supply chain is not realistic.

A reasonable proportion of North Queensland freight does not move directly to or from standard gauge, but goes to warehousing for further distribution via road and rail. The road-served Big W warehouse at Warwick is a case in point, with all deliveries arriving by road, then being redistributed via road to the Acacia Ridge terminal for rail haulage north.

As an originating terminal Acacia Ridge directly accounts for 50.5% of the narrow gauge trains moving into North Queensland. Rail accounts for only 35% of all freight moving on the Bruce Highway corridor. The trucking industry doesn't stop at Acacia Ridge, it often doesn't even pass through Brisbane to serve North Queensland.

The ACCC's focus on Acacia Ridge is also ignoring the ability of any Acacia Ridge rail customer to build its own terminal. Aurizon/Linfox already owns land at Bromelton and the ARTC North Coast Line was dual gauged (not commissioned) to serve the proposed terminal. As it is, Acacia Ridge is almost unique as a multi-user terminal in Queensland - Pacific National and Linfox each have separate terminals at every other location served by QR's North Coast Line.

Beyond this, there remains three fixed factors in road/rail competition in any corridor -

1. Transit time
2. Price  
3. Reliability

If a mode beats the other on all three, it will be the modal choice for most, if not all, customers. If a mode wins on two it has a good chance of retaining the majority of customers. If a mode only wins on one, retaining customers becomes solely based on maintaining that single element. If PN can only beat road on price into Acacia Ridge (which is probably the case), then it risks bleeding away all of its customers if it raises rates - it's hard to see Pacific National not already being aware of this situation. PN clearly is price constrained by the market, and will remain so if it wants to stay in the rail business.

Remember, the rail tonnages coming into Brisbane from the south are already a fraction of the tonnages arriving on road. Absorbing another 2-million tonnes of Pacific National containers into the endless parade of B-Doubles on the Newell, New England and Pacific Highways is not going to be difficult for the road industry. The Glencore contract debacle on the Mt Isa corridor already demonstrates how effectively and quickly the road industry can react to a modal shift of containers.

From my point of view, the ACCC is clearly demonstrating an incredible lack of understanding for the arguement it is attempting to make - it is describing Acacia Ridge as a bottleneck monopoly when the North Queensland supply chain looks more like a seive.
  Sunbird Station Master

Can anybody tell me why the proposed Aurizon/Linfox intermodal yard at Bromelton hasn't gone ahead?

If they purchased land and ARTC were willing to fund the dual conversion of the line it must have been a serious prospect back in about 2008.

I suspect its because they subsequently realised the inland rail project would make the location redundant.

It was already known the project was going to meet the existing line at Kagaru ( about 12 km's further north) even then so it always seemed a poor location to me (chasing votes in Beaudesert perhaps).

I think if they ever build a terminal it would have to be in a new location to the north of Kagaru so it could handle trains from both lines.

Does anyone else have any info on what happened?
  bevans Site Admin

Location: Melbourne, Australia


A reasonable proportion of North Queensland freight does not move directly to or from standard gauge, but goes to warehousing for further distribution via road and rail. The road-served Big W warehouse at Warwick is a case in point, with all deliveries arriving by road, then being redistributed via road to the Acacia Ridge terminal for rail haulage north.
Sulla1

I would be asking for funding to connect the warehouse to the rail network for distribution by rail removing the road hauling component.  Is this a possibility?

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