Home Insights Last port of call: ACCC obtains access-regime style commitments in lieu of penalties in TasPorts case
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Last port of call: ACCC obtains access-regime style commitments in lieu of penalties in TasPorts case

The ACCC’s first enforcement action under the reformed misuse of market power prohibition in section 46 of the Competition and Consumer Act 2010 (CCA) has been resolved in a surprisingly pragmatic and efficient way, after the Tasmanian Ports Corporation (TasPorts) admitted that it engaged in anti-competitive conduct in towage and pilotage services markets, and gave the ACCC an undertaking regulating aspects of TasPorts’ activities into the future. 

In return, the Australian Competition and Consumer Commission (ACCC) agreed not to press for penalties to be imposed on TasPorts. By extracting the undertaking, the ACCC appears to have cleverly used the prohibition on misuse of market power to establish a miniature regulatory regime that in part reflects long-standing ACCC concerns about the lack of effective regulation of state-owned monopoly infrastructure assets such as ports.

Background

TasPorts is a state-owned company that owns and operates all of Tasmania’s marine port assets except for Port Latta in Tasmania’s north-west. TasPorts was also the sole provider of pilotage services and towage services in Tasmania prior to the entry of Engage Marine Pty Ltd (Engage Marine) at Port Latta, which is owned and operated by Grange Resources Ltd (Grange).

In July 2017, Grange informed TasPorts that it had decided to obtain towage and pilotage services from Engage Marine. In response, TasPorts advised Grange that it would need to pay a new tonnage charge for vessels calling at Port Latta. TasPorts represented to Grange that it could impose this tonnage charge in the performance of its regulatory functions. However, TasPorts had no legislative right to require Grange to pay the new tonnage charge. The tonnage charge would have cost Grange an estimated $940,000 per annum, which TasPorts offered to reduce to $600,000 per annum for the first two years if Grange re-engaged TasPorts as its service provider. TasPorts also:

  • imposed on Engage Marine a new fee of $965 per day for use of a temporary berth at the Port of Burnie (a charge not included in TasPorts’ schedule of charges);

  • introduced a charge for ‘non-cargo’ vessels, targeted to apply to Engage Marine’s tug boats;

  • informed Engage Marine that it would need to constantly ‘man’ its tug when berthed at TasPorts’ temporary berths, at a substantial cost to Engage Marine;

  • failed or refused to provide Engage Marine with pilot training in accordance with the Marine Pilotage Code, a prerequisite to obtaining a pilot’s licence to provide pilotage services to Grange at Port Latta;

  • failed or refused to facilitate the provision of long-term berths for Engage Marine’s tugs at the Port of Devonport, which were required for Engage Marine to perform its obligations to Grange; and

  • failed or refused to place Engage Marine on its shipping schedule as a towage service provider for Tasmanian ports, which was necessary for Engage Marine to provide towage services outside of Port Latta.

The ACCC’s enforcement proceedings

In late 2019, the ACCC commenced enforcement proceedings against TasPorts, alleging that it had misused its market power by:

  • imposing the new tonnage charge on Grange;

  • offering to reduce the tonnage charge if Grange agreed to acquire TasPorts’ services; and

  • engaging in the various other behaviours to disadvantage Engage Marine. 

Section 46 of the CCA prohibits companies with a substantial degree of power in a market from engaging in conduct which has the purpose, effect or likely effect of substantially lessening competition in that market or any other market in which the corporation supplies goods or services.

The ACCC claimed that TasPorts’ anti-competitive strategy was to prevent Engage Marine from competing in the towage and pilotage markets in Northern Tasmania by:

  • limiting Engage Marine to a single tug towage service operation;

  • preventing Engage Marine from supplying pilotage services at Port Latta; and

  • preventing Engage Marine from expanding its business to other Tasmanian ports. 

The ACCC sought declarations of contravention of section 46 CCA, pecuniary penalties and injunctive relief against TasPorts. 

The settlement

On 4 May 2021, Justice Davies made consent orders in the Federal Court declaring that TasPorts had contravened section 46 of the CCA in its dealings with Grange and awarding costs to the ACCC, but omitting any order as to an injunction or penalties.

Justice Davies’ reasons reflect a statement of agreed facts, in which TasPorts admitted that it had a substantial degree of market power in managing and maintaining infrastructure in ports (other than Port Latta) in northern Tasmania, that it imposed the new tonnage charge on Grange in circumstances where it did not have a legislative right to do so, and that its conduct was likely to have the effect of substantially lessening competition in towage and pilotage markets in northern Tasmania. 

TasPorts’ undertaking

In parallel with the statement of agreed facts, the ACCC and TasPorts negotiated an enforceable undertaking under section 87B of the CCA on the understanding that the ACCC would not press for penalties against TasPorts. That undertaking requires TasPorts:

  • not to seek or require payment from Grange (or any other person) for a tonnage charge or any similar charge in respect of Port Latta, unless:

    • Grange (or such other person) agrees to pay the charge; or

    • TasPorts is entitled to impose the charge pursuant to legislation or the amount of the charge is determined to be reasonable by an independent expert approved by the ACCC;

  • not to discriminate between suppliers of towage and/or pilotage services to Grange at Port Latta in relation to the tonnage (or similar) charge imposed for such services;

  • to offer Engage Marine a medium-term licence to use berth space at Inspection Head (another northern Tasmanian port facility);

  • to invest a minimum of $1 million in the wharf or other facilities at Inspection Head to mitigate the risk of the wharf deteriorating; and

  • to take all steps necessary to enable port users to use TasPorts’ communication system to book the towage services provided by Engage Marine at the ports of Bell Bay, Burnie and Devonport, subject to Engage Marine providing TasPorts with details necessary for TasPorts to facilitate bookings.

The broader context for the negotiation of TasPorts’ undertaking is undoubtedly ongoing dissatisfaction with state-level regulation of monopoly assets and a failure to encourage competition in the supply of infrastructure services, particularly at ports. ACCC Chair Rod Sims has repeatedly made clear his view that state and territory governments have failed “to ensure that there is an effective constraint on monopoly pricing at Australian ports” and that some governments have put in place arrangements that “ensure little to no prospect of future competition”, resulting in “key infrastructure assets that have an unfettered ability to exploit their enviable situation for years to come”.[1] For the ACCC, TasPorts’ undertaking arguably serves as an alternative to broader and/or more stringent regulation – albeit a second-best alternative that is relatively targeted in that it seeks to prevent particular, known misuses of market power from reoccurring.

In some respects, the undertaking given by TasPorts is narrow and cannot be said to reflect a broader intention to regulate TasPorts’ port infrastructure or services generally. For instance, the price controls and non-discrimination provisions apply only to TasPorts’ conduct in relation to the use of Port Latta, which it does not own or operate. On the other hand, the undertaking is consistent with the policy underpinning the National Access Regime in Part IIIA of the CCA and mirrors some of the terms that the ACCC seeks when assessing whether to accept a proposed access undertaking under that regime. These include, for example:

  • restrictions and transparency mechanisms regarding how access or other regulated charges will be determined, with the potential for an ACCC-approved or appointed independent expert to determine pricing where a dispute arises;

  • measures to ensure equitable access, such as the requirement to offer Engage Marine berth space and access to the TasPorts booking system at Inspection Head;

  • principles relating to how investment decisions will be made, such as maintaining the Inspection Head wharf to mitigate the risk of deterioration (which would frustrate the objective of other aspects of the undertaking); and

  • measures to ensure effective regulatory oversight, which in the case of the undertaking includes a requirement for TasPorts to notify the ACCC of matters requiring independent expert determination and furnishing information to the ACCC to enable it to assess compliance with its undertaking.

Trading away penalties

The bargain struck between the ACCC and TasPorts – i.e. no injunction or penalties in exchange for an undertaking – likely reflects the ACCC’s view that any injunction the court would have imposed was likely to have been narrower in scope than the commitments it was able to obtain through a section 87B undertaking. For example, it seems unlikely that a court would issue an injunction providing for detailed regulation of tonnage charges at Port Latta and non-discrimination obligations, particularly given that in principle TasPorts’ would be able to impose tonnage charges and/or disadvantage Engage Marine in ways that would not have a substantive anti-competitive purpose or effect of the kind required by the misuse of market power prohibition in section 46. The outcome therefore highlights the potential for defendants in future misuse of market power cases – particularly where the alleged market power arises from the ownership or operation of infrastructure – to craft an undertaking that goes beyond the scope of any likely injunction and promotes the ACCC’s policy agenda, with a view to either reducing or eliminating a penalty.

ACCC commentary

Finally, the ACCC noted in its press release that firms with market power have a ‘special responsibility’ not to abuse their position to stifle competition.[2]

That framing – which is consistent with the law in the European Union and US –  was front and centre in the ACCC’s Digital Platforms Inquiry[3] and reflects the ACCC’s position that competitively benign conduct by a non-dominant firm may become problematic when engaged in by a dominant firm. That said, the ACCC’s ability to pursue cases will continue to be bounded by the terms of section 46 of the CCA, which will continue to require that the ACCC establish the essential elements of market power and a substantive anti-competitive purpose or effect.

This article was originally co-authored by Alistair Newton.


[1] ACCC Chairman, Rod Sims, ‘Ports: What Measure of regulation’ (Speech, Ports Australia Conference, 2016), available here.
[2] ACCC, TasPorts declared to have misused its market power (Media release, 5 May 2021), available here.
[3] See ACCC Digital Platforms Inquiry, Final Report, page 1, available here. See also ACCC Chairman, Rod Sims, ‘Insights and impacts of the ACCC Digital Platforms Inquiry’, (Speech, IIC Australian Chapter Half Day Seminar, 2019), available here.


Authors

MCCOWAN-mark-highres_SMALL
Mark McCowan

Head of Competition

GRAY Jodi SMALL
Jodi Gray

Partner


Tags

Competition/Antitrust

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