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ACCC orders stevedores to change unfair contracts

Three container stevedore companies have amended their contracts with land transport businesses after the ACCC raised concerns that certain terms in each of these agreements may be unfair contract terms.
DP World Australia, Hutchison Ports Australia and Victoria International Container Terminal (VICT) agreed, after the ACCC’s intervention, to remove or amend terms in their standard form contracts that the ACCC considered were likely to be considered ‘unfair’ within the meaning of the Australian Consumer Law.
DP World and Hutchison had contract terms that allowed a stevedore to unilaterally vary terms in the agreements without notice, including fees paid by the land transport operators.
DP World and Hutchison also had terms that limited their liability for loss or damage suffered by the transport businesses, while not offering the transport businesses the same protections. VICT’s contract had a term requiring transport businesses to indemnify VICT for loss or damage, with no reciprocal obligation on VICT.
DP World’s standard agreement also required the transport businesses to pay the stevedore’s legal costs and expenses, in circumstances where such payments would normally be determined by court order.
The three stevedores cooperated with the ACCC’s investigation and agreed to remove or amend the terms. Hutchison has made its commitments in a court enforceable undertaking and will also place a corrective notice on its website and put in place a compliance program.
Those contract terms which previously allowed the stevedore to amend the contract without notice have either been removed, or now require the stevedore to give 30 days’ notice of any changes, including for any price rises.
“Thousands of transport businesses, which have standard form agreements with DP World, Hutchison and VICT, stand to benefit from these changes,” ACCC Commissioner Sarah Court said.
“The handling of containers has a direct bearing on the cost of goods in Australia and the competitiveness of Australian exports, so it is crucial for businesses and consumers that the supply chain operates fairly and efficiently.”
The ACCC launched its investigation in early 2018 following concerns being raised about alleged unfair terms in contracts between container stevedores and land transport operators, such as rail and trucking businesses.
The ACCC’s 2018 Container Stevedore Monitoring Report noted the ACCC was assessing unfair contract terms within the industry. The ACCC has now concluded that assessment.
The court enforceable undertaking given by Hutchison can be found at Hutchison Ports Australia Pty Limited.

Stevedores are charging truckers, shippers

The ACCC is calling on state governments to regulate the stevedoring industry.
A record 5.1 million containers were lifted at the monitored ports last financial year, but profit margins in the container stevedoring industry suffered (on charges collected from lines), according to the ACCC’s 20th annual container stevedoring monitoring report.
In 2017–18 the average prices charged to shipping lines fell further, resulting in a drop in profit margins to a low of 4.5 per cent, while productivity remained largely unchanged. Meanwhile, stevedores increased ‘infrastructure charges’ that likely add costs to the supply chain.
“The stevedoring industry has changed significantly over time, with large increases in productivity and reductions in costs since the ACCC started monitoring the industry 20 years ago, but challenges remain,” ACCC chairman Rod Sims said.
Shipping lines have been able to negotiate cheaper rates because of growing competition between stevedores and consolidation in the shipping line industry, resulting in an 8.5 per cent fall in quayside revenue per lift for stevedores.
Stevedores continued to rapidly increase ‘infrastructure charges’ applied to truck and rail companies delivering or collecting containers at port, which has led to strong criticism from transport operators and cargo owners.
Stevedores have justified these charges with increases in operating costs and the need to invest in infrastructure to handle the increasingly large ships visiting Australian ports.
It is not unreasonable for stevedores to recover some costs for investment in container terminal facilities. However, transport operators and cargo owners are limited in being able to respond to higher stevedore charges by taking their business elsewhere, unlike shipping lines.
“The use of infrastructure charges means that stevedores can earn a greater proportion of their revenues in a market in which their market power is stronger relative to the more competitive market in which they provide services to shipping lines,” Mr Sims said.
“We are concerned about the potential impact of these charges. If stevedores do not face a competitive constraint on their prices, it will leave consumers paying higher charges for goods and make exporters less competitive,” Mr Sims said
The ACCC does not have the power to determine stevedoring charges as they are not a regulated asset.
“State governments, which regulate stevedores and ports, may need to conduct further detailed examination and, if warranted, use their regulatory powers,” Mr Sims said.
“We do not have sufficient information about the broader supply chain to conclusively determine if regulation would be appropriate. We note that the profitability of stevedores has continued to fall despite the increases in infrastructure charges.”
Two stevedores, DP World and Flinders Adelaide, commenced extensive capital expenditure in 2017–18, with very little investment from other stevedores.
In 2017–18, productivity performance remained mixed; while labour and multifactor productivity improved slightly, capital productivity fell slightly. Truck turnaround times continued to improve in Melbourne, but deteriorated slightly in Sydney.
The ACCC’s report is available here.
Background
The ACCC has monitored the container stevedoring industry since 1998-99 under a direction from the Australian Government. Container stevedoring involves lifting containers on and off ships. The ACCC currently monitors the prices, costs and profits of container stevedores at five Australian container ports.
Patrick and DP World operate at the four largest ports—Brisbane, Fremantle, Melbourne and Sydney. Hutchison operates in Brisbane and Sydney, while VICT commenced operations in Melbourne in early 2017. Flinders Adelaide is the sole terminal operator at the Port of Adelaide.

Linfox can buy Aurizon’s Queensland intermodal business: ACCC

The ACCC has acknowledged Aurizon’s sale of its Queensland intermodal business to Linfox.
The ACCC has considered the Linfox proposal, and has decided that a public review of the transaction is not required, as it does not consider the acquisition by Linfox will give rise to a substantial lessening of competition.
“Linfox’s operations in Queensland are relatively limited, and the transaction will mean there will remain two intermodal rail line-haul providers in Queensland, which is a good outcome for rail competition and Queenslanders,” ACCC chairman Rod Sims said.
Aurizon had previously announced that it would shut the Queensland intermodal business if it couldn’t progress the earlier transaction proposal involving Pacific National.
Under the earlier transaction proposal, it planned to sell the rail component of the Queensland intermodal rail business to Pacific National, its only competitor in intermodal rail in Queensland.
“The ACCC did not consider that Aurizon’s shut-down plans were rational given there were other options,” Mr Sims said.
“The sale of the Queensland intermodal business demonstrates why the ACCC must always question claims that businesses will be shut if we don’t approve a merger.”
The ACCC litigation concerning the sale of Acacia Ridge Rail Terminal to Pacific National and Aurizon’s intermodal sale process is continuing.
 

Siemens, Alstom rail merger troubles the ACCC

The ACCC has expressed preliminary concerns about the proposed merger of Siemens A.G.’s (Siemens) Mobility Division with Alstom S.A. (Alstom), which are detailed in a Statement of Issues published today.
“A combined Siemens-Alstom would be by far the largest supplier of heavy rail signalling in Australia,” ACCC chairman Rod Sims said.
The ACCC’s review has focused on signalling systems for heavy rail passenger networks, particularly train interlocking systems and automatic train protection (ATP) systems. Signalling systems provide safety and traffic management controls on rail networks. Interlockings are the core of a signalling system; they set routes for the safe movement of trains across railway lines. Train protection systems ensure that trains comply with movement authorities issued by the interlockings.
“The ACCC’s preliminary view is that the proposed merger may substantially lessen competition in the supply of heavy rail signalling systems for passenger rail networks in Australia, in particular interlocking systems and ATP systems. The loss of competition could result in increased prices for customers, or lower levels of service, quality, or innovation,” Mr Sims said.
“We have heard from many industry participants who have expressed competition concerns with the merger. We will continue to evaluate the competitive options available to passenger rail networks in Australia.”
The proposed merger is also being reviewed by overseas competition regulators, including the European Commission.
“The ACCC is liaising closely with overseas competition regulators, as some of these potential competition issues may also arise in other countries,” Mr Sims said.
The ACCC has invited further submissions from interested parties in response to the Statement of Issues by 20 September 2018. The ACCC’s final decision is due on 29 November 2018.
Background
Siemens is a listed German conglomerate headquartered in Munich. Its Mobility Division is one of eleven business divisions. Siemens acquired signalling supplier Invensys Rail in 2013 and Perth-based MRX Technologies in 2017.
Alstom is a French société anonyme listed on the Euronext Paris stock exchange. In 2015, Alstom acquired GE’s signalling business.
Siemens and Alstom are both active in the rail mobility industry globally and each supplies rail signalling systems, rolling stock and rail electrification services in Australia. The key area of overlap between the parties in Australia is in the supply of rail signalling systems.

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