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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.
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.
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.