At the request of BP and Woolworths, the ACCC has delayed its consideration of BP’s proposed acquisition of the Woolworths’ retail service station sites so that the ACCC can consider further information from the parties. The expected new decision date is 14 December 2017.
“This is a significant decision for the retail petrol market in Australia. The extension to the consideration period will allow the ACCC to consider further information from the parties,” ACCC chairman Rod Sims said.
“This potential transaction involves complex, extensive data analysis of fuel prices across all fuel sites in Australia over a number of years, and it’s vital we take the time to thoroughly assess its likely impact.” Background
The ACCC commenced a public review of the proposed acquisition on 15 March 2017. The ACCC released a Statement of Issues outlining preliminary competition concerns on 10 August 2017.
BP supplies fuel to approximately 1,400 BP-branded service stations throughout Australia. Of these sites, BP controls 347 sites. This includes 316 of BP’s own network of sites referred to by BP as ‘company-owned-and-company-operated’ and 31 ‘commission agency’ sites. Additionally, BP sets the price of diesel only at a further 34 ‘diesel commission agency’ sites. At the remaining BP-branded sites prices are set independently by third-party site operators.
Woolworths Limited currently operates 531 sites and has 12 sites in development. Woolworths entered fuel retailing in the late 1990s, establishing service stations that offer fuel discounts to those purchasing groceries at its stores. In August 2003, Woolworths entered into an alliance with Caltex to operate dual-branded service stations. These dual-branded sites are operated by Woolworths and obtain all fuels from Caltex. Authorisation applications
On 28 April 2017, BP lodged applications for authorisation on behalf of itself, Woolworths, and BP Resellers.
In addition to BP’s proposed acquisition of Woolworths’ network of retail service station sites, the applicants have applied for authorisation to implement a shopper docket discount scheme and loyalty program at participating BP sites as part of the ‘Commercial Alliance.’ The conduct includes third-line forcing and exclusivity arrangements between BP and Woolworths, and between BP and BP Resellers.
On 29 August 2017, the ACCC issued a draft determination proposing to grant conditional authorisation to BP. The conditions included that Woolworths and BP offer and comply with a section 87B undertaking acceptable to the ACCC which caps Woolworths’ shopper docket and Woolworths Rewards loyalty program fuel discount offers to 4 cents per litre in total. The ACCC will release its final determination on the applications for authorisation by 15 December 2017.
More information is available here: BP – proposed acquisition of Woolworths’ retail service station sites
A report produced by the Australian Competition and Consumer Commission (ACCC) on the country’s stevedores has suggested that Port Botany has overtaken the Port of Melbourne for container trade due to constraints at the Victorian port, as first reported by The Age.
In 2016/17, Port Botany handled 34 per cent of Australia’s container movements, with 33 per cent going through the Port of Melbourne – down from 36 per cent in 2015/16.
While the report did not directly link the Port of Melbourne’s reduced volume to the increasing size of container ships, it noted that it is the most likely port to put limits on the size of ships visiting the country.
The Age noted that the biggest ship to visit Australia, the 347-metre Susan Maersk that docked at the Port of Brisbane in October, would have been unable to travel up the mouth of the Yarra River to Swanson Dock, and its 10,000 TEU (twenty-foot equivalent unit) load may or may not have managed to fit underneath the West Gate Bridge.
In a recent newsletter, industry body Shipping Australia wrote that with only one terminal able to take the larger ships – Webb Dock, with Swanson Dock out of reach – “Melbourne is already the limiting factor for the size of ships coming to Australia’s east coast ports and is preventing Australians benefiting from the efficiencies of larger ship operations.”
“The risk is that shipping lines may consider by-passing Melbourne for Adelaide or Sydney and use rail, or a smaller ship feeder service (possibly from New Zealand) to make the connection,” it added.
“This would ultimately cost the Victorian consumer, the Port of Melbourne and the state economy.”
The ACCC’s annual Container Stevedoring Monitoring Report has found that while stevedoring operating profits per TEU have risen by over 25 per cent in 2016-17, competition levels are set to increase as there are now three stevedores competing at the nation’s three largest container ports.
“Competition has significantly increased in recent years with the introduction of a third stevedore in Sydney and Brisbane, and now we can add Melbourne to that list. As such, we expect to see greater levels of price competition as new entrants and incumbents compete for market share,” ACCC Chairman Rod Sims said.
“Stevedores will need to work harder to win or retain their customers, with benefits flowing through to shipping lines, importers, and exporters.”
“However, this remains a critical period for competition. For sustainable competition to develop, these new entrants will need to win a commercially viable share of the market,” Mr Sims said. Charges under scrutiny
Both DP World and Patrick recently either introduced or substantially increased ‘infrastructure charges’ at a number of ports for transport companies collecting or dropping off containers. The stevedores claim that the higher charges are necessary because of rising property costs and the need to fund new investment. While there is merit to the stevedores’ claims about higher property costs, their overall costs remain stable.
“Whilst it is true that the stevedores are facing higher property costs, the ACCC will be interested to see whether these infrastructure charges are used to improve landside facilities beyond business as usual levels,” Mr Sims said.
“It is concerning that truck and rail operators face these higher charges but are limited in their ability to take their business elsewhere.”
Some organisations approached the ACCC with allegations that the new infrastructure charges may have been in contravention of provisions of the Competition and Consumer Act 2010. Most of the concerns were that the price increases were excessive, but there are no provisions in the Act to deal with excessive pricing.
Shipping lines benefitted from lower prices as the stevedores reported falling unit revenues in 2016-17. Stevedoring revenue fell 4.5 per cent to $138.8 per TEU. This has continued a very consistent trend as unit stevedoring revenue is about a quarter less than a decade ago in real terms.
The number of containers passing through Australia’s ports is the highest ever recorded. In 2016-17 Australian stevedores handled 7.2 million TEU, an increase of 3.7 per cent.
The report also found that quayside productivity remains close to record levels. However, both capital and labour productivity fell slightly.
“The stevedoring industry is not reporting the same level of productivity improvements that we have seen in previous years. With the new stevedores now in place along the east coast ports, we will be looking for this productivity growth to return in future,” Mr Sims said.
The ACCC’s Container stevedoring monitoring report 2016-17 report is available here.
The Australian Competition and Consumer Commission has issued a draft decision proposing to grant conditional authorisation to a commercial alliance between BP Australia Pty Ltd, BP Resellers, and Woolworths Limited (ASX:WOW).
Authorisation would allow participating BP service stations to accept Woolworths shopper dockets and participate in the Woolworths Rewards loyalty program, if BP is successful in acquiring Woolworths’ service stations.
“Customers value fuel-related discounts and loyalty programs. We believe giving consumers more opportunities to redeem shopper docket discounts and earn and redeem points through Woolworths’ loyalty program will likely result in some public benefits,” ACCC chairman Rod Sims said.
However, the ACCC has long-standing concerns that these kinds of fuel discounts can have anti-competitive effects if they are at a level that is unable to be matched by otherwise efficient fuel retailers.
“The ACCC considers that fuel discount offers in excess of 4 cents per litre could have longer-term effects on the structure of the retail fuel markets and that the detriments from reduced competition may outweigh any benefits,” Mr Sims said.
To address this potential harm, the ACCC is proposing to grant authorisation on condition that the parties do not offer fuel discounts from shopper dockets and the loyalty scheme in excess of 4 cents per litre in total.
These proposed shopper docket and loyalty scheme arrangements form part of a broader transaction between BP and Woolworths, where BP is proposing to acquire Woolworths’ network of service stations. The ACCC is conducting a separate merger review of that proposed acquisition.
The proposed shopper docket and loyalty scheme arrangements will only occur if the proposed acquisition is completed.
The ACCC has not taken into account any detriments from a lessening of competition or any benefits resulting from the proposed acquisition as part of its assessment of the authorisation applications.
“The proposed acquisition by BP of Woolworths service stations is subject to separate consideration by the ACCC. This draft decision regarding authorisation does not in any way indicate the ACCC’s view of the proposed acquisition,” Mr Sims said.
The ACCC has published a Draft Determination: BP Australia Pty Ltd & Ors – Authorisations – A91580 – A91582.
The ACCC is now seeking submissions before making its final decision. Submissions should be provided to the ACCC by 18 September 2017. The ACCC expects to release its final decision in October 2017. Background ACCC merger review of related proposed acquisition
On 10 August 2017 the ACCC released a Statement of Issues outlining the Commission’s preliminary views on BP’s proposed acquisition of Woolworths’ petrol sites.
The ACCC proposes to release a final decision on the proposed acquisition on 26 October 2017. Woolworths’ undertaking on petrol discounts
In December 2013 Woolworths (and Coles) provided court enforceable undertakings in relation to their fuel discount offers following the identification of competition issues by the ACCC. The undertakings prevent Woolworths and Coles from offering discounts on fuel if the discount is funded from outside Woolworths’ and Coles’ petrol divisions and where the discount is more than 4 cents per litre and contingent on purchases made outside the petrol division.
Road Freight NSW (RFNSW) has joined forces with its interstate counterpart, the Western Australian Road Transport Association (WARTA), in a renewed fight against landside surcharges imposed by stevedores at ports across the country.
RFNSW General Manager Simon O’Hara met with WARTA Executive Officer Cam Dumesny on 29 August, observing freight movements and out of the Port Botany terminals and getting feedback from carriers about the impact the new levies were having on their day to day operations.
“In New South Wales and Western Australia, truck operators, particularly those smaller, family-run businesses, are hurting,” said O’Hara.
“RFNSW and WARTA have now decided to use our collective strength in bringing the stevedores to account, for the sake of our members.
He noted that stevedores imposed the “unjustified” taxes on “hardworking truck operators” without any regulatory scrutiny.
“We are concerned about the dangerous domino effect this has had on industry,” O’Hara added. “Since stevedores started imposing these charges, other operators with significant supply chain power have also begun slugging transport operators.
“RFNSW and WARTA believe we need an independent body, ultimately the ACCC (Australian Competition and Consumer Commission), to be called in to put the brakes on the stevedores and start regulating landside port charges.
“We believe the recent Federal Court finding, which allows the ACCC to monitor and regulate pricing at the Port of Newcastle, means the ACCC should be in a position to review the situation at Australia’s ports,” he said.
“Accordingly, RFNSW and WARTA will make a joint submission to the ACCC, again calling for an investigation and independent umpire to review any financial charges.”
A Federal Court ruling has given the Australian Competition and Consumer Competition (ACCC) power to monitor and regulate pricing at the Port of Newcastle.
Road Freight NSW (RFNSW) General Manager Simon O’Hara said RFNSW was carefully analysing the ruling but described it as a “precedent case of intervention for the regulator.”
“It certainly sends a very strong message to industry about price gouging and that price increases need to be on the basis of an actual increase in costs,” O’Hara said.
RFNSW has thus called for the ACCC to act on new stevedore taxes imposed on truck operators.
“We believe there’s a lesson to be learnt here for stevedores, given that they have burdened our members with unreasonable increases in charges for accessing their terminals at Port Botany.
“They’re on notice.
“In light of the Federal Court’s ruling, RFNSW is again calling on the ACCC to act, for the sake of our members and other users of port infrastructure.”
The Australian Logistics Council (ALC) has reminded the ACCC to ensure it is sufficiently resourced and has personnel possessing experience in the operation and/or regulation of logistics infrastructure.
“There are many specialist and complex issues at work with the operation of supply chains and logistics infrastructure,” said Michael Kilgariff, Managing Director, ALC.
“[The] Federal Court decision seems to point to increasing ACCC involvement in pricing and access issues at ports.
“If that is going to be the case, then it is imperative that the ACCC ensures it is properly resourced with personnel who have had exposure to and experience in dealing with the complex and unique nature of these infrastructure assets,” he said.
“Any regulatory role played by the ACCC in the freight logistics sector must be fit for purpose.”
The Federal Court has convicted Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) of criminal cartel conduct and ordered it to pay a fine of $25 million, the second-highest fine imposed in ACCC history.
The judgment also marks the first successful prosecution under the criminal cartel provisions of the Competition and Consumer Act 2010 (CCA).
Following an extensive investigation by the ACCC, the Commonwealth Director of Public Prosecutions (CDPP) charged NYK with giving effect to cartel provisions in an arrangement or understanding with other shipping lines relating to the transportation of motor vehicles to Australia between 2009 and 2012.
The cartel operated from at least February 1997 and affected vehicles transported to Australia by NYK and other shipping lines from locations in Asia, the US and Europe on behalf of major car manufacturers including Nissan, Suzuki, Honda, Toyota and Mazda.
ACCC chairman Rod Sims welcomed the Federal Court’s decision.
“The Australian community relies heavily on imported vehicles, so a longstanding cartel in relation to the transportation of those vehicles to Australia was of significant concern,” ACCC chairman Rod Sims said.
“The NYK fine is also the second largest ever imposed under the Competition and Consumer Act, and incorporated a significant discount for NYK’s plea and cooperation.”
Justice Wigney said the fine “incorporates a global discount of 50% for NYK’s early plea of guilty and past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation – meaning that but for the early plea and past and future cooperation, the fine would have been $50 million”.
In this case, the maximum penalty was calculated on the basis of 10 per cent of NYK’s annual turnover in connection with Australia, in the 12 months prior to the commencement of the offence. On that basis, NYK’s conduct attracted a maximum penalty of $100 million.
“The sentence imposed on NYK by the Federal Court sends a strong warning to the industry and the business community at large. The CDPP and ACCC can and will criminally prosecute cartel conduct. It also highlights that parties who engage early and cooperate with the authorities may be shown leniency,” Mr Sims said.
Justice Wigney said in his judgment the “cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment” because “it is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly”. Background
NYK entered a guilty plea on 18 July 2016 in the Federal Court. NYK has cooperated throughout the ACCC’s investigation.
NYK was sentenced for one ‘rolled-up’ criminal charge of giving effect to cartel provisions. A ‘rolled-up’ charge is one in which more than one offence forms part of the charge. Rolling-up is permissible on a plea of guilty in Commonwealth matters.
On 2 November 2016, the CDPP laid charges against another alleged participant in the cartel, Kawasaki Kisen Kaisha (K-Line), also a Japanese shipping company. The ACCC’s investigation in relation to other alleged cartel participants is continuing.
NYK is headquartered in Tokyo and has a controlling interest in a global group of companies with offices in Europe, Africa, East Asia, South Asia, China, Oceania and the North and South Americas with over 33,000 employees. It also operates an Australian subsidiary, NYK Line (Australia) Pty Ltd.
Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), should take over regulating toll road and landside port charges, Ben Maguire CEO of the Australian Truck Association said on 28 July.
The Australian Government is considering setting up an independent regulator to control truck and bus registration charges and road user charges that truck and bus operators pay on fuel.
Maguire commented that the independent regulator – ultimately the ACCC – should be responsible for toll road and landside port charges as well.
“Toll road charges for trucks are growing rapidly,” he added. “Small trucking businesses simply cannot afford them. Although these charges are set by state governments, the arrangements for setting them are not transparent and do not take into account costs across the supply chain.
“The ATA and its members have similar concerns about landside port charges.
“Earlier in 2017, DP World unilaterally increased the infrastructure surcharge at its Melbourne terminal and imposed a new surcharge of $21.16 per container at its Port Botany terminal. ATA member association Road Freight NSW pointed out that the Port Botany surcharge could cost carriers up to $150,000 per year.
“Separately, Patrick increased its existing surcharges this month, and introduced a $4.76 surcharge per container at its Fremantle terminal and a $25.45 surcharge per container at its Port Botany terminal.
“These charge increases cannot be avoided by trucking operators – they have not been subject to detailed regulatory scrutiny, they simply build additional costs into Australia’s supply chains.
“To fix these problems, heavy-vehicle tolls and landside port charges should be set by the road-price regulator, which should ultimately be the ACCC or a dedicated body established under its Act.”
Maguire said governments must start the reform process by fixing the overcharging of truck and bus operators.
“Truck and bus operators will be overcharged by $264.8 million in 2017–18. The meter is ticking up by more than $725,000 per day,” he noted.
“It’s time for governments to take action and stop overcharging the hard-working small businesses that make up the vast majority of operators in our industry.”
The ACCC is urging small business owners to start preparing now for the ban on excessive payment surcharges that will apply to all businesses across Australia from 1 September 2017.
The new law limits the amount that a business can charge customers for use of payment methods such as EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks. It came into effect for large businesses last year.
“Small businesses that choose to impose payment surcharges should review their surcharge levels to ensure they are compliant when the ban starts applying to them in under two months,” ACCC Deputy Chair Dr Michael Schaper said.
“Businesses can only pass on to customers what it costs them to process a payment such as bank fees and terminal costs. For example, if your cost of acceptance for Visa Credit is one per cent you can only surcharge one per cent on Visa credit card payments onto your customers.”
Small businesses will shortly be receiving information from their bank, which will help them to calculate appropriate surcharges when accepting debit and credit cards. The ACCC has also published a fact sheet so business owners can better understand their obligations.
“Banks are required to send businesses merchant statements that clearly set out the business’ costs of acceptance for each payment method. The ACCC urges businesses to follow up with their bank if they have not yet received these statements,” Dr Schaper said.
Passing on the cost of processing debit and credit card payments is not mandatory for businesses and the ban has no effect on those that do not impose a payment surcharge.
“In the lead-up to last year’s excessive surcharging ban on large businesses, many reviewed and amended their surcharging practices to reflect the costs to the business and we hope small businesses will do the same,” Dr Schaper said.
The ACCC has published guidance material for consumers and businesses. Background
The ACCC has been given new powers to enforce the ban.
A surcharge will be considered excessive where it exceeds the permitted cost of acceptance, as defined by the Reserve Bank of Australia.
The RBA’s website also provides detailed information for businesses about the Standard, including how businesses can identify and quantify those costs that can be passed on to a consumer as a surcharge.
Payment types that are not covered by the ban include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.
British Airways has indicated that it may abandon its UK-Australia route.
British Airways has indicated that it may abandon its UK-Australia route.
This comes after Qantas Airways, flag carrier of Australia, announced of the company’s plans to choose Emirates as the company’s new alliance partner, and end its 17-year alliance with British Airways, the Business Spectator reports.
In a submission to the Australian Consumer and Competition Commission (ACCC), British Airways said that “it is increasingly challenging for an international airline to operate services on long-haul routes between the United Kingdom-Europe and Australia in the absence of such an alliance, due to persistent excess capacity and the nature of the substantial fixed costs involved in their operation.”
The existing alliance agreement between British Airways and Qantas will expire in March.