Tug of War: ACCC v TasPorts

Published On 10/12/2019 | By Phillip South | Access, Litigation

The ACCC has commenced proceedings against Tasmanian Ports Corporation Pty Ltd (TasPorts) claiming that TasPorts has misused its market power in the supply of marine services at certain Tasmanian ports in an attempt to capsize an emerging competitor, Engage Marine Tasmania Pty Ltd (Engage Marine).

While some private parties have started proceedings under the new laws, this is the first case brought by the ACCC under the new misuse of market power provisions which were introduced following the Harper Review.

Misuse of market power cases are generally few and far between. Accordingly, this is a valuable  opportunity for the development of Australia’s case law – both in relation to the new laws and the potential issues relating to crown immunity.

Background

TasPorts owns all the ports in northern Tasmania, except for Port Latta, and provided marine pilotage and towage services all northern Tasmanian ports. TasPorts is wholly-owned by the State of Tasmania.

The ACCC is alleging that TasPorts used its market power in the markets for the supply of towage services at Tasmanian/northern Tasmanian ports and pilotage services at Port Latta/Tasmanian ports  to prevent the entry of Engage Marine as a competitor. “Towage services” refers to the use of tug boats to guide a vessel into port and “pilotage services” refers to a licensed marine pilot assisting a ship’s captain move a ship in port waters.

In 2017, Engage Marine beat TasPorts in a bid to supply marine services (including towage and pilotage services) to Grange Resources at Port Latta.

The ACCC’s concerns

In response to losing the contract with Grange Resources, the ACCC alleges that TasPorts contravened section 46(1) of the Competition and Consumer Act 2010 (Cth) (CCA) by:

  • imposing a new ‘marine tonnage charge’ (MTC) on Grange Resources for all vessels entering Port Latta, and subsequently offering Grange Resources a discount to the MTC if TasPorts was awarded the piloting services;
  • failing or refusing to engage with Engage Marine about the provision of long-term berthing facilities for its tug boat, forcing Engage Marine to deploy an offshore mooring which limits its ability to expand its fleet;
  • imposing on Engage Marine a “minimum lay up charge” for the use of temporary berth facilities by non-cargo vessels, which made it uneconomical for Engage Marine to use temporary berths;
  • requiring Engage Marine to constantly staff its tug boat while attached to temporary berths in case other users required access to the berth, which imposed substantial additional costs on Engage Marine;
  • failing or refusing to provide pilot training to Engage Marine in accordance with the Marine Pilotage Code, preventing its pilots from obtaining the necessary licence, and subsequently advising Engage Marine that its licenced pilots would not be able to work as a pilot unless contracted to do so by TasPorts; and
  • failing or refusing to place Engage Marine on the Shipping Schedule, which is necessary to provide towage services for ports other than Port Latta.

ACCC claims that TasPorts’ strategy was “to limit Engage Marine to a single tug towage service operation in Port Latta and prevent or hinder Engage Marine from expanding into other Tasmanian ports and supplying pilotage services at Port Latta.” Engage Marine has not subsequently expanded beyond the single tugboat it operates for Grange Resources at Port Latta.

The ACCC is alleging that this conduct had the purpose and/or effect, and/or was likely to have the effect, of substantially lessening competition in markets for the supply of towage and pilotage services.

Key Issues

First ACCC case brought under the new section 46 “effects test”

This case marks the first action brought by the ACCC under the new section 46 of the CCA following the Harper Reforms.

The Harper Reforms amended section 46 of the CCA by introducing an “effects test”. Under the amended section, a firm with substantial market power will contravene the law if it engages in conduct which has the purpose, effect or likely effect of substantially lessening competition in a market.

The amended section was designed to “to improve [section 46’s] clarity, force and effectiveness so that it can be used to prevent unilateral conduct that substantially harms competition and that has no economic justification.”[1]

Given the ACCC’s strong support for the introduction of an “effects test” and its relatively poor track record under the previously law, it will be very interesting to watch the evidence that the ACCC provides to support its concerns – and conversely the justifications presented by TasPorts.

Crown immunity

The proceedings also raise questions of whether crown immunity may apply to TasPorts, which is a wholly-owned government entity. Whether crown immunity will apply in this case is likely to depend on the court analysis of the statute which established TasPorts.

The Harper Review recommended that CCA should not apply to the crown when it undertakes an activity in trade or commerce. While the Federal government agreed to the recommendation in principle, the CCA has not yet been amended.

Rod Sims has previously lamented the constraints that crown immunity placed on the ACCC in relation to port operations in NSW, and this case will give the ACCC another opportunity to air its views on crown immunity.

Private section 46 Litigation

Although this marks the ACCC’s first foray into the amended misuse of market power provisions, there have been a number of private actions commenced in the past 12 months. These include the claim made by Qube Ports Pty Ltd against the Port of Newcastle on 19 November 2019 and the B&K Holdings case against Garmin Australasia Pty Ltd, filed in 2018 and withdrawn on 18 November 2019.

These cases demonstrate the increasing willingness of private parties to rely on the new misuse of market power provision to enforce their private rights. But for now, all eyes will be on the ACCC.

Photo: Nareeta Martin / Unsplash.com

[1] Page 61, Competition Policy Review Final Report (March 2015)

 

 

 

 

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