ACCC to open WA grain supply chain to competition

by World Grain Staff
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CANBERRA, AUSTRALIA — The Australian Competition and Consumer Commission (ACCC) on June 29 issued a notice revoking Co-operative Bulk Handling Limited's (CBH's) exclusive dealing notification effective May 1, 2012. ACCC said that the notification allowed CBH to require Western Australian grain growers and marketers who use its “up-country” storage facilities to also use its transport services to deliver grain to port for export.

ACCC said the 2012 date will allow sufficient time for CBH and industry participants to adjust and put appropriate systems and processes in place and to take advantage of the opportunity afforded by potential competition in the provision of rail transport services for bulk export grain.

"By virtue of the notified conduct CBH is the monopoly supplier of transport services for moving grain to port in WA," ACCC chairman Graeme Samuel said. "The notified conduct allows CBH to leverage its substantial market power in up-country storage to insulate itself from any competition in the supply of grain transport services. The ACCC recognizes that there are efficiencies in CBH offering a whole of supply chain receival, storage, handling and transport service. The ACCC's decision does not prevent CBH from continuing to offer this service and, importantly, any grower who wishes to continue to use CBH's bundled storage and transport service will remain free to do so."

The CBH Group responded to the ACCC’s final decision to revoke the notification for Grain Express by noting that it was disappointed, but that it would continue to champion the interests of Western Australian grain growers to ensure they receive the most value from their system. CBH noted that it has been actively working on contingencies for some time but will now take advice from appropriate experts to consider the best course of action. That action may involve seeking a review of the decision by the Australian Competition Tribunal.

CBH said a more detailed response will be issued in due course.

The ACCC said it considers that it is likely that CBH will continue to be the dominant provider of grain receival, storage and handling services and port terminal services for grain and at least a major provider of transport services. However, as is already the case with bulk storage and handling providers in other states, other suppliers will be able to compete with CBH to provide services to transport grain to port for export.

ACCC noted that a number of industry participants have expressed concerns that in periods of high congestion in the CBH supply chain they are required to continue to use CBH's transport services when other alternatives that would allow them to bypass this congestion are readily available.

"In this respect, forced acquisition of transport services from CBH not only prevents growers and marketers from exploring other transport options that may better suit their individual needs, it also insulates CBH from any competitive pressure in relation to the terms and conditions on which it supplies transport services," Samuel said.

The ACCC noted that at the time the notification was lodged in June 2008 there was support for the arrangements in the grain industry from growers, freight companies and marketers. Many saw the arrangements as providing desirable certainty and stability, particularly in light of uncertainty about the market environment post the imminent deregulation of the industry.

A copy of the ACCC's decision will be available from the ACCC website and by following the links to this matter.
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