SYDNEY, AUSTRALIA — The Australian Competition and Consumer Commission (ACCC) said on Nov. 26 that it has decided not to accept undertakings offered by Brookfield Infrastructure Partners LP in relation to its proposed acquisition of Asciano Limited.
While the ACCC has not yet formed a final view as to whether or not it will oppose the proposed acquisition, after careful consideration of the issues and the nature of the behavioral undertakings proposed, the ACCC has concluded it would be inappropriate to conduct industry consultation on the undertakings.
Following the proposed A$8.9 billion acquisition, Brookfield, based in Canada, would own Asciano’s rail network and train operations in two of Australia’s eight states. This includes Pacific National, which operates on Brookfield’s rail network in Western Australia and transports products to Brookfield’s terminal in central Queensland.
When an acquisition raises potential competition issues, the parties may decide to offer remedies to the ACCC in the form of court enforceable undertakings under s. 87B of the Competition and Consumer Act 2010 in order to address the concerns identified by the ACCC.
The ACCC will only consult on proposed undertakings if the ACCC considers that the undertakings are capable of being enforced and have the potential to adequately address competition concerns arising from the acquisition. The ACCC considers that the proposed undertakings offered by Brookfield do not meet these criteria.
“While the ACCC does not generally make public its decision whether or not to consult on proposed undertakings, we considered it important to do so in light of the recent media reports that Brookfield has proposed long-term behavioral undertakings to the ACCC,” ACCC Chairman Rod Sims said. “The undertakings seek to address potential issues arising from the vertical integration of above and below rail assets in West Australia and the integration of port and rail assets in Queensland.
“After detailed consideration, the ACCC has concluded that the undertakings are not acceptable, and accordingly we will not be conducting third-party consultation on the undertakings,” Sims said.
“The ACCC’s review of the proposed acquisition continues and we are assessing the large volume of submissions from industry participants and the parties,” Sims said.
Brookfield, in consultation with Asciano, said it is assessing the ACCC’s announcement and evaluating the variety of available alternatives for addressing those issues that the ACCC has determined cannot be resolved through undertakings relating to conduct alone, including the provision of new structural undertakings, Brookfield said. Brookfield remains committed to working cooperatively with the ACCC in seeking to secure pre-clearance of its proposed transaction, which is the only proposal capable of acceptance by Asciano’s shareholders, the company said.
The ACCC commenced a review of the proposed acquisition on Aug. 6and released a Statement of Issues on Oct. 15. The ACCC expressed a preliminary view that the vertical integration resulting from the proposed acquisition is likely to lead to a substantial lessening of competition in markets for the supply of above rail haulage services in Western Australia and Queensland.
Following the proposed acquisition, Brookfield would own Asciano’s Pacific National above rail business. Pacific National operates on Brookfield’s rail network in Western Australia and transports coal to Brookfield’s Dalrymple Bay Coal Terminal in central Queensland.
Regulators have expressed antitrust concerns with the Brookfield-Asciano deal.
“The ACCC is concerned that the vertical integration will lead to a substantial lessening of competition in related markets for the supply of above rail haulage services in WA and Queensland,” Sims said. “Competition concerns can be particularly acute in cases involving key infrastructure assets of a technical nature, which require many operational decisions to be made on a daily and longer-term basis.”
The ACCC expects to announce its final decision on Dec. 17. Further information on the ACCC’s review is available at its public register.