Competition Regulator Sues Port Operator Over Alleged Misuse Of Market Power

An alleged attempt by near-monopoly port operator TasPorts to block a new company from providing towage and pilotage services in competition with its own marine services offerings is at the heart of a legal action by the Australian Competition & Consumer Commission (ACCC).

Details of the lawsuit were released yesterday by the ACCC, the competition watchdog.

"In short, our case is that TasPorts sought to maintain its monopoly in towage and pilotage in Tasmania, resulting in higher prices and lower quality services," ACCC Chair Rod Sims said.

"We are alleging that TasPorts' actions are driven by an anti-competitive purpose, and that its conduct has had or is likely to have an anti-competitive effect," he added.

The ACCC is seeking injunctions, declarations, penalties and costs.

Commenting on the ACCC's actions in the Federal Court in a statement provided to FreightWaves, TasPorts stated that it "strenuously denies that it has breached competition law as alleged by the ACCC." The port operator added that it would "vigorously defend" against the ACCC's allegations.

The Law

Section 46(1) of Australia's Competition and Consumer Act 2010 forbids companies with "a substantial degree of power in a market" from engaging in conduct that is likely to have the effect of substantially lessening competition.

In determining whether a company has "a substantial degree of power," a court will take into account whether the behavior of the company is limited by the conduct of actual or potential competitors and suppliers. A court will also take into account whether there are any actual or proposed contracts, arrangements or understandings between the parties in a given market.

Ultimately, it will be up to the Federal Court to decide the meaning of the various parts of section 46 and whether or not TasPorts has breached it. It will also be the decision of the Federal Court what, if any, penalties should be imposed if it decides that the port operator has breached section 46.

Background

TasPorts is the near monopoly port operator on the Australian island of Tasmania. In addition to its port operations business, TasPorts is – or was – the monopoly supplier of marine services at ports on Tasmania. But, in 2017, Engage Marine won a contract to supply towage and pilotage services to iron ore mining company Grange Resources at Port Latta, which is a pelletised magnetite iron ore export facility on the north coast of the island.

According to the official court filing, TasPorts had previously supplied those services to Grange.

A "marine pilot" is a very highly experienced and qualified commercial mariner. He or she is also exceedingly expert in the varied quirks peculiarities of navigating in and out of the particular port that he or she covers. For example, the pilot will know thoroughly how wind shear will affect the steerage of a large ship compared to a smaller ship at a given turn in the port, taking into account the underwater slope, currents and how ships displace water at that particular spot in a range of tidal conditions. It is the pilot's job to advise the master of the ship how best to proceed while navigating in and out of the port.

Grange announced in August 2017 that it intended to use Engage Marine for those services. It also was agreed between Grange and TasPorts that the port operator would continue to provide marine services to Grange at Port Latta until June 30, 2018.

TasPorts is also the sole provider of training for maritime pilots in Tasmanian ports under an agreement with the Marine and Safety Authority of Tasmania. Large ships must employ the services of a licensed marine pilot to access Tasmanian ports.

The incidents

In October 2017, TasPorts wrote to Grange saying that it required the mining company to pay a new "marine precinct tonnage charge" for vessels calling at Port Latta as of July 1, 2018. The charge equated to about A$750,000 a year (about $555,000 as of July 2018). The charge had never been issued before while Grange was using TasPort services.

Grange refused to pay.

According to the ACCC, TasPort also wanted to impose tonnage charges on the shipping agents for ships calling at Port Latta – "a cost that would ultimately be passed on to Grange," the ACCC said.

TasPorts then made proposals to Grange that TasPorts would provide pilotage services to Grange instead of Engage marine "with significantly discounted rates" for the new marine precinct tonnage charge.

In June 2018, the ACCC alleges that TasPorts imposed a new "layup minimum charge of A$965 a day (plus taxes) for the use of a temporary berth at a nearby port. "This was not a charge included in TasPorts' Schedule of Port Charges."

In July 2018, TasPorts introduced a new type of "tonnage" charge for "non-cargo" vessels of A$984 plus taxes for Engage Marine's tugs if they used temporary berthing facilities in Tasmanian ports.

"It was targeted to apply to Engage Marine's tug boats. The new Minimum Lay Up Charge made it uneconomical for Engage Marine to use TasPorts' temporary berths for its tugs. Further, TasPorts told Engage Marine it would need to constantly `man' its tug if it used TasPorts' temporary berths in case other users required access to the berth. This would impose substantial additional costs on Engage Marine. TasPorts' tugs have long-term berths," the ACCC alleged.

The ACCC went on to allege that, despite being the sole officially recognized provider of local pilotage training that leads to a license to operate, TasPorts "failed or refused" to provide Engage Marine with pilot training. Engage Marine then had to sub-contract its pilotage services that it provided to Grange back to TasPorts.

Then, at a meeting in November 2018, TasPorts told Engage Marine that its employees would not be able to work as pilots "unless contracted to do so by TasPorts."

TasPorts also refused to give consent to a third-party shipping company that wanted to sub-lease its berth to Engage Marine at the port of Devonport.

"TasPorts failed or refused to engage in any genuine discussions with Engage Marine about long-term berthing facilities until at least September 2019. This was more than two years after Engage Marine approached TasPorts regarding access to berth space in May 2017," the ACCC alleged.

Finally, "despite repeated requests by Engage Marine," Tasports has failed or refused to put Engage Marine on the Shipping Schedule as a towage service provider for Tasmanian ports, which would prevent Engage Marine from offering its services at ports other than Port Latta, the ACCC alleged.

Allegations by the ACCC

The regulator alleged in court filings that the TasPorts's behavior 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."

This conduct was for the purposes of "substantially lessening competition" the regulator alleged. 

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