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Shape up or ship out: TasPorts provides undertaking to ACCC under new misuse of market power laws

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The Australian Competition and Consumer Commission (ACCC) has accepted a court enforceable undertaking from a corporation in breach of section 46 of the Competition and Consumer Act 2010 (Cth) (CCA). This is the first application of the misuse of market power provision since its 2017 reform introduced the ‘purpose, effect or likely effect of substantially lessening competition’ test.

In May 2021 the Federal Court declared that Tasmanian Ports Corporation Pty Ltd (TasPorts) misused its market power by requiring Grange Resources Limited (Grange) to pay a “marine precinct tonnage charge” (Tonnage Charge). TasPorts imposed this charge in response to the attempted entry of Engage Marine Pty Ltd (Engage Marine) as a competitor into the Port Latta marine towage and pilotage market. TasPorts admits that in doing this, it engaged in conduct that had the likely effect of substantially lessening competition in the markets for towage and pilotage services in northern Tasmania, therefore being in contravention of s 46(1) of the Competition and Consumer Act 2010 (Cth) (CCA).

Pier Pressure – the background to the conduct

TasPorts is a Tasmanian owned company, providing marine towage and pilotage services to ports in Tasmania. Prior to 2018 TasPorts was the sole provider of marine services at major ports in Tasmania, including Port Latta.

The infrastructure on Port Latta is privately owned and operated by Grange, a publicly listed mining company, and TasPorts provided towage, pilotage and other marine services to Grange under the Port Latta Services Agreement (PLS Agreement). In August 2017, after negotiations for the continuation of services after the expiry of the PLS Agreement, Grange advised TasPorts that it would obtain towage and pilotage services from another provider, Engage Marine.

Subsequently, in October 2017, TasPorts advised Grange that it would need to pay the Tonnage Charge for vessels calling in Port Latta after the expiry of the PLS Agreement. TasPorts had no legal right to require Grange to pay the charge and the invoiced amounts were not paid. On 15 July 2019, the ACCC notified TasPorts that it was investigating allegations of anti-competitive conduct.

CCA Reform

The present form of section 46 of the CCA commenced operation on 6 November 2017, serving to repeal and relace the previous misuse of market power provision.

Previously, a corporation with substantial market power was prevented from acting for the purpose of:

(a) Eliminating or substantially damaging a competitor in that or any other market;

(b) Preventing the entry of another person into that or any other market; or

(c) Deterring or preventing a person from engaging in competitive conduct in that or any other market.

These provisions required that the conduct of a corporation with significant market power have the purpose of damaging the competition of an actual or potential competitor. However, the new law provides that the conduct has ‘the purpose, or has or is likely to have the effect of substantially lessening competition’. Thus, for a corporation to contravene s 46(1), that corporation must:

(a) have a substantial degree of market power; and

(b) engage in conduct which is likely to have the effect of substantially lessening competition in that market or another market in which it trades or is likely to trade.

The Proceedings

The ACCC commenced proceedings in 2019 seeking declarations of contravention of s 46(1) by TasPorts, s 76(1) pecuniary penalties and s 80 injunctive relief under the CCA. The parties agreed to resolve the proceedings by way of an undertaking given by TasPorts to the ACCC. The Federal Court ordered TasPorts to pay part of the ACCC’s costs.

TasPorts admitted that it had a substantial degree of market power in the management and maintenance of port infrastructure in Northern Tasmania. TasPorts’ also made the further admission that its conduct had the “likely effect” of substantially lessening competition in the related Tasmanian towage and pilotage market.

The Tonnage Charge would have cost Grange an estimated $940,000.00 per year had it been enforced. There was a real commercial likelihood that this would have had the effect of raising Grange’s future costs of acquiring services from Engage Marine.

The bottom line

This case demonstrates the way in which the ACCC will examine related markets when determining if there has been a misuse of market power. TasPorts had a substantial degree of market power in the marine management and infrastructure market, and its actions were found to have substantially lessened competition in the marine towage and pilotage market in Northern Tasmania.

The ACCC agreed to not seek a penalty against TasPorts which indicates that ACCC may be willing to seek enforceable undertakings by consent over pursuing civil penalties at the end of lengthy and expensive civil proceedings. The undertaking given by TasPorts is available here.

Contributors

Nathan Jones
Special Counsel
Emma Connolly
Lawyer
William Wade
Graduate Lawyer

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