TWO of Australia’s most powerful competition regulators are at odds over whether the Port of Newcastle should be able to set its own shipping charges.
The two organisations are the Australian Competition and Consumer Commission, which wants to retain its ability to regulate port charges, and the National Competition Council, which is recommending that an earlier decision that allowed this to happen be revoked.
The regulation dispute began after the port hiked its shipping charges in 2015 and has being closely watched as a key test case by a range of business sectors.
In a separate matter, the ACCC has effectively intervened on behalf of Newcastle in its fight to build a container terminal.
But on this issue, it is siding with Newcastle’s coal industry customers when it comes to fears that the port would have “the ability and incentive to earn monopoly profits” if the existing regulations were revoked.
“In particular, the ACCC points to standard economic theory which suggests that monopolies can maximise profits by charging more, even if this reduces volumes,” the commission said this week in a submission to the competition council.
It said the port’s “overriding incentive [was] to maximise profits, not volumes” of coal.
“Should the declaration of the shipping channel service at the Port of Newcastle ultimately be revoked, the ACCC . . . it would leave PNO as an unregulated monopolist that is able to determine the terms and conditions of access to its services with little constraint,” the ACCC said.
On the other hand, the competition council – which has issued a preliminary decision in favour of the port – says it accepts Newcastle has “a bottleneck monopoly in the coal export market . . . and could play a role in the future state of competition in the container port market (if the container terminal is developed)”.
But having considered the port’s “ability and incentives” to raise charges or “impose restrictive access terms” to its customers, it did not think the port was likely to do so.
It also said the charges in question – whether or not the port was regulated – were “very small” in in relation to the products being shipped.
Its preliminary decision was therefore to recommend the federal government revoke the pricing regulation, freeing the port from ACCC oversight.
The Port of Newcastle declined to comment on the situation, but its submission, also made public this week, said the ACCC oversight was “burdensome and intrusive”.
“Coal producers are aware it is not in PoN’s commercial interests to increase prices to the point where it reduces production and investment, leaving PoN with even greater surplus capacity,” the submission said.
“It is in PoN’s commercial interests to encourage increased production and new investment in the Hunter.”
Coal producers knew that excessive price increases impacting on competition would not be “countenanced by the NSW government”.