Users of open access supply chains frequently seek to
collectively negotiate various arrangements between themselves and
with the supply chain operator. These negotiations and subsequent
agreements often involve discussions amongst competitors of price
matters, non-price matters and capacity allocation. Users therefore
risk breaching the cartel provisions, exclusionary provisions,
secondary boycott provisions and the anticompetitive agreement
provisions in the Competition and Consumer Act 2010 (Cth)
(Act). Users may apply to the Australian Competition and Consumer
Commission (ACCC) for authorisation of discussions and agreements
which may breach the Act.
KEY COMPETITION ISSUES
This article outlines key competition issues that may arise in
sharing infrastructure and seeking authorisation to collectively
negotiate and make agreements.
Development and expansion
Parties seeking the development or expansion of facilities such
as coal terminals, may wish to collectively bargain with the
facilities manager in order to improve the speed of construction,
reduce transaction costs and develop a uniform view of the
project's needs. These joint discussions or agreements may
contain cartel provisions, exclusionary provisions or may be
arrangements that substantially lessen competition.
In 2012 Carabella Resources, Macarthur Coal, Middlemount Coal,
New Coal, New Hope Corporation and Peabody Energy Australia sought
authorisation to collectively negotiate with Dudgeon Point Project
Management for the development of and access to the port
facilities, expansions to the terminal and associated
infrastructure necessary to support the terminal. The ACCC granted
the authorisation, stating that collective negotiations may
increase transaction cost savings, decrease delays in the terminal
construction and assist in identifying proposals that satisfy the
relevant parties' needs more fully.
Capacity allocation and supply chain
Capacity constraints at ports can create an imbalance between
the demand for services and the capacity of the supply chain
resulting in long queues of vessels at ports, demurrage charges and
delivery delays to recipients. In order to address these issues,
the owners and operators can apply for authorisation to develop
queue management processes or capacity framework arrangements.
These agreements may contain cartel provisions, exclusionary
provisions, anti-competitive arrangements or secondary boycott
In 2009, Port Waratah Coal Services, Newcastle Infrastructure
Group and the Newcastle Port Corporation sought authorisation of
their 'Capacity Framework Arrangements' (Framework) to
address capacity constraints in the Hunter Valley. The Framework
included the allocation of port capacity to access seekers under
long term contracts. The ACCC allowed the authorisation, stating
that the Framework would facilitate the alignment of contractual
obligations and incentives in the supply chain, increase the
accuracy and timeliness of investment decisions and increase
Increased bargaining power
Collective negotiations by users of a supply chain with owners
and operators enable parties to negotiate access on better terms
and conditions than if they engage in individual negotiations.
Parties may make direct agreements as to the price of access, the
mechanism by which price reviews will occur and also non-price
matters. Without authorisation, these discussions and agreements
could breach the cartel provisions or anticompetitive arrangement
provisions of the Act.
In 2010, the North West Iron Ore Alliance (NWIOA), sought
authorisation on behalf of its shareholders, to collectively
negotiate terms and conditions with BHP Billiton, Rio Tinto and
Fortescue Metals Group for the acquisition of above and below rail
access in the Pilbara, including on matters such as price, services
and obligations. In granting conditional authorisation, the ACCC
noted that BHP and Rio Tinto had not provided rail services to
other iron ore producers in the previous 40 years and that without
authorisation participants of the NWIOA would have little
bargaining power in negotiating terms of access with infrastructure
owners such as BHP Billiton, Rio Tinto and Fortescue Metals
LOOK OUT FOR
Look out for our future update on 'Marketing agreements
between joint venture partners' and 'Exclusivity in supply
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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