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ACCC on the dangers of monopolists without constraint

  • Posted on Monday 7th, October 2019.

The Port of Newcastle is at risk of becoming a monopolist without constraint according to the Australian Competition & Consumer Commission (ACCC).

ACCC Chair, Rod Sims, spoke at the Australasian Transport Research Forum on the ACCC’s perspectives on a number of transport issues.

Sims noted the National Competition Council's recent recommendation to revoke the declaration of the shipping channel service at the Port of Newcastle, which has now occurred.

“A monopolist that controls this type of bottleneck infrastructure, operating without any regulation, has a clear incentive to maximise profits by raising prices even if this means reduced volumes or less use of their service,” said Sims.

“It is bad for the economy when bottleneck infrastructure, at the end of a crucial value chain, is in the hands of a company with unfettered market power,” he said.

Sims is concerned about what this means for users of the service as it will cause companies to limit investment in related markets.

A declaration, however, according to Sims, would constrain monopoly pricing and promote investment by providing a credible threat of arbitration.

“Just as under the Part IIIA access regime the test for vertically integrated monopolies is one of harm to upstream or downstream competition, for non-vertically integrated infrastructure we may need a ‘market power’ test,” said Sims.

“The ACCC has been considering the need for such a ‘Part IIIB’ provision for some time. The reasonable alternative is bespoke regulation as we have for electricity networks and gas pipelines, both of which are not vertically integrated. Either can work. Why regulate energy monopolies but not transport monopolies?”

“Just as we do not want vertically integrated monopolies denying access to their competitors, we do not want non vertically integrated infrastructure exercising their market power to raise prices to users and so damage the economy,” he said.

Sims’ speech covered a range of transport issues including the reform of roads funding, protection of shipping lines coordinating their behaviour, high profile transport mergers that raise competition issues and monopoly airport charges.

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