Collective negotiation in the Wild West?

By Paul Bugler*

As reported in Rail Express last week, the Australian Competition & Consumer Commission published its draft determination on an application from North West Iron Ore Alliance (NWIOA) to collectively negotiate either rail haulage contracts or rail access contracts with railway owners, BHP Billiton (BHPB), Rio Tinto and Fortescue Metals Group (FMG).
Although this is a draft decision, the submissions to the ACCC indicate there is no real opposition from the track owners. We can reasonably assume that the final decision will mirror the draft decision, and collective bargaining will be authorised in this instance.
So what does this mean? In my opinion, this is a good decision and will potentially save all parties a large amount time, trouble and money. However, it will not significantly improve the chances of NWIOA members actually getting their product onto anybody’s trains or tracks in the near future.
The ACCC is authorising NWIOA to negotiate a series of bi-lateral contracts on behalf of its members either to use another party’s railway as a ‘whole service’ or to access the owner’s tracks. The ‘whole service’ option is really what most people would associate with a traditional railway – the NWIOA members would be customers who would load their iron ore onto the railway owner’s trains at the mine and take delivery of the ore at the port. The alternative ‘access only’ option, would see them buying track capacity from the track owner but using their own (or a third party’s) trains.
One of the subtleties of rail access is that it is important for access contracts to have a high degree of similarity across a number of areas. This arises from the fact that, regardless of who operates the trains, they will all be using the same tracks – the trains need to conform to a variety of operational and technical specifications that allow for a relatively small degree of flexibility. These requirements need to be reflected uniformly in all access contracts. This is why access arrangements across Australia tend to provide a standard access contract – it simplifies the negotiation process for everybody.
So, if the access contract is going to look the same for all NWIOA members, it makes sense they be allowed to negotiate a single set of terms and conditions (effectively a de facto standard contract) to which the individual members can execute with the track owner. From this perspective, the ACCC decision is to be applauded.
It is rather less clear that a haulage contract is subject to the same inflexibility. Heavy haul contracts for iron ore are likely to be substantially similar, but there is more scope for differentiation on service and pricing depending on what the customer wants. Notwithstanding this, I see no fundamental objection to the ACCC authorising collective negotiation in this situation.
But … and it is big but. What the decision doesn’t do is address the problem that neither BHPB nor Rio Tinto is interested in providing access under either mode to their competitors. FMG has said it would be happy to provide access to its new railway to others, provided that BHPB and Rio Tinto do the same.
BHPB and Rio Tinto have been fighting tooth and nail for the last six years to prevent being forced to give FMG and others access to their tracks and trains.  In 2008, the federal treasurer, on recommendation from the National Competition Council, ‘declared’ the BHPB and Rio Tinto rail lines under the Trade Practices Act Part IIIA, forcing those companies to negotiate access or face compulsory arbitration through the ACCC. That declaration is still under appeal in the Australian Competition Tribunal.
Commenting on the declaration, BHPB’s counsel told The Australian that even if the tribunal allowed the declaration to stand “in the extremely unlikely event there was no appeal”, access seekers wouldn’t get on the track before 2014.
So NWIOA members may now be allowed to collectively negotiate, but with whom, and when, a negotiation happens is less clear.

*With over 30 years of experience, Paul Bugler has been influential in the area of access regulation and heavily involved in business development in the rail freight area with the development of open access. In 2009 he formed Lacertus Verum, a consulting firm offering rail management services particularly in the areas of business development, infrastructure access and contract negotiation. www.lacertusverum.com.au