Acquisitions, Freight Rail, Rollingstock & Manufacturing

ACCC green light for One Rail acquisition

The Australian Consumer and Competition Commission will not oppose the proposed acquisition of One Rail by Aurizon, after accepting a court-enforceable undertaking from Aurizon to divest One Rail’s east coast business.

Without the divestment of One Rail’s east coast business, the ACCC considered that the proposed acquisition would reduce the number of main competitors in the supply of coal haulage in New South Wales and Queensland from three to two, likely resulting in higher prices or decreased service levels.

Aurizon and One Rail both supply rail haulage services for coal in NSW and Queensland and are the two of the three main suppliers of coal haulage in these states, along with Pacific National.

Aurizon is the largest supplier of coal haulage in Queensland, and the second largest in NSW. One Rail is a well-established third supplier in NSW and has recently emerged as a third competitor in Queensland that is having a significant impact.

Aurizon offered a proposed undertaking to the ACCC early in the process to divest One Rail’s east coast business, which includes its coal haulage operations in NSW and Queensland. The undertaking allows Aurizon to sell the business either by a trade sale or demerging it as a new separate ASX-listed entity.

ACCC chair Gina Cass-Gottlieb said the divesture ensures there will remain three main suppliers of coal haulage in NSW and Queensland.

“The ACCC also considered the impact of the proposed acquisition on competition in one or more regional markets for the supply of rail haulage services for bulk commodities, other than coal,” she said.

“We are also satisfied that the divestment of One Rail’s east coast business would preserve it as a potential competitor to Aurizon for the supply of non-coal bulk rail haulage in the future, and Aurizon would continue to be constrained by a number of existing bulk rail haulage competitors.”

Following the acquisition, Aurizon will retain One Rail’s bulk haulage operations and rail network assets in South Australia and the Northern Territory.

Concerns were raised with the ACCC that One Rail’s ownership of rail networks in South Australia and the Northern Territory allow it to continue to favour One Rail’s bulk rail haulage services to the detriment of competitors. Concerns were also raised about the ability of the regulation in place to adequately address the competitive impact of vertical integration in these regions.

“Our merger assessment is limited to competition effects that are the result of the proposed acquisition and cannot address concerns with the existing rail industry or its regulation,” Cass-Gottlieb said.

“We are however satisfied that the transaction does not result in Aurizon having a greater ability and incentive than One Rail currently does, to prevent or impede a rival rail operator from competing on the SA and the NT networks.”