Australia’s competition watchdog has alleged Aurizon and Pacific National conspired to stifle new entrants into the local intermodal rail market when they agreed to a $225 million asset sale in 2017.
Aurizon announced last August it would exit the intermodal sector by selling its Queensland intermodal business to Pacific National and trucking firm Linfox, selling its Acacia Ridge terminal south of Brisbane to Pacific National, and closing its remaining intermodal assets.
The transfer of assets from Aurizon to Pacific National unsurprisingly attracted the attention of the Australian Competition and Consumer Commission, which said in March it had “strong concerns” over the move.
The ACCC on Thursday not only rejected the deals on competition grounds, but launched Federal Court action against Aurizon and Pacific National “for allegedly reaching an understanding… that had the purpose and/or would be likely to have the effect of substantially lessening competition in the supply of intermodal and steel rail linehaul services throughout Australia”.
Aurizon has said it will simply close its Queensland assets if the ACCC blocks the deal, but the competition regulator is now seeking an injunction to prevent Aurizon from doing that, at least until the matter is settled by the court.
The crux of the competition watchdog’s claim is that early in the sale process, Aurizon allegedly agreed to make Pacific National the only candidate to buy the businesses, in a mutual effort to eliminate potential new competition in the Australian rail market.
Pacific National has already paid Aurizon a non-refundable $35 million in the deal.
“At all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive,” ACCC chairman Rod Sims said. “The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business.
“However, the evidence makes it clear that it was more lucrative for Aurizon to agree to sell parts of its intermodal business to its closest competitor, and close other parts of that business, than it was to sell the whole intermodal business to a potential new entrant.”
Sims said the proposed sale would make Pacific National the monopoly operator of intermodal rail linehaul on the North Coast Line servicing northern Queensland, and would cut the number of players in Australia’s interstate intermodal market from three to two (with SCT Logistics being the other player).
The ACCC is seeking declarations, pecuniary penalties, costs, and orders from the Federal Court restraining Pacific National from acquiring Acacia Ridge and Aurizon’s Queensland intermodal business.
It is also seeking an interlocutory injunction to prevent Aurizon from closing the businesses until the matter is determined by the Federal Court.
Aurizon said it was “disappointed” by the ACCC’s decisions, and would fight back.
“Today’s ACCC decisions negatively impact Aurizon’s commercial interests,” the company said in a short statement to the ASX.
“Aurizon strongly refutes the ACCC allegations in today’s decision and will vigorously defend the proceedings commenced by the ACCC.”
When the sale was announced last August, Pacific National boss Dean Dalla Valle said the Acacia Ridge site “supports Pacific National’s goal of providing consistent and reliable freight rail services to our customers”.
The drama adds to Aurizon’s ugly battle with Queensland’s competition regulator, the QCA, over how much it is allowed to earn from its exclusive operation of the Central Queensland Coal Network, which coal miners use to export hundreds of millions of tonnes of product each year.