AusRAIL, Market Sectors

Patrick rebuffs ACCC competition concerns on FCL buyout

<p>Patrick Corporation has refuted Australian Competition and Consumer Commission (ACCC) concerns over potential competition issues underlying its proposed acquisition of FCL.</p> <p>Patrick yesterday (Thursday, June 9) issued a detail response rejecting the five issues the ACCC identified as being competition concerns.</p> <p>Several of those issues concern Patrick’s involvement in the Pacific National rail business it co-owns with Toll Holdings, and the implication this will have on competition between the two companies and on how they will respond to other competition.</p> <p>The first issue the ACCC raised is that the acquisition could increase the incentive and likelihood for Pacific National to foreclose on FCL and Toll’s rival freight forwarders.</p> <p>"Post acquisition both the owners of Pacific National, Toll and Patrick, will have significant rail freight forwarding interests, and will have many more freight forwarding competitors in common," the ACCC stated.</p> <p>"Both Patrick and Toll will have the potential to benefit from a strategy of foreclosing on rival freight forwarders by utilising Pacific National to disadvantage FCL and Toll’s rivals."</p> <p>Patrick has dismissed this point, saying it "would not make sense" for Pacific National to discriminate against competing freight forwarders.</p> <p>"It is not in Patrick’s interest, nor is it in Pacific national interest to encourage other freight forwarders to either move their containers by road or to encourage an existing or new rail operator to take that business away from Pacific National," Patrick stated.</p> <p>The ACCC’s second concern is that the acquisition will raise barriers to entry for potential rivals to Pacific National for interstate container rail haulage.</p> <p>Patrick rejects this assertion and states that if FCL does not provide a competitive price for its services then customers will switch to other freight forwarders thereby encouraging existing or new rail operators to take business away from FCL and Pacific National.</p> <p>The third issue for ACCC is that there will be a reduction in the level of competitive tension between Toll and FCL and that the acquisition could lead to increased opportunity for parallel behaviour.</p> <p>On this issue Patrick says that the interests of the firms are not aligned and that where business operations overlap, "Toll and Patrick will compete vigorously for customers" as they do on the Bass Strait.</p> <p>Patrick also points to the low barriers to entry in this market and that its structure precludes "conscious parallelism".</p> <p>The ACCC’s fourth concern is that aggregation of Patrick and FCL’s rail terminals will reduce the level of competition in those markets, particularly for container freight passing through inland rail terminals.</p> <p>Patrick has said the situation will not prevent other freight forwarders or rail operators getting access to terminals.</p> <p>"There are a myriad of existing terminals that can be used and there is substantial undeveloped land adjacent to rail," Patrick stated.</p> <p>The final issue concerns vertical integration in Bass Strait shipping, namely that FCL’s freight may end up being uncontestable to other shipping firms.</p> <p>However, Patrick states that FCL freight is just 1.2% of all containerised and trailer freight on the strait and this will have a negligible impact on market share.</p> <p>It also notes that there is nothing to prevent FCL customers approaching other Bass Strait shipping lines &#8211 who also offer vertically integrated packages.</p> <br />