Competition czar Rod Sims says government preferences for price monitoring regimes at Australian ports is failing to constrain monopoly pricing.
Speaking to the Ports Australia Centennial Conference in Melbourne, Sims took aim at some big-name terminals.
“Take for example the Port of Newcastle. This is the world’s largest coal export port, and it was privatised in 2014 with a sale price of $1.75bn. Less than a year later, the new owner revalued its port assets to $2.4bn and increased navigation charges by over 40%,” Sims said.
“There is no effective regulatory regime to constrain monopoly pricing at this port. Instead, there is simply a price monitoring regime. As you may expect, this regime has had no visible impact in dealing with this price increase.”
Sims said a negotiate-arbitrate framework was a minimum for effective monopoly infrastructure regulation and questioned moves by governments to sweeten deals for port buyers, such as the Port of Melbourne, by putting in place arrangements that ensure little to no prospect of future competition.
“To date we have expressed concern about the initial proposal by the WA Government to offer the new owner of the Port of Fremantle the first right to develop a new port south of Fremantle in the future,” he said.
“Allowing the owner of the existing facility the right to develop a new port forecloses the potential for future competition between two Fremantle ports. This limits the competitive constraint on the privatised port operator, to the detriment of users.”
Sims said maximise proceeds often was a core objective in privatising assets.
“This is fine if there is a competitive market, or there are sound regulatory arrangements in place to curb monopoly pricing and protect the long term interests of consumers,” he said.
“But as I’ve noted, the ACCC has been concerned that this has not been the case with many privatised port assets.”
Sims, however, reported examples where governments had leaned towards a more robust regulatory regime to apply post-privatisation.
“We saw some positive results from our engagement with the Victorian Government last year, with important improvements to the regulatory regime applying to the Port of Melbourne,” he said.
“An even more pleasing result has been our recent engagement with the WA Government on the proposed privatisation of the Utah Point Bulk Handling Facility (Port Hedland).”
“After the ACCC pointed out the limits of price monitoring to constrain pricing, the WA Government now proposes to replace the monitoring regime with a negotiate-arbitrate framework.
“We consider that this will provide a credible constraint on monopoly pricing, while still allowing users to commercially negotiate terms of access.”
This article originally appeared on Rail Express affiliate site Lloyd’s List Australia.