Court orders sought to prevent closure of Aurizon's Queensland intermodal business over competition fears
The Australian Competition and Consumer Commission (ACCC) has started Federal Court proceedings against Pacific National and Aurizon, alleging the companies agreed to lessen competition in intermodal freight in Queensland.
The Commission not only rejected the proposed sale of the Acacia Ridge Terminal to Pacific National, but is seeking court orders to prevent it from acquiring both the Terminal and Aurizon’s Queensland intermodal business – which was to be sold to a consortium of Pacific National and Linfox.
The ACCC has also applied for an injunction to prevent Aurizon from closing its Queensland intermodal business while the case is being determined.
Both Aurizon and Pacific National work in intermodal freight – freight using two or more modes of transport – and they are the only companies to provide it on the North Coast Line servicing northern Queensland.
Aurizon’s Acacia Ridge intermodal terminal is a vital piece of infrastructure in that industry, providing a connection to a rail line where containers can be transferred between transportation modes.
The understanding
Aurizon launched a sale process for its intermodal business in the beginning of 2017, and by late July, the ACCC alleges that Aurizon and Pacific National had reached an understanding – leading Aurizon to stop talking to other bidders.
ACCC chairman Rod Sims says the effect of the understanding was that Aurizon would stop competing with Pacific National to supply intermodal and steel rail linehaul services throughout Australia.
Under the alleged understanding, Pacific National was to obtain control of the Acacia Ridge Terminal either by acquiring it or by being appointed by Aurizon to run its interstate operations by December 1, 2018.
They also allegedly agreed Pacific National would become the only bidder for Aurizon’s Queensland intermodal business, and that if Pacific National did not acquire that business, Aurizon would close it.
Sims says the proposed acquisitions and the agreement for Pacific National to operate the Acacia Ridge Terminal would have had the effect of creating a monopoly on the route – and that each component of the understanding would substantially lessen competition.
“At all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive. The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business,” he says.
“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.”
After the launch of the March review, the ACCC says Pacific National sought to address its concerns by offering a court enforceable undertaking that it would not discriminate in providing access to the Acacia Ridge Terminal.
But Sims says this was not enough for him.
“The ACCC is of the view that the long term behavioural undertaking offered by Pacific National is not capable of addressing the ACCC’s concerns about the loss of competition resulting from the alleged understanding or Pacific National’s proposed acquisitions of Aurizon’s Queensland intermodal business and the Acacia Ridge Terminal,” he says.
Aurizon hits back
Sims says the regulator acted following an Aurizon announcement that it would close its Queensland intermodal business if the ACCC opposed the proposed acquisition by Pacific National, having already closed its interstate intermodal business in December 2017.
“Given Aurizon’s announcement that it will close its Queensland intermodal business if the Pacific National acquisition is opposed by the ACCC, in circumstances where there is at least one alternative purchaser, the ACCC is seeking an interlocutory injunction to prevent Aurizon from closing this business until the matter is determined by the Court,” Sims says.
Aurizon says it is “disappointed” with the decisions released today in a statement released to the Australian Securities Exchange.
“Today’s ACCC decisions negatively impact Aurizon’s commercial interests,” the company says.
“Aurizon strongly refutes the ACCC allegations in today’s decision and will vigorously defend the proceedings commenced by the ACCC.”
The company says it will retain the $35 million for the total $225 million purchase price for Acacia Ridge and the Queensland business already paid to it.