The competition watchdog has proposed a shake-up of grain transport in WA by removing Cooperative Bulk Handling’s monopoly on transport from its ‘up-country’ storage facilities.
CBH has a notification in place with the Australian Competition and Consumer Commission that allows the company to require growers who store grain in its ‘up-country’ storage facilities to also use its transport services to move the grain to port for export.
The ACCC wants to revoke this notification.
CBH has about 4650 shareholders who grow grain and owned around 90 per cent of up-country storage facilities in WA and also owns and operates WA’s four port export terminals.
“The ACCC considers that the notified conduct allows CBH to leverage its significant competitive advantage in supplying up-country receival, storage and handling services to foreclose any possibility of competition to supply transport services to customers who use its up-country storage facilities,” ACCC chairman Graeme Samuel said.
“The ACCC recognises the potential benefits in CBH offering a whole of supply chain receival, storage, handling and transport service.
“However, the forced tying arrangement is not necessary to realise these benefits,” he said.
“To the extent that CBH’s storage, handling and transport service is an efficient system, delivering benefits to growers, they will continue to use it without being forced to do so.
“Grain is transported efficiently and cost effectively to port in other states, often as a bundled service similar to CBH’s arrangement, without forcing growers to acquire all relevant storage, handling and transport services from a single supplier.
“In this respect, most interested parties that have objected to CBH’s arrangements have indicated that they would be likely to continue to use CBH even if they were not forced to do so, but that the opportunity to explore alternatives would put competitive pressure on the company.
“By leveraging its dominance of up-country storage to force growers to use its transport services CBH can insulate itself from competition.”
In a statement the ACCC said for the reasons outlined by Mr Samuel it has issued a draft notice proposing to revoke the notification.
This will allow grain growers who use CBH’s up-country storage facilities to have choice in who they use to move their grain to port.
“Importantly the ACCC’s draft notice only relates to CBH’s conduct in forcing growers who use its up-country storage and handling facilities to also use its transport services,” Mr Samuel said.
“If the ACCC revokes the notification CBH will still be able to offer a bundled receival, storage, handling and transport service.
“All that will change is that growers who store their grain with CBH will be free to choose whether to use CBH’s transport services or organise their own,” he said.