ACCC makes tracks to the High Court in bid to block rail sale

The ACCC will take its fight to the High Court in a bid to stop Pacific National buying the Acacia Ridge freight rail terminal.

Pacific National’s terminal deal would reduce competition, the ACCC claims. Picture: Bloomberg

The competition watchdog will take its fight all the way to the High Court in a bid to stop Pacific National’s acquisition of the Acacia Ridge freight rail terminal, in what ACCC chairman Rod Sims says is an important test for Australia’s merger laws.

The Australian Competition & Consumer Commission’s decision to take the matter to Australia’s highest court of appeal will further delay Aurizon’s $205m sale of Acacia Ridge to Pacific National, first proposed in 2017, until a final ruling is made.

Mr Sims told The Weekend Australian that, despite the ACCC twice losing in its bid to block the sale in the Federal Court, he believed the matter was important enough to test the ACCC’s arguments in the High Court.

The terminal is the only point in Queensland where goods can be transferred from NSW’s standard gauge rail to Queensland’s narrow gauge track, or to road haulage, and the ACCC has ­argued that Pacific National’s acquisition of the asset would give it an effective monopoly on railing freight into northern Queensland.

“The rail freight industry is very important to Australia — we are a bunch of city states. So just as I’m keen to get two airlines coming out of the Virgin situation, I think it’s pretty fundamental. And now you’ve got Pacific National effectively as a near monopoly on the north-south route, and they want to buy the key bottleneck asset that will decide whether ­rivals get to compete,” he said.

Mr Sims added that the issue would also give the High Court the opportunity to hear its first case concerning the interpretation of Australia’s merger laws, and whether they were fit for the purpose of restraining the establishment of monopoly businesses.

“Separately, where you have a near-monopoly buying a bottleneck asset, I think we want to test the court’s view on whether that should amount to a substantial lessening of competition, and get the court’s view, therefore, on whether our merger laws are relevant to a dominant player buying an asset that can keep others out,” he said.

While Mr Sims said the ACCC believed it had a strong argument to convince the High Court to hear the matter, it has already lost successive legal bids to block the transaction, with the Federal Appeals Court last month upholding a May 2019 decision by judge Jonathan Beach to allow the sale.

Mr Sims said he believed the full Federal Court’s decision did not recognise the impact of the proposed transaction.

“Competition depends on ­rivals having the chance to compete. While no one can predict the future, we do know that, with this acquisition, the barriers to entry would become effectively insurmountable and Pacific National’s near monopoly as the dominant rail freight carrier on the east coast would be entrenched,” he said.

“A lack of competition in rail freight would likely lead to increased prices, for businesses and consumers around the country.”

In his original decision, Justice Beach said he may have accepted the ACCC’s argument that Pacific National’s ownership of the terminal could reduce competition in Queensland’s freight industry had it not been for a voluntary undertaking offered by Pacific National on the last day of court hearings, giving guarantees around access and pricing for third-party users.

The ACCC’s appeal argued Justice Beach did not have the power to accept such an undertaking, and should not have done so even if the power existed.

But the Federal Court of Appeal dismissed the ACCC argument in May and went further, ruling the acquisition would not breach competition laws even without the undertaking.

Mr Sims said he was not deterred by the full Federal Court’s decision, adding that the High Court often took a “fresh look” at matters — as it did in reversing a Federal Court decision when the ACCC took Flight Centre to court over whether it was allowed to block airlines from selling tickets cheaper than those offered through its own services.

“We’ve had losses in cases that, in my view, looking back, damaged competition,” he said. “And future cases are going to come along so it’s important we get the High Court’s view on whether our laws are effective in protecting the competitive process.”