Economics Legislation Committee
Estimates hearings 29 May 2012
Mr Rod Sims, Chairman
Mr Marcus Bezzi, Executive General Manager, Enforcement and Compliance Division
Mr Scott Gregson, Group General Manager, Enforcement Operations Group
Mr Richard Chadwick, General Manager, Adjudication Branch
Senator RHIANNON: I might start with the ACCC’s capacity framework arrangements for Port Newcastle. Clause 6AI in that document refers to a capacity shortfall as the triggering condition for Port Waratah Coal Services to expand its Newcastle coal loading facilities. It defines a capacity shortfall as when Port Waratah’s contracted allocations exceed capacity. Port Waratah now argues that this shortfall has occurred. It asserts that it has take or pay contracts to accept 176.7 million tonnes of coal a year, but the company has not publicly provided any of the required detail to substantiate this figure. Has Port Waratah provided information about its take or pay contracts to accept 176.7 million tonnes of coal? If so, what are the details? Has it provided it to the ACCC?
Mr Chadwick : I will just clarify our role in this. We were involved in the Port Waratah coal development really because they need an exemption from competition law to enable them to get together to set up those arrangements. So we granted an authorisation to enable that to happen. Part of that arrangement had triggering provisions to enable them to expand production. We do not have detailed reporting requirements to us because the role the commission has here is really to, if you like, grant an exemption to competition law to enable the industry to get together and establish these arrangements. We do not have an ongoing regulatory role.
Senator RHIANNON: Who does have the regulatory role?
Mr Chadwick : I think the New South Wales government, as the owner of the port, probably has a role there.
Senator RHIANNON: Well, they do the planning side of it. I did not have any understanding that they were involved in this aspect. That is why I came here. It does seem extraordinary that you have set up the arrangement for the trigger to expand but we have no idea if the take or pay contracts for that amount are accurate, because nothing has been released.
Mr Chadwick : We did not set up the trigger for establishing those. They were negotiated by the industry, and I think with the involvement of the New South Wales government, to set up the triggers and the frameworks. We simply granted an exemption from competition law to enable them to build that framework, if you like. But in terms of the terms of the framework, we were not involved in those negotiations.
Senator RHIANNON: Did you provide any detail in terms of what needed to be provided in the framework when we get to the point of trigger, even if you are not going to be the regulatory mechanism? What I am trying to understand is, with this amount—in this case, 176.7 million tonnes—what mines does it come to? What contracts? Over what period of time? Did you get down to that level of detail?
Mr Chadwick : No. The test for us to grant that exemption from competition law was really whether the arrangements result in a public benefit that is sufficient to outweigh any anticompetitive detriment. The benefit, in a sense, is clear in terms of the expansion of the port. And our focus was on the potential anticompetitive harm in the arrangements. So that was really our focus there.
Senator RHIANNON: How do you justify a public benefit when we cannot be confident that the trigger has been achieved? If your justification for providing the exemption is on the basis of public benefit, how do we know we have a public benefit here?
Mr Chadwick : We consulted with a range of stakeholders.
Senator RHIANNON: Who were the stakeholders?
Mr Chadwick : This happened a year or two ago, so I do not have the list with me.
Senator RHIANNON: Can you take that on notice?
Mr Chadwick : I can take that on notice. Really the focus was on the strategy to expand the port. That was really the focus of that assessment.
Senator RHIANNON: So is it correct to say that your strategy to expand the port is based on the assumption that it is a public benefit for that expansion to occur?
Mr Chadwick : I think that is right. I think the commission accepted that.
Senator RHIANNON: We are dealing with coal here. Coal is obviously responsible for about 40 per cent of Australia’s greenhouse gas emissions. Obviously with the export industry there is a lot more. Was that taken into consideration when you looked at the public benefit?
Mr Chadwick : No. I do not think that came up in the analysis.
Senator RHIANNON: Could you take on notice what issues you did look at in terms of public benefit and how you defined that?
Mr Chadwick : We put out a draft decision and a final decision which set out all that reasoning. It is on our public register. I am sure we can get you a copy somehow.
Senator RHIANNON: So you will take that on notice. Thank you. I will move from coal to eggs. The ACCC initiated court action against egg suppliers who have misrepresented eggs they have sold as free range when they are not. How many of these complaints have been taken to court and what have been the outcome?
Mr Gregson : The ACCC receives a variety of complaints in relation to either free range eggs or variations to those type of representations. To date, we have had two matters proceed to court, one in Western Australia. We resolved that with penalties in the order of $50,000. I do not have the precise details in my head about the individuals. It was through some of the ancillary remedies we got in that case. The other matter is being run in our South Australian office presently and is still before the court. I mention that we have related matters in relation to free to roam and chicken meat.
Senator RHIANNON: Could you repeat that?
Mr Gregson : Chickens for meat. The allegations relate to free to roam.
Senator RHIANNON: Is that the South Australian one?
Mr Gregson : No. This is a third matter.
Senator RHIANNON: What court is that in, please?
Mr Gregson : That would be in the Victorian division of the Federal Court.
Senator RHIANNON: And how far advanced are the Victorian and South Australian cases? When do you think we will have an outcome?
Mr Gregson : The Victorian matter has just completed the trial. So we are awaiting judgment on that. That is in the hands of the court. The timetabling with respect to the South Australian matter is that we are currently going through the directions phase of the matter. We hope to have the matter back before the court later this year.
Senator RHIANNON: I return to the Western Australian court case. You said there was a $50,000 penalty. Were there any other aspects to that decision?
Mr Gregson : We ordinarily obtain other remedies in the court. I am happy to give you a copy of the media release that sets all of those out.
Senator RHIANNON: The Australian Egg Corporation has applied to be allowed to label and trademark free range eggs from hens kept to a density of 20,000 a hectare. How does this compare with the current standard that describes free range eggs?
Mr Gregson : I might hand over to Richard Chadwick.
Mr Chadwick : You are correct; we are currently establishing a certification trademark, which has been lodged with us. We have begun consultation on that process with interested parties in terms of their standard.
Senator RHIANNON: I was interested in which community groups. I understand you have invited some groups to comment on the AEC’s application. Which groups are they?
Mr Chadwick : Again, I am afraid I did not bring that list with me either.
Senator RHIANNON: Can you take that on notice, please? Have the public been invited to comment on this application?
Mr Chadwick : In a sense, we have written out to mainly peak industry bodies and consumer groups, as I understand it.
Mr Sims : But anyone can make a submission.
Mr Chadwick : Anyone can make a submission. We have asked for submissions by 20 June.
Mr Sims : We advertise in the press, so anyone can make a submission.
Senator RHIANNON: So it goes into the public. I have only seen the groups you invited.
Mr Bezzi : Mr Gregson mentioned the case in Victoria. That case very much revolves around the issue of whether or not chickens that have a very small amount of space in which to grow up are free to roam. The issues in that case are relevant to the Egg Corporation’s processes and application as well.
Senator RHIANNON: Thank you for that. Will the ACCC consider factors such as the term 'free range' being associated with natural chicken behaviour, such as scratching and turning the dirt and investigating their surroundings? There is so much confusion now about the term free range, so I am interested in how you are approaching it.
Mr Chadwick : With the certification trademark, that assessment is done by the ACCC under the Trade Marks Act. There are a range of technical requirements which really focus on what the standard is—whether or not there is an objective process for assessing the standard and how the standard is assessed. But there is also a broader catch-all provision which basically says that the commission can only grant a certification trademark where they believe it is in the public interest and consistent with the principles of fair trading and consumer protection. So that is the broad framework. It is really a consumer protection test. But we also look at the content of the standards to see if they are, in a sense, enforcing the standard as they say they would.
Mr Bezzi : And that consumer protection test that Mr Chadwick refers to is, in a sense, going to be elucidated and explained, we expect, by the judge who is dealing with the case in Victoria.