What must you demonstrate when seeking infrastructure access? The National Competition Council clarifies the principles

The National Competition Council (NCC) has clarified what access seekers will need to demonstrate from now on when seeking declaration of services provided by monopoly infrastructure service providers.

On 24 September 2019, the revocation of the declaration of the shipping channel service at the Port of Newcastle became effective. Having received the NCC's recommendation that the shipping channel service be revoked, and not making a decision within the 60 day statutory period, the Treasurer was taken to have accepted the NCC's final recommendation.

The immediate effects of the Treasurer’s deemed decision to revoke the declaration of the shipping channel service are that:

• the current statutory obligation under Part IIIA of the CCA requiring Port of Newcastle Operations Pty Limited (PNO) to negotiate with access-seekers to provide the declared services at the Port will fall away; and
• an access-seeker will no longer be able to refer any dispute over the provision of the shipping channel service at the Port to the ACCC.

This is the first time the NCC has considered the Harper reforms on third party access, and signals how it is likely to approach future applications made by access-seekers for the regulation of monopoly infrastructure services.

The Port of Newcastle dispute – background

Since June 2016, a defined shipping channel service provided by PNO at the Port has been declared under Part IIIA of the Competition and Consumer Act 2010 (CCA). This has meant that during that time PNO has been required to negotiate with access-seekers for the provision of the regulated service. If agreement could not be reached between PNO and an access-seeker, then a dispute could be referred to the ACCC for determination.

This occurred when Glencore referred a dispute to the ACCC for arbitration in November 2016. The ACCC made its determination in relation to that dispute in September 2018. Both Glencore and PNO appealed the ACCC's determination to the Tribunal, which is currently considering the review applications, and a decision is due to be delivered later this year. The current arbitration is unaffected by the revocation.

The decision by the Treasurer and the NCC on revocation

Crucial to the NCC's consideration of PNO's application was whether the statutory declaration criteria, as they currently apply under Part IIIA of the CCA, were satisfied. If all the declaration criteria were satisfied, then the NCC could not recommend that the services cease being regulated. Conversely, if at least one of the declaration criteria was not satisfied, then the NCC could recommend to the Treasurer that the services cease being declared.

Since Glencore’s original application for declaration was first considered, there have been significant changes made to the declaration criteria. Following the Harper amendments to criterion (a), a declaration applicant must show:

“that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service”.

In recommending revocation, the NCC has taken the view that access to the shipping channel services would not promote a material increase in competition in markets such as the coal export market or the container port market.

This significant shift from the pre-Harper position means that it will no longer be enough for an access-seeker to simply demonstrate that the services are provided by means of a bottleneck facility or that the service provider possesses market power.

Such was made very clear by the NCC when it said:

"Declaration of the Service needs to promote a material increase in competition in at least one other market. An assessment of whether declaration of a service satisfies criterion (a) therefore requires consideration of the impact declaration would have on competition in so-called “dependent” markets. The Council accepts that when assessing those impacts it is relevant to consider the degree of market power PNO has and the fact that it operates a bottleneck facility. But neither the fact that the service provider has market power nor that it operates a bottleneck facility is in itself sufficient to satisfy criterion (a). It is only where a material increase in competition would be likely to result in another market that the criterion is satisfied".

The implication of the NCC's approach in light of the post-Harper amended form of criterion (a) is that it will not be as straightforward for an access-seeker to satisfy criterion (a) in order to seek the declaration (under Part IIIA of the CCA) of services provided by monopoly infrastructure service providers.