Monopoly Case Gives Australian Port Operator Win

Containers are loaded onto cargo ships at Port Botany in Sydney, Australia, on June 4, 2021. Saeed Khan/AFP via Getty Images

Private-owned port operator NSW Ports has won an appeal case in which it was accused of monopolising container port services in the Australian state of New South Wales (NSW).

The case was first brought by the Australian Competition Consumer Commission (ACCC) in 2018 when the competition authority alleged the firm violated competition laws when it entered into three 50-year agreements with the NSW government a few years earlier.

Two of the agreements were related to the privatisation of the firm’s subsidiaries in Port Botany and Port Kembla in May 2013, while the third was linked to the privatisation of the Port of Newcastle in May 2014.

ACCC Alleged Agreements Lessened Competition

Under the agreements, the NSW government would compensate Port Botany and Port Kembla operators if container traffic at the Port of Newcastle exceeded a minimal specified cap.

The Port of Newcastle then had to reimburse the government for those fees.

The ACCC alleged that the reimbursement would significantly raise the cost of moving a container at the Port of Newcastle and make the development of a new container terminal at Newcastle uneconomic, effectively lessening competition and causing harm to businesses and consumers.

A container ship gets loaded at the main Botany port in Sydney, Australia, on Aug. 4, 2020. Saeed Khan/AFP via Getty Images

In June 2021, the Federal Court dismissed the lawsuit as it found NSW Ports had “derivative crown immunity” and that the terms of the three agreements did not reduce competition in the state’s port sector.

Derivative crown immunity is the immunity an entity enjoys when dealing which the Crown (or an agent of the Crown–which is the NSW government in this case) under limited circumstances.

In addition, the court found that the ACCC based its case on mere speculations that a new container terminal might be developed at Newcastle somehow in the future while there was likely no chance for the NSW government to permit the development of another container terminal at the Port of Newcastle before Port Botany reached its capacity.

In July 2021, the ACCC lodged an appeal against the Federal Court’s decision. However, it was struck down by the court on Feb. 23, 2023.

Response from the Parties

Following the court’s decision, ACCC commissioner Liza Carver said the competitive authority took legal action due to concerns about a 50-year monopoly imposed by NSW Ports on the state’s container port services.

“We appealed this case because we considered that the compensation provisions created a significant barrier to entry,” she said in a statement.

“The threat of new entry is an important part of the competitive process and imposes a competitive discipline on existing businesses, including monopolies.”

The court has not publicly announced the judgement as it gave each party one week to examine the decision and redact any confidential information.

Meanwhile, NSW Ports CEO Marika Calfas said the court’s ruling was a “win for economic certainty and prosperity” that would benefit local businesses and consumers.

“Maintaining the right ports and freight strategy to cater for NSW’s growing trade needs is crucial to the state’s economic future,” she said in a statement.

“Port Botany and Port Kembla are key economic drivers for NSW and the nation, contributing more than $13 billion a year to the state’s economy and supporting 65,000 jobs.”

The CEO said the judgment was in line with the NSW government’s long-term strategy for the port sector, in which Port Botany will be prioritised for shipments first, followed by the development of a new container terminal at Port Kembla.

It is worth noting that after the ACCC launched the appeal, the NSW parliament passed new laws establishing a process to remove the requirement for the Port of Newcastle to reimburse any compensation paid by the NSW under the agreements.

The new legislation took effect on Nov. 25, 202.

“The passage of the legislation should facilitate competition between ports in NSW for the provision of container port services,” the ACCC said.