News

CBH gives supply chain undertaking to ACCC

Grain Central, October 18, 2016
 The Australian Competition and Consumer Commission has accepted a court enforceable undertaking from Co-operative Bulk Handling Limited (CBH) that ensures greater opportunities for West Australian grain growers and grain marketers to use alternative grain transport services to those offered by CBH. 

In 2016, CBH has begun offering new services for growers and marketers who use its storage and handling network including:

  • “CBH Site Select” – a service that will allow marketers to buy grain delivered to a CBH receival site and arrange a transport provider other than CBH to transport the grain to port or domestic customers; and
    “CBH Integrated” – a fully integrated service managed by CBH from receival point to export or domestic markets

CBH has undertaken to the ACCC that in offering these services it will, for four harvest seasons commencing from the 2016/17 season:

allow growers until 1 February after harvest to decide whether to opt out of the CBH Integrated service;
significantly reduce the number of CBH receival sites at which users will only be able to acquire the CBH Integrated service; and
price the CBH Integrated and CBH Site Select services as outlined in the undertaking and has agreed to only change its fees and charges for these services in accordance with the terms of the undertaking.
“The new services and the undertaking offered by CBH will facilitate increased competition between grain transport service providers to the benefit of grain growers and marketers and other participants in the WA grain supply chain,” ACCC Chairman Rod Sims said.

Between 2008 and 2016, CBH offered an integrated grain receival, transport and supply chain service known as Grain Express.

In 2013, following a ruling by the Australian Competition Tribunal*, CBH offered an unbundled grain supply chain service, known as Non Grain Express, to allow grain growers and marketers who used CBH’s grain storage and handling services the ability to acquire independent (non-CBH) grain transport services.

The Non Grain Express service:

required growers to opt out of the Grain Express service within seven days of the grower delivering each parcel of grain to a CBH receival site;
was not available at 31 (reduced to 30 in 2015) CBH receival sites which were designated as Grain Express only sites; and
was priced above the Grain Express service.
The ACCC considers that, in combination, the effect of these requirements was that growers and marketers would not, except to a limited extent, use the Non Grain Express service and acquire grain transport services from a competitor of CBH.

The ACCC considers that CBH’s conduct had the effect, or likely effect, of substantially lessening competition in the West Australian grain transport services market, in contravention of section 47 of the Competition and Consumer Act 2010.

CBH has acknowledged the ACCC’s concerns, and while it does not agree that its conduct had an adverse effect on competition, it has offered a court enforceable undertaking to resolve those concerns and continue to manage the export supply chain efficiently for growers.

“The ACCC welcomes CBH’s offer of this undertaking to resolve this matter without the need for court proceedings,” Mr Sims said.

The undertaking was provided following extensive negotiations between the ACCC and CBH at the conclusion of the ACCC’s investigation. This outcome completes that investigation, and facilitates the opportunity for increased competition in the market.

The undertaking is available at http://registers.accc.gov.au/content/index.phtml/itemId/1199137

Background

*In June 2008, CBH lodged an exclusive dealing notification with the ACCC under section 93(1) of the Trade Practices Act 1974. The notified conduct involved CBH offering to supply grain storage and handling services on condition that growers or marketers also acquired supply chain co-ordination services and transport services from CBH.

The ACCC initially allowed the notified conduct to stand. However, in June 2011 the ACCC issued a final notice to CBH revoking the notification. The ACCC considered that the notified conduct had, or would be likely to have, the effect of substantially lessening competition in the supply of grain transport services and that any benefit to the public resulting or likely to result from the conduct would not outweigh the detriment to the public constituted by the lessening of competition.

CBH sought review of the ACCC’s decision by the Australian Competition Tribunal. On 19 April 2013, the Tribunal affirmed the ACCC’s decision to revoke the notification. The Tribunal was not satisfied that notified conduct would not lead to a substantial lessening of competition in the market in Western Australia for grain transport services, and concluded that CBH had not satisfied the Tribunal that the public benefits that were likely to arise from the notified conduct outweighed the anti-competitive detriment.

Source: ACCC

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