Application by Sea Swift Pty Limited
[2016] ACompT 9
•28 July 2016
AUSTRALIAN COMPETITION TRIBUNAL
Application by Sea Swift Pty Limited [2016] ACompT 9
File number: ACT 2 of 2016 Tribunal: FARRELL J, DEPUTY PRESIDENT
MR R C DAVEY, MEMBER
PROFESSOR D K ROUND, MEMBERInterveners: Toll Holdings Limited
Maritime Union of AustraliaDate of Reasons for Determination: 28 July 2016 Catchwords: AUTHORISATION – Competition and Consumer Act 2010 (Cth) – application under s 95AU for a grant of authorisation under s 95AT – acquisition of shares in, and assets of, applicant’s major competitor in the supply of scheduled marine freight services to remote communities in Far North Queensland and the Northern Territory – whether s 95AZH(3) applied to prevent the grant of authorisation – whether there are net public benefits
COMPETITIVE DETRIMENT – consideration of the future “with” and “without” the proposed acquisition – where “with” or “without” the proposed acquisition the applicant’s major competitor will exit the market in the short term – where “with” or “without” the proposed acquisition applicant likely to acquire its major competitors leased facilities at Gove – where future “with” the proposed acquisition includes a s 87B undertaking offered by applicant as a condition of authorisation addressing potential competitive detriment
BENEFITS – where condition of authorisation preventing applicant from enforcing clauses in contracts novated to it by its major competitor relating to exclusivity, minimum volumes and rights of first refusal allows other service providers to compete for the contracts during their term – where conditions of authorisation mandate minimum frequency of services to specified remote disadvantaged communities and maximum prices that applicant may charge uncontracted customers in the communities – where condition of authorisation mandates applicant’s leased facilities at Gove be subject to a s 87B undertaking providing for better prices and access than its major competitor’s existing s 87B undertaking in relation to those facilities – where Tribunal satisfied that public benefits justify authorisation
Legislation: Competition and Consumer Act 2010 (Cth) ss 4, 42, 50, 90 Pt VII Div 3
Trade Practices Act 1974 (Cth) s 90(9) (repealed)
Cases cited: Application by Medicines Australia Inc [2007] ACompT 4
Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1
Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317; [2003] FCA 1525
Hospital Benefit Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369; (1997) 157 ALR 105; (1997) ATPR 41-569
Re Australian Association of Pathology Practices Incorporated (2004) 206 ALR 271; (2004) ATPR 41-985; [2004] ACompT 4
Re Qantas Airways Limited [2004] ACompT 9
Re VFF Chicken Meat Growers’ Boycott Authorisation (2006) ATPR 42-120; [2006] AComptT 2
Date of hearing: 6-10, 14-17 June 2016 Date of last submissions: 30 June 2016 Category: Catchwords Number of paragraphs: 347 Counsel for the Applicant: Mr N Young QC and Ms R Orr QC with Mr A d’Arville Solicitor for the Applicant: Gilbert + Tobin Counsel for the Australian Competition and Consumer Commission: Mr J Burnside QC with Ms N Sharp and Ms C van Proctor Solicitor for the Australian Competition and Consumer Commission: DLA Piper Counsel for Toll Holdings Limited: Mr J Lockhart SC with Mr C Colquhoun Solicitor for Toll Holdings Limited: Minter Ellison Counsel for the Maritime Union of Australia: Mr R Scruby Solicitor for the Maritime Union of Australia: W.G. McNally Jones Staff IN THE AUSTRALIAN COMPETITION TRIBUNAL
ACT 2 of 2016 RE: APPLICATION FOR MERGER AUTHORISATOIN OF THE PROPOSED ACQUISITION OF CERTAIN ASSETS OF TOLL MARINE LOGISTICS AUSTRALIA’S MARINE FREIGHT OPERATIONS
BY: SEA SWIFT PTY LIMITED
Applicant
TRIBUNAL:
FARRELL J (DEPUTY PRESIDENT)
MR R C DAVEY (MEMBER)PROFESSOR D K ROUND (MEMBER)
DATE OF DETERMINATION:
1 July 2016
THE TRIBUNAL DETERMINES THAT:
1.Subject to the conditions in the Annexure to this determination, Sea Swift Pty Limited (ACN 010 889 040) (“Sea Swift”) is granted authorisation pursuant to ss 95AT and 95AZJ of the Competition and Consumer Act 2010 (Cth) to acquire:
(a)shares in:
(i)Perkins Maritime Pty Ltd (ACN 009 616 960); and
(ii)Perkins Lady Jan Pty Ltd (ACN 064 110 247); and
(b)assets from:
(i) Perkins Shipping Pty Ltd (ACN 009 597 835);
(ii) Perkins Properties Pty Ltd (ACN 009 592 885); and
(iii) Gulf Freight Services Pty Ltd (ACN 010 755 683)
as set out in a Deed of Amendment dated 17 March 2016 and the appended Amended and Restated Asset and Share Sale Agreement between the following parties:
Vendors:
Perkins Industries Pty Ltd (ACN 009 593 257)
Perkins Shipping Pty Ltd (ACN 009 597 835)
Perkins Properties Pty Ltd (ACN 009 592 885)
Gulf Freight Services Pty Ltd (ACN 010 755 683)
Vendor Guarantor:
Toll Holdings Limited (ACN 006 592 089)
Purchaser:
Sea Swift Pty Limited (ACN 010 889 040)
Purchaser Guarantor:
Sea Swift (Holdings) Pty Limited (ACN 159 387 390)
2.This determination includes the Annexure and all Schedules thereto.
ANNEXURE TO THE DETERMINATION DATED 1 JULY 2016
CONDITIONS OF THE TRIBUNAL’S AUTHORISATION
TRANSFERRED CONTRACTS CONDITION
1 Transferred Contracts Condition
(a)The authorisation is subject to the condition that Sea Swift will not give effect to, or rely on, any provision in the Transferred Contracts which requires the Customer to:
(i)exclusively use the marine freight services of Sea Swift; or
(ii)allow Sea Swift a Right of First Refusal; or
(iii)ship a minimum volume of freight with Sea Swift,
(together the Transferred Contracts Condition).
(b)For the purposes of the Transferred Contracts Condition:
(i)Transferred Contracts means the contracts listed in Schedule 2; and
(ii)Sea Swift must ensure that its obligations under the Transferred Contracts Condition are published on Sea Swift’s website and communicated to Customers within 30 days of the Completion Date.
REMOTE COMMUNITY SERVICE CONDITION
2 Remote Community Service Condition
(a)The authorisation is subject to the condition that Sea Swift will:
(i)maintain a minimum level of scheduled services to the locations and at the frequencies set out in the Remote Community Service Schedule contained in Schedule 3; and
(ii)maintain an up-to-date shipping schedule of services on its website, (together the Remote Community Service Condition).
(b)Sea Swift’s obligations under the Remote Community Service Condition are suspended to the extent that it is prevented from carrying out those obligations by an event or circumstance, or combination of events or circumstances, that are beyond the reasonable control of Sea Swift, including but not limited to:
(i)fire, lightning, explosion, flood, earthquake, storm or any other act of God or force of nature;
(ii)damage to vessel(s) or port facilities;
(iii)civil commotion, sabotage, war, revolution, radioactive contamination, or toxic or dangerous chemical contamination;
(iv)strikes, lock-outs, industrial disputes, labour disputes, industrial difficulties, labour difficulties, work bans, blockades or picketing;
(v)the impact of public holidays or necessary vessel maintenance or refit; or
(vi)any event or circumstance that prevents or jeopardises the safe operation of any scheduled service.
REMOTE COMMUNITY PRICE CONDITION
3 Remote Community Price Condition
(a)The authorisation is subject to the condition that Sea Swift will:
(i)charge no greater than the Maximum Charge for the destinations and services listed in the Remote Community Service Schedule, except as allowed by Condition 4 or in accordance with the Independent Price Review Process set out in Schedule 5;
(ii)publish on its website the Maximum Base Price for the Services, as well as the applicable rate of GST, Consignment Note Fee, Dangerous Goods Surcharge and Minimum Freight Charge, for each Financial Year,
(the Remote Community Price Condition).
(b)For the purposes of the Remote Community Price Condition:
(i) Subject to clause 3(b)(ii) below, Maximum Charge means:
(A)for Vehicle Freight Services, the Maximum Base Price multiplied by the number of units carried; and
(B)for all other Services, the Maximum Base Price multiplied by total tonnes or total cubic metres carried (whichever is greater);
(the Maximum Base Freight Charge),
plus additional charges that may include:
(C) the Fuel Surcharge Fee;
(D) applicable GST;
(E) the Consignment Note Fee;
(F) the Port, Council and Royalty Charges;
(G) the Dangerous Goods Surcharge (if applicable); and
(H) Other Charges (if applicable).
(ii)If, for a particular service, the sum of:
(A) the Maximum Base Freight Charge;
(B) the Fuel Surcharge Fee;
(C) the Consignment Note Fee;
(D) the Port, Council and Royalty Charges; and
(E) the Dangerous Goods Surcharge (if applicable);
is less than the Minimum Freight Charge, then the Maximum Charge is the total of:
(F) the Minimum Freight Charge;
(G) applicable GST; and
(H) Other Charges (if applicable).
(iii)Maximum Base Price is to be determined in accordance with the following formula:
Maximum Base Price = Base Price x (1 + CI)
where:
CI = CPI + LRI
Base Price is determined as follows:
For the Financial Year commencing 1 July 2015 the rates set out for the services listed in Schedule 4.
For each subsequent Financial Year, the Base Price is the accumulated Maximum Base Price as calculated for the previous Financial Year.
CPI is determined in accordance with the following formula:
CPI = [(CPIn – CPIb) / CPIb] x WFCPI
where:
CPIn = the quarterly Consumer Price Index: All groups, Australia for the quarter that was most recently published as at the date on which Sea Swift proposes to complete an Annual Price Review.
CPIb = the quarterly Consumer Price Index: All groups, Australia for the quarter ending June of the previous Financial Year.
WFCPI = the cost component weighting of general costs to provide the Service (31%).
And CPI is subject to a minimum of zero. CPI cannot be a negative number.
LRI is determined in accordance with the following formula:
LRI = LRIn x WFWPI
where:
LRIn = the annual labour rate percentage increases as set out in the Sea Swift Collective Agreement.
WFWPI = the cost component weighting of labour costs to provide the Service (52%).
And LRI is subject to a minimum of zero. LRI cannot be a negative number.
(iv)Consignment Note Fee is a per-consignment fee to cover the cost of documenting a consignment from receipt through to delivery. The Consignment Note Fee is as follows:
(A)for destinations listed in the Remote Community Service Schedule in the Northern Territory: $15.00 plus GST.
(B)for destinations listed in the Remote Community Service Schedule in Far North Queensland: $15.00 plus GST.
(v)Port, Council & Royalty Charges means any charges or statutory fees levied by the applicable port, government or council bodies on the cargo that is imported and exported to/from a wharf, barge ramp or any other landing site in respect of the Service being provided to the customer.
(vi)Fuel Surcharge Fee is calculated as a percentage of the Maximum Base Freight Charge for a Service. The percentage surcharge and fee are calculated (on a monthly basis) as follows:
Fuel Surcharge percentage = [(Fn – Fb) / Fb] x WFF
Fuel Surcharge Fee = Fuel Surcharge percentage x Maximum Base Freight Charge
where:
Fb = the average fuel price as at 2 February 2016 obtained from AIP Terminal Gate Pricing – Diesel – National Average (exclusive of GST and any applicable rebates).
Fn = the average fuel price on the first Business Day of the month prior to the Monthly Fuel Surcharge Review obtained from AIP Terminal Gate Pricing – Diesel - National Average (exclusive of GST and any applicable rebates).
WFF = the cost component weighting of the fuel costs to provide the Service (17%).
And the Fuel Surcharge Fee is subject to a minimum of zero. The Fuel Surcharge Fee cannot be less than zero.
(vii)Other Charges means any charges for voluntary additional services that a customer requests to be provided in conjunction with the service. These charges are notified to and accepted by the customer prior to the service being provided.
(viii)Dangerous Goods Surcharge is applied as a percentage of the Maximum Base Freight Charge for all goods that are classified as dangerous goods under the Australian Dangerous Goods Code or the International Maritime Dangerous Goods Code. During the term of this Condition, the Dangerous Goods Surcharge percentage will be no higher than 25%.
(ix)Minimum Freight Charge means a specified minimum charge to consolidate and transport a single consignment of freight. The Minimum Freight Charge is as follows:
(A)for destinations listed in the Remote Community Service Schedule in the Northern Territory: $50.00.
(B)for destinations listed in the Remote Community Service Schedule in Far North Queensland: $50.00.
4 Price Reviews
(a)Sea Swift may increase the Maximum Base Price for the Services from or on 1 July each Financial Year in accordance with the formulas set out in Clause 3(b)(iii) above (Annual Price Review).
(b)Sea Swift may increase the Fuel Surcharge Fee on a monthly basis in accordance with the formula set out in Clause 3(b)(vi) above (Monthly Fuel Surcharge Review).
(c)Sea Swift may increase the applicable GST at any time but only in accordance with changes legislated by the Australian Federal Government.
(d)Sea Swift may only:
(i)increase its Base Price above the Maximum Base Price determined using the formula in Clause 3(b)(iii); or
(ii)increase the Additional Fees above the amounts set out in or determined according to Clause 3(b)(iv)-3(b)(viii);
in accordance with the Independent Price Review Process set out in Schedule 5 (Additional Proposed Price Increase).
5 Period for Which Sea Swift Must Comply With the Conditions
(a)Subject to paragraphs (b), (c) and (d) below, Sea Swift must comply with the Conditions until the earliest of:
(i)five years from the Completion Date;
(ii)a determination is made by the Tribunal that it is no longer necessary for Sea Swift to comply with the Conditions (including in circumstances where the ACCC has accepted an undertaking under section 87B of the Act in substantially the same terms as the Conditions); and
(iii)if the parties do not complete the Proposed Acquisition, when Sea Swift notifies the Tribunal of the non-completion of the Proposed Acquisition (and provides a copy of the notice to the ACCC).
(b)Sea Swift will be relieved of its obligation to comply with the Transferred Contracts Condition in respect of each of the Transferred Contracts on the date that the Current Term of that Transferred Contract expires.
(c)Subject to sub-clause 5(d) below, Sea Swift will be suspended of its obligation to comply with the Remote Community Service Condition if another operator commences operating a weekly (or more frequent than weekly) Scheduled Service, and operates that Scheduled Service for a period of 12 consecutive weeks or more:
(i)along one of the following routes, in which case the suspension applies to that route and any destination transhipped through that route:
(A) Cairns – Weipa;
(B) Cairns – Thursday Island/Horn Island;
(C) Darwin – Gove; or
(D) Darwin – Groote Eylandt,
or
(ii)to any specific destination set out in the Remote Community Service Schedule contained in Schedule 3, in which case the suspension applies in respect of that destination.
(d)If Sea Swift is suspended of its obligations to comply with the Remote Community Service Condition under sub-clause 5(c) above, because another operator commences operating a weekly (or more frequent than weekly) Scheduled Service along one of the routes listed in sub-clause 5(c)(i) or a specific destination under sub-clause 5(c)(ii), and that operator subsequently ceases to provide that Scheduled Service, Sea Swift must re-commence that Scheduled Service in accordance with the Remote Community Service Condition as soon as practicably possible, but no later than 28 days after that operator ceases to provide the Scheduled Service.
(e)Sea Swift may subcontract any or all of its obligations under the Remote Community Service Condition to another qualified supplier, but will remain responsible for satisfying the Remote Community Service Condition, subject to clause 5(c) above, at prices that comply with the Remote Community Price Condition.
SELF-COMPLIANCE REPORTING
6 Annual Reporting
Within 30 days of the end of each Financial Year comprising the Term of these Conditions, Sea Swift is to provide the ACCC with a report containing the following information:
(a)in relation to each of the Services to destinations listed in the Remote Community Service Schedule:
(i)the Base Prices that it charged for the previous Financial Year;
(ii)the Base Prices that it is charging in the current Financial Year, including details of all inputs and calculations underlying any increase to the Base Prices from the previous Financial Year that have been made in accordance with Clause 3(b)(iii);
(iii)the Fuel Surcharge Fee for each calendar month of the past Financial Year, including all underlying calculations;
(iv)the result of any Independent Price Review process during the previous Financial Year, including all documents prepared for the purpose of, or resulting from, the Independent Price Review; and
(v)details of any instances of non-compliance by Sea Swift with the Remote Community Price Condition during the relevant Financial Year, or confirmation that there has been no instance of non-compliance.
(b)the current schedule of Services and the frequency of those Services to each of the destinations set out in the Remote Community Service Schedule.
(c)details of any instances of non-compliance by Sea Swift with the Remote Community Service Condition (including failure to provide services in accordance with Schedule 3) during the relevant Financial Year.
Sea Swift must provide the ACCC with any information or documents that the ACCC reasonably requests to verify the accuracy of the report.
7 Event Reporting
Within 30 days of the occurrence of an event listed below which occurs during the Term of these Conditions, Sea Swift is to provide the ACCC with a report containing the following information:
(a)for any suspension of Sea Swift’s obligation to comply with the Remote Community Service Condition under clause 2(b):
(i)the nature and duration of these circumstances; and
(ii)the resulting changes that Sea Swift has made to its Scheduled Service schedule and the expected duration of those changes.
(b)for any suspension of Sea Swift’s obligation to comply with the Remote Community Service Condition under clause 5(c):
(i)details of the Scheduled Service route(s) and destination(s) that Sea Swift has ceased or intends to cease servicing; and
(ii)details of the other operator who has commenced operating a Scheduled Service in relation to the relevant routes(s) or destinations(s) including the frequency and continuous duration of the Scheduled Service provided by that operator.
(c)for any obligations under the Remote Community Service Condition that are subcontracted by Sea Swift to another qualified supplier under clause 5(e):
(i)the details of the Scheduled Service route(s) and destination(s) that Sea Swift has subcontracted; and
(ii)a copy of the subcontract agreement between Sea Swift and the qualified supplier.
8 Review Event
(a)If a Review Event occurs, Sea Swift may apply to the Tribunal to vary or suspend (for a period of time) one or more of the Conditions to the extent the variation or suspension is necessary to deal with the effect of the Review Event on Sea Swift.
(b)Review Event means an event or circumstance that has the result that Sea Swift:
(i)is unlikely to be able to comply with its obligations under the Conditions; or
(ii)believes that it is necessary to seek some variation due to changed circumstances (including any relevant market change, such as the loss of major contracts to competing coastal and community marine freight suppliers, or overall market contraction, or changes within the relevant regulatory environment, any of which that has a material impact on service viability).
GOVE LEASE UNDERTAKING
9 Gove Lease Undertaking
The authorisation is subject to the condition that Sea Swift:
(a)by the Completion Date has executed and given to the ACCC in respect of the Gove Lease an undertaking pursuant to section 87B of the Act in the same form as Annexure E to Sea Swift’s Application for Authorisation filed on 4 April 2016;
(b)complies with the Gove Lease Undertaking in all material respects unless and until released from it by the ACCC; and
(c)does not transfer the Gove Lease without the approval of the ACCC.
TOLL COMMITMENTS
10 Toll Commitments
The authorisation is subject to the condition that Toll:
(a)releases back to their owners two vessels it currently uses in the Northern Territory, being the Toll Territorian and the Bimah Tujuh as soon as reasonably practicable after the Completion Date;
(b)sells the Warrender as soon as reasonably practicable after the Completion Date; and
(c)does not sell the Warrender to Sea Swift, any Officer of Sea Swift, any Related Entity of Sea Swift or any Officer of such Related Entities, or any person acting under the direction or for the benefit of any of those persons or Related Entities.
11 Time limit on Proposed Acquisition
The authorisation is subject to the condition that the Proposed Acquisition is completed by 30 September 2016.
12 Defined Terms and Interpretation
A term or expression starting with a capital letter in the conditions:
(a)which is defined in the Dictionary in Schedule 1 of the Annexure (Dictionary), has the meaning given to it in the Dictionary; or
(b)which is defined in the Corporations Act, but is not defined in the Dictionary, has the meaning given to it in the Corporations Act.
SCHEDULE 1
Dictionary
Act means the Competition and Consumer Act 2010 (Cth)
ACCC means the Australian Competition and Consumer Commission.
Additional Fees means the Fuel Surcharge Fee, the Consignment Note Fee, the Port, Council and Royalty Charges, the Dangerous Goods Surcharge and Other Charges.
Additional Proposed Price Increase has the meaning given in clause 4.
Annexure means the Annexure to the Tribunal’s determination dated 1 July 2016 including all Schedules to the Annexure.
Annual Price Review has the meaning given in clause 4.
Base Price has the meaning given in clause 3(b)(iii).
Completion Date means the date on which the Proposed Acquisition is completed.
Conditions means each of the conditions set out in this Annexure.
Consignment Note Fee has the meaning given in clause 3(b)(iv).
Customer means a counterparty to the Transferred Contracts identified in Schedule 2.
Current Term of a Transferred Contract includes any option to renew or extend the term of the Transferred Contract.
Dangerous Goods means dangerous or hazardous materials classified under the Australian Dangerous Goods Code or the International Maritime Dangerous Goods Code.
Dangerous Goods Surcharge has the meaning given in clause 3(b)(viii).
Dry Freight Services means scheduled services for the transport of cargo by sea (including the transport of Dangerous Goods) which does not require a temperature controlled environment and does not include Vehicle Freight Services.
Financial Year refers to the period from 1 July to 30 June in each year.
Fuel Surcharge has the meaning given in clause 3(b)(vi).
Gove Lease means the lease between Perkins Properties Pty Ltd and the Arnhem Land Aboriginal Council in relation to the Gove Wharf at Melville Bay Rd, Foreshore Drive, Nhulunbuy, to be acquired by Sea Swift as part of the Proposed Acquisition.
Gove Lease Undertaking has the meaning given in clause 9(a).
GST means the Goods and Services Tax.
Independent Price Expert means the person appointed under Schedule 5.
Independent Price Review Process means the process set out in Schedule 5.
Maximum Base Price has the meaning given in clause 3(b)(iii).
Maximum Charge has the meaning given in clause 3(b)(i).
Minimum Freight Charge has the meaning given in clause 3(b)(ix).
Monthly Fuel Surcharge Review has the meaning given in clause 4(b).
Other Charges has the meaning given in clause 3(b)(vii).
Port, Council & Royalty Charges has the meaning given in clause 3(b)(v).
Price Increase Notice has the meaning given in clause 3(a) of Schedule 5.
Proposed Acquisition means the proposed acquisition by Sea Swift of:
(a)shares in:
(i)Perkins Maritime Pty Ltd (ACN 009 616 960); and
(ii)Perkins Lady Jan Pty Ltd (ACN 064 110 247); and
(b)assets from:
(i)Perkins Shipping Pty Ltd (ACN 009 597 835);
(ii)Perkins Properties Pty Ltd (ACN 009 592 885); and
(ii)Gulf Freight Services Pty Ltd (ACN 010 755 683)
as set out in a Deed of Amendment dated 17 March 2016 and the appended Amended and Restated Asset and Share Sale Agreement.
Refrigerated Freight Services means scheduled services for the transport of cargo by sea (including the transport of Dangerous Goods) which requires a temperature controlled environment and does not include Vehicle Freight Services.
Remote Communities Independent Price Expert means the person appointed in accordance with clause 1(a) of Schedule 5.
Remote Community Price Condition has the meaning given in clause 3.
Remote Community Service Condition has the meaning given in clause 2.
Remote Community Service Schedule means the schedule identified in Schedule 3.
Review Event has the meaning given in clause 8.
Right of First Refusal means a clause in any of the Transferred Contracts that may have the purpose or effect of requiring a Customer to allow Sea Swift to match any price proposed by a competitor.
Scheduled Service means a service by which an operator offers to the public to carry freight between two or more destinations at predetermined dates or days of the week.
Sea Swift means the entity Sea Swift Pty Ltd ACN 010 889 040.
Sea Swift Collective Agreement means the collective agreement between Sea Swift and employees of Sea Swift lodged with the Fair Work Commission in 2009 in relation to employees’ terms and conditions of employment, and includes any replacement of that agreement in the future.
Services means the scheduled general cargo services set out in Schedule 4, being:
(a)Dry Freight Services;
(b)Refrigerated Freight Services; and
(c)Vehicle Freight Services,
but excluding charter services.
Term means the period between the Completion Date and that date that is five years after the Completion Date.
TML means the entity trading as Toll Marine Logistics Australia.
Toll means Toll Holdings Limited (ACN 006 592 089)
Transferred Contracts means the contracts listed in Schedule 2.
Transferred Contracts Condition has the meaning given in clause 1.
Tribunal means the Australian Competition Tribunal.
Vehicle Freight Services means scheduled services for the transport of motor vehicles by sea, specifically meaning a domestic vehicle under 6m in length.
SCHEDULE 2
Transferred Contracts
Item
Customer
1.
IBIS
2.
Boral
3.
Gemco (BHP) (Groote Eylandt)
4.
Pacific Aluminium (Rio Tinto) (Gove)
5.
ALPA
6.
PUMA
7.
Allied Pickfords Pty Ltd
8.
Alyangula Recreation Club
9.
Aminjarrinja Enterprises Aboriginal Corporation
10.
Kun Huy Kag t/a Angurugu Chinese Takeaway
11.
Anindilyakwa Land Council
12.
B Kumar & P Kumar & P Kumar & R Kumar t/a Country Fried Chicken
13.
The Trustee for Dugong Beach Resort t/a Dugong Beach Resort Pty Ltd
14.
Groote Eylandt & Bickerton Island Enterprises Aboriginal Corp
15.
Gove Unit Trust t/a Gove Motors
16.
Gove Tackle & Outdoors
17.
Groote Eylandt Aboriginal Trust
18.
Ericann Pty Ltd t/a Groote Retravision & Homeware
19.
Hasting Deering (Aust) Ltd
20.
Scoffee Pty Ltd t/a The Coffee Shop
21.
Three C's Café
22.
Walkabout Lodge & Tavern
23.
Bradley Carey t/a BC Autos
24.
Fulton Hogan Industries Pty Ltd
25.
Miwatj Health Aboriginal Corporation
26.
Best Bar Pty Ltd
27.
Outback Stores Pty Ltd
28.
Maningrida Progress Association
SCHEDULE 3
Remote Community Service Schedule
Location Frequency (per week)* Dry Services Refrigerated Services Dangerous Goods Services Vehicle Services North Queensland (ex Cairns) Boigu 1 1 1 1 Dauan 1 1 1 1 Mabuiag 1 1 1 1 Saibai 1 1 1 1 St Pauls 1 1 1 1 Hammond 1 1 1 1 Coconut 1 1 1 1 Murray 1 1 1 1 Darnley 1 1 1 1 Stephen Island (1/mth tide dependant) (1/mth tide dependant) (1/mth tide dependant) (1/mth tide dependant) Warraber 1 1 1 1 Yam 1 1 1 1 Yorke 1 1 1 1 Badu 1 1 1 1 Kubin 1 1 1 1 Horn Island 2 2 2 2 Thursday Island 2 2 2 2 Seisia/Bamaga 2 2 2 2 Aurukun 1 (wet season only) 1 (wet season only) 1 (wet season only) 1 (wet season only) Lockhart River 1 (wet season only) 1 (wet season only) 1 (wet season only) 1 (wet season only) Weipa 2 2 2 2 Northern Territory (ex Darwin) Milingimbi 1 1 1 1 Ramingining 1 1 1 1 Elcho Island 1 1 1 1 Numbulwar (1/fortnight tide dependent) (1/fortnight tide dependent) (1/fortnight tide dependent) (1/fortnight tide dependent) Umbakumba 1 1 1 1 Bickerton Island Fortnightly Fortnightly Fortnightly Fortnightly Lake Evella 1 1 1 1 Groote Eylandt 1 1 1 1 Nguiu 2 2 2 2 Pirlangimpi 2 2 2 2 Port Keats 1 (wet season only) 1 (wet season only) 1 (wet season only) 1 (wet season only) Milikapiti 1 1 1 1 Gove 1 1 1 1 Paru 2 2 2 2 Croker Island 1 1 1 1 Goulburn Island 1 1 1 1 Maningrida 1 1 1 1 * Unless otherwise specified.
SCHEDULE 4
BASE PRICES
North Queensland
Schedule of rates (excludes GST) ¹
Freight (ex-Cairns) ²
Bamaga / Seisia (NPA), Thursday Island, Horn Island, Weipa
OTSI, Lockhart, Aurukun
Dry (m³ or tonnes) ³
275.54
413.31
Refrigerated (m³ or tonnes) ⁴
482.20
723.29
Passenger vehicles (each) ⁵
984.07
1,476.10
¹ Excludes Additional Fees, including the Fuel Surcharge Fee and Port & Council Charges (see further information below on Additional Fees).
² Dry and refrigerated freight will be charged either per cubic metre or per tonne, whichever measure is the greatest for a given consignment. Note that where freight is outside standard slot dimensions (20ft container size 6m x 2.4m x 1.8m) or weighing more than 20 tonnes, this schedule of rates will not apply and the Remote Community Price Condition does not apply to that service. Sea Swift will provide an individual quote to customers for such freight.
³ Sea Swift and TML adopt different terminology in categorising their respective rates. Sea Swift’s standard terminology for all dry freight is “Dry”. TML’s standard terminology for dry freight is “General Cargo”. Sea Swift’s terminology has been adopted in this Schedule.
⁴ Sea Swift’s standard terminology for temperature controlled freight is “Refrigerated”. TML’s standard terminology for temperature controlled freight is “Freezer / Chiller”. Sea Swift’s terminology has been adopted in this Schedule.
⁵
Sea Swift’s standard terminology for vehicle freight is “Passenger Vehicles”. TML’s standard terminology for vehicle freight is “Vehicles up to 5.3 mtrs”. Sea Swift’s terminology has been adopted in this Schedule. Note that the schedule of rates will not apply to vehicles over 6 metres in length and the Remote Community Price Condition does not apply to that service. Sea Swift will provide an individual quote to customers for such freight.
Northern Territory
Schedule of rates (excludes GST) ¹
Freight (ex-Darwin) ²
Dry (m³ or tonnes) ³
Refrigerated (kg) ⁴
Passenger vehicles (each) ⁵
Port Keats ⁹
189.55
1.30
974.84
Milingimbi / Ramingining
279.74
1.40
2,008.64
Maningrida
217.79
1.40
1,555.96
Lake Evella
329.92
1.40
2,356.88
Gove
250.00
1.61
1,000.00
Groote Eylandt
369.99
1.62
1,000.00
Garden Pt (Pirlangimpi)
156.07
1.37
1,114.14
Goulburn
218.96
1.40
1,564.66
Elcho
302.07
1.40
2,158.82
Snake Bay (Milikapiti) ⁸
132.14
0.83
649.90
Croker
208.15
1.40
1,486.36
Nguiu ⁶ / Paru ⁷
119.15
0.75
541.58
Black Point
208.15
1.44
-
Bickerton / Numbulwar / Umbakumba
401.84
1.44
2,809.52
¹ Excludes Additional Fees, including the Fuel Surcharge Fee and Port & Council Charges (see further information below).
² Dry freight will be charged either per cubic metre or per tonne, whichever measure is the greatest for a given consignment. Refrigerated freight will be charged per kg. Note that where freight is outside standard slot dimensions (20ft container size 6m x 2.4m x 1.8m) or weighing more than 20 tonnes, this schedule of rates will not apply and the Remote Community Price Condition does not apply to that service. Sea Swift will provide an individual quote to customers for such freight.
³ Sea Swift’s standard terminology of “Dry” freight has been adopted.
⁴ Sea Swift’s standard terminology of “Refrigerated” freight has been adopted.
⁵ Sea Swift’s terminology for vehicle freight has been adopted in this Schedule. Note that the schedule of rates will not apply to vehicles over 6 metres in length and the Remote Community Price Condition does not apply to that service. Sea Swift will provide an individual quote to customers for such vehicles.
⁶ Note that TML does not currently service Nguiu. Sea Swift’s rates as at 1 August 2015 for deliveries to Nguiu have been adopted.
⁷ Note that TML does not currently service Paru. Sea Swift’s rates as at 1 August 2015 for deliveries to Paru have been adopted.
⁸ Note that TML does not currently service Snake Bay. Sea Swift’s rates as at 1 August 2015 for deliveries to Snake Bay have been adopted.
⁹ Note that TML does not currently service Port Keats. Sea Swift’s rates as at 1 August 2015 for deliveries to Port Keats have been adopted.
Additional Fees Information
Fuel Surcharge Fee
A fuel surcharge fee applies on all deliveries. The fuel surcharge fee is subject to monthly review based on movements in the national average fuel price as monitored by the Australian Institute of Petroleum.
Consignment Note Fee
A one-off consignment fee applies on all deliveries ($15.00).
Port & Council Fees
Various ports and councils charge port cargo fees on the volume of cargo that is shipped through the relevant facility. Port & Council fees will be added to those consignments which attract port cargo fees (where applicable).
Dangerous Goods Surcharge
For goods classified as dangerous goods under the Australian Dangerous Goods Code or the International Maritime Dangerous Goods Code, a 25% surcharge on the Maximum Base Freight Charge will apply.
Minimum Freight Charge
Where the total calculated rate for a consignment (including all Additional Fees other than any applicable Other Charges) is below $50.00, a minimum charge of $50.00 for those services will apply, in accordance with clause 3.2(b)(ii).
Other Charges
Where customers request additional services from Sea Swift, including pallet wrapping or transport by road to the departure depot, Sea Swift may apply a charge for those additional services.
SCHEDULE 5
Independent Price Review Condition Process
1 Appointment of Remote Communities Independent Price Expert
(a)Within 28 days of the Completion Date, Sea Swift must appoint a Remote Communities Independent Price Expert for, subject to paragraph 1(c) of this Schedule 5, the duration of this Condition.
(b)Remote Communities Independent Price Expert must have the qualifications and experience necessary to carry out its functions independently of Sea Swift and must not be:
(i)an employee or officer of Sea Swift or its Related Bodies Corporate or of Toll or its Related Bodies Corporate, whether current or in the past 3 years;
(ii)a professional adviser of Sea Swift or its Related Bodies Corporate or of Toll or its Related Bodies Corporate, whether current or in the past 3 years;
(iii)a person who holds a material interest in Sea Swift or its Related Bodies Corporate or of Toll or its Related Bodies Corporate;
(iv)a person who has a contractual relationship with Sea Swift or its Related Bodies Corporate or of Toll or its Related Bodies Corporate (other than the terms of appointment of the Remote Communities Independent Price Expert);
(v)a customer, material supplier or material customer of Sea Swift or its Related Bodies Corporate or of Toll or its Related Bodies Corporate; or
(vi)an employee or contractor of a firm or company referred to in paragraphs 1(b)(iii) to 1(b)(v) of this Schedule 5.
(c)Sea Swift must, as soon as practicable, appoint a replacement Remote Communities Independent Price Expert who meets the requirements set out in paragraph 1(b) of this Schedule 5 in the following circumstances:
(i)if the Remote Communities Independent Price Expert resigns or otherwise stops or is unable to act as the Remote Communities Independent Price Expert; or
(ii)if Sea Swift has terminated the Remote Communities Independent Price Expert's terms of appointment in accordance with those terms of appointment.
(d)Where the Remote Communities Independent Price Expert is unable to act for a period of time, Sea Swift may appoint a replacement Remote Communities Independent Price Expert to act as the Remote Communities Independent Price Expert for that period of time only.
(e)Within 2 Business Days of the appointment of the Remote Communities Independent Price Expert under paragraph 1(a) of this Schedule 5 or replacement of the Remote Communities Independent Price Expert under paragraphs 1(c) or 1(d) of this Schedule 5, Sea Swift must:
(i)forward to the ACCC a copy of the executed terms of appointment; and
(ii)publish the name and contact details of the Remote Communities Independent Price Expert on Sea Swift's website.
2 Conditions relating to the Remote Communities Independent Price Expert's functions
Sea Swift must:
(a)procure that the terms of appointment of the Remote Communities Independent Price Expert include obligations on the Remote Communities Independent Price Expert to:
(i)continue to satisfy the independence criteria in paragraph 1(b) of this Schedule 5 for the period of his or her appointment;
(ii)provide any information or documents requested by the ACCC about Sea Swift's compliance with this Independent Price Review Condition Process directly to the ACCC; and
(iii)report or otherwise inform the ACCC directly of any issues that arise in the performance of his or her functions as the Remote Communities Independent Price Expert or in relation to any matter that may arise in connection with this Independent Price Review Condition Process;
(b)comply with and enforce the terms of appointment for the Remote Communities Independent Price Expert;
(c)maintain and fund the Remote Communities Independent Price Expert to carry out his or her functions;
(d)indemnify the Remote Communities Independent Price Expert for any expenses, loss, claim or damage arising directly or indirectly from the performance by the Remote Communities Independent Price Expert of his or her functions as the Remote Communities Independent Price Expert except where such expenses, loss, claim or damage arises out of the gross negligence, fraud, misconduct or breach of duty by the Remote Communities Independent Price Expert;
(e)not interfere with, or otherwise hinder, the Remote Communities Independent Price Expert's ability to carry out his or her functions as the Remote Communities Independent Price Expert;
(f)provide and pay for any external expertise, assistance or advice required by the Remote Communities Independent Price Expert to perform his or her functions as the Remote Communities Independent Price Expert;
(g)provide to the Remote Communities Independent Price Expert any information or documents requested by the Remote Communities Independent Price Expert that he or she considers necessary for carrying out his or her functions as the Remote Communities Independent Price Expert or for reporting to or otherwise advising the ACCC; and
(h)ensure that the Remote Communities Independent Price Expert will provide information or documents requested by the ACCC directly to the ACCC.
3 Raising an Additional Proposed Price Increase
(a)Sea Swift may seek an Additional Proposed Price Increase by providing written notice to the Remote Communities Independent Price Expert (Price Increase Notice).
(b)A Price Increase Notice must detail:
(i)the specific Service and location (within the Northern Territory or Far North Queensland) to which the Additional Proposed Price Increase relates;
(ii)the specific amount of the Additional Proposed Price Increase; and
(iii)Sea Swift’s reasons for the Additional Proposed Price Increase. By submitting a Price Increase Notice, Sea Swift agrees to comply with this Independent Price Review Condition Process.
(c)Sea Swift may at any time withdraw a Price Increase Notice by written notice to the Remote Communities Independent Price Expert, in which case the powers and authority of the Remote Communities Independent Price Expert to make a determination of that Price Increase Notice under paragraph 4 of this Schedule 5 shall forthwith cease.
4 Remote Communities Independent Price Expert Determination
(a)Where the Remote Communities Independent Price Expert has received a Price Increase Notice in relation to an Additional Proposed Price Increase, the Remote Communities Independent Price Expert must:
(i)determine whether Sea Swift’s proposed price increase is reasonable and appropriate having regard to the principles listed in paragraph 5 below; and
(ii)decide whether to accept, reject or vary Sea Swift’s proposed price increase.
(b)The Remote Communities Independent Price Expert will make his or her determination within:
(i)30 days of the receipt of the Price Increase Notice from the Sea Swift; or
(ii)such further period as necessary for the Remote Communities Independent Price Expert to consider information requested under paragraph 4(c) of this Schedule 5, as the Remote Communities Independent Price Expert reasonably requires.
(c)Sea Swift must provide the Remote Communities Independent Price Expert with any information he or she requires to make a determination under this paragraph 4 of this Schedule 5 within a timeframe reasonably determined by the Remote Communities Independent Price Expert.
(d)In the event that more than one Price Increase Notice is received in relation to a proposed new Additional Proposed Price Increase for a particular Service, the Remote Communities Independent Price Expert will only make a single determination about that Additional Proposed Price Increase.
(e)The Remote Communities Independent Price Expert's determination is final and binding on Sea Swift.
(f)When making a determination under this paragraph 4 of this Schedule 5, the Remote Communities Independent Price Expert is acting as an expert and not as an arbitrator.
5 Relevant considerations
In determining whether an Additional Proposed Price Increase is reasonable and appropriate, the Remote Communities Independent Price Expert will have regard to the following principles:
(a)that the Additional Proposed Price Increase should be set taking into account:
(i)all efficient input costs;
(ii)an appropriate allocation of Sea Swift’s relevant overhead costs;
(iii)expected volumes over the period Sea Swift has used to calculate the proposed price increase;
(iv)whether the “weighting factors” (WFCPI, WFWPI and WFF) referred to in the calculation of Maximum Base Price continue to accurately reflect the cost component weighting of general costs, labour and fuel;
(v)a rate of return that utilises a weighted average cost of capital which would be required by a benchmark efficient entity providing services with a similar degree of risk as that which applies to Sea Swift; and
(vi)the long term interests of customers of the Service.
6 Notice and Publication of Determination
(a)The Remote Communities Independent Price Expert must notify Sea Swift of the determination within seven days of making a determination.
(b)Within 30 days of receiving the determination:
(i)Sea Swift must notify its affected customers of the Remote Communities Independent Price Expert's determination by writing to or emailing customers, or publishing the information about the determination on its website;
(ii)if a retrospective adjustment is necessary to comply with the Remote Communities Independent Price Expert’s determination, Sea Swift must refund the relevant adjustment amount to the relevant customer(s).
(c)Whatever the outcome, the cost of the Remote Communities Independent Price Expert's determination will be borne by Sea Swift.
7 Date price increase takes effect
If the Remote Communities Independent Price Expert makes a determination under paragraph 4, then the new price increase as determined by the Remote Communities Independent Price Expert takes effect on the date that Sea Swift is notified under paragraph 6(a) of Schedule 5.
8 Sea Swift must notify the ACCC
Sea Swift must notify the ACCC at the time it initiates an Independent Price Review Process and must notify the ACCC of the results of each review, in each case within 5 business days of the relevant event occurring
REASONS FOR DETERMINATION
THE TRIBUNAL:
Unless otherwise indicated, all references to legislation are references to the Competition and Consumer Act 2010 (Cth).
On 4 April 2016, Sea Swift Pty Limited (“Sea Swift”) filed a Form S with the Australian Competition Tribunal (“the Tribunal”)(“Application”). Sea Swift thereby applied under s 95AU for the grant of an authorisation under s 95AT(1) in relation to its proposed acquisition of shares in two companies and most of the assets associated with the general marine freight business of Toll Marine Logistics (“TML”) in Far North Queensland (“FNQ”) and the Northern Territory (“NT”) from subsidiaries of Toll Holdings Limited (“Toll”) (“Proposed Acquisition”). Annexure A to the Application set out conditions (“Proposed Conditions”) on the basis of which the Tribunal might grant authorisation. Sea Swift also indicated that, if required by the Tribunal, it was prepared to give an undertaking to the Australian Competition and Consumer Commission (“ACCC”) pursuant to s 87B relating to arrangements for accessing the wharf facility at Gove that was to be acquired from TML as part of the Proposed Acquisition (“Gove Lease Undertaking”); the proposed form of the undertaking was set out in Annexure E to the Application. The Application also set out commitments that Toll was willing to make if the Tribunal were to grant authorisation (“Toll Commitments”).
Toll was given leave to intervene in the proceedings on an unrestricted basis. While Toll was an intervener in these proceedings, both Sea Swift and Toll sought approval of the Proposed Acquisition.
The Maritime Union of Australia (“MUA”) was given leave to intervene on the basis that its intervention would be limited to making submissions, adducing evidence and cross-examining other witnesses on the topic of any detriment to the public by reason of any risk to the employment or prospective employment of its members by Sea Swift or Toll in the NT or FNQ in relation to the Proposed Acquisition.
Determination
On 1 July 2016, the Tribunal announced that it had determined to authorise the Proposed Acquisition subject to the conditions set out in the determination (“Determination”). Shortly before making the determination, the Tribunal circulated to the ACCC, Sea Swift and Toll a draft of the Determination containing conditions which it intended to impose and invited submissions in relation to them. Changes to the Proposed Conditions required by the Tribunal, including conditions relating to the provision of the Gove Lease Undertaking and the Toll Commitments are mentioned below.
It is a condition of the Determination that the Proposed Acquisition be completed by 30 September 2016.
These are the Tribunal’s reasons for making the Determination.
Confidentiality Regime
On 15 April 2016 Justice Middleton (now the President of the Tribunal) issued a set of directions for the use and management of confidential information provided to the Tribunal in respect of the proceedings (“Confidentiality Regime”). “Confidential Information” was defined as “all information filed with the Tribunal in these proceedings in respect of which a claim of confidentiality has been made and not refused by the Tribunal, including the Sea Swift Pricing Information”. External legal advisers, consultants and independent experts retained by Sea Swift, Toll, and the ACCC (and their support staff) received unrestricted access to Confidential Information provided that the names of those persons had been notified to Sea Swift, the ACCC, any intervener and the Tribunal. The ACCC and its staff as well as the Tribunal and staff of the Tribunal and Federal Court of Australia assisting the Tribunal were also given access to Confidential Information as necessary. Mr Scruby, counsel for the MUA and Mr Nathan Keats, the MUA’s legal representative, were given access to some Confidential Information on the same basis.
Information which remains subject to the Confidentiality Regime has been redacted. Prior to publication, the Tribunal circulated a final draft of the reasons to the ACCC and external legal advisors to Sea Swift, Toll and the MUA to facilitate maintenance of confidentiality claims.
Introduction
Both Sea Swift and TML operate “full service” marine freight businesses providing scheduled services for delivery of freight by sea to islands and remote coastal communities in FNQ (including the Outer Torres Strait Islands (“OTSI”)) and the NT. Those services will be referred to as “scheduled services”, distinct from ad hoc charter (sometimes called “project”) freight services described more fully below. Sea Swift and TML are each other’s nearest competitors in FNQ and the NT.
Sea Swift has provided a scheduled service to remote communities in FNQ for over 30 years; its main depot has been in Cairns since 1987. In 2009, TML was established following Toll’s acquisition of Perkins Industries Pty Ltd and its subsidiaries (“Perkins Group”). For ease of reference in these reasons, the Tribunal will refer to Perkins Group without distinction between individual companies since nothing turns on the distinction. Perkins Group had been providing shipping services predominantly in the NT, including to remote NT communities, for at least 40 years. Perkins Group’s operations in FNQ were less extensive and, since some time before 2003, they were largely limited to servicing contracts with Alcan (later Rio Tinto) and Woolworths on the Cairns-Weipa route.
Sea Swift
Sea Swift is a subsidiary of Sea Swift (Holdings) Pty Ltd (“Sea Swift Holdings”) which became majority owned by private equity firms CHAMP Ventures Funds (“Champ Ventures”) in November 2012. HarbourVest Partners 2007 Direct Fund LP and various individuals (including members of Sea Swift’s management) invested at the same time.
Sea Swift describes itself as a marine logistics company providing shipping and associated services in FNQ and the NT. The main products and services that Sea Swift supplies are:
(1)General cargo services: Sea Swift operates both charter and scheduled services for cargo including food, fuel and other goods to customers such as businesses, government agencies, mining projects and individuals on remote islands and in coastal communities;
(2)Fishery support: Sea Swift provides mothershipping services to fishing fleets, including the delivery of fuel, fresh water, packaging, consumables and exchange crew to fishing vessels and the transportation of catch back to port;
(3)Charter and project logistics: Sea Swift provides these services to resources and infrastructure customers who require large, sporadic or one-off deliveries, including the movement of construction and infrastructure materials and machinery for major projects;
(4)Passenger cruise: Sea Swift provides limited services transporting passengers and their vehicles to various locations across FNQ and the Torres Strait Islands; and
(5)Fuel retail: Sea Swift retails a small volume of fuel to regional communities at depots located in FNQ and the Torres Strait Islands.
Sea Swift operates the Humbug Wharf in Weipa on behalf of RTA Weipa Pty Ltd and has utilised the Gove Boat Club facility at Gove since early 2014. It operates depots at Darwin (Hudson Bay), Cairns, Weipa, Seisia/Bamaga (without a lease), Horn Island, Gove and Thursday Island.
TML
From 2009 until August 2014, in addition to charter and scheduled services provided to island and coastal communities in FNQ and the NT, TML ran Perkins Group’s international liner service on the Darwin-Dili-Singapore route. That international part of the service was sold as part of a planned restructure and turnaround of the performance of the TML business as a whole. TML no longer provides any international liner services into or out of Australia. It continues to provide marine logistics services to the oil and gas sector in Queensland and Western Australia. Toll became a subsidiary of Japan Post Co Ltd in May 2015.
To conduct its scheduled service business in the NT and FNQ, TML currently employs the following assets.
Vessels – TML uses two vessels in FNQ and three vessels in the NT. The two vessels in FNQ are both owned by TML: the Fourcry and the Warrender. The vessels used in the NT to provide scheduled services have changed from time to time, but currently include: the Coral Bay owned by TML, the Bimah Tujuh chartered from Barge Express and the Territorian also on charter. TML also owns the Biquele Bay which is currently used for ad hoc charter work (not scheduled services).
Landing facilities – TML uses various landing facilities in the NT and FNQ, all of which are common user facilities apart from its private landing facilities in Darwin and the facilities that it operates at Gove.
·Toll currently has a lease over wharf facilities in Melville Bay, located on the Gove Peninsula, about 13 kilometres from the community of Nhulunbuy in the NT; it is owned by the Arnhem Land Aboriginal Land Trust (“Gove Lease”). The wharf is land based, on the lee side of Gove Harbour. The facilities include a public wharf, a “heavy lift” (“lift-on/lift-off”) wharf and a “roll-on/roll-off” landing ramp. The landing ramp is suitable for discharge of freight from barges. An aerial photograph of this facility identifying each of the wharves appears at Annexure 8 to these reasons. Access to the heavy lift wharf (but not the landing ramp) is the subject of an undertaking to the ACCC under s 87B. The undertaking was first given by Perkins Group in December 2003 after it acquired Gulf Freight Services Pty Ltd (“Gulf Freight Services”); it was modified in 2005 to allow a priority user arrangement with Alcan during the expansion of its alumina refinery at Gove; and it was continued when Toll acquired Perkins Group in 2009. TML provides stevedoring services on the heavy lift wharf and the roll-on/roll-off landing ramp.
·TML’s private landing facility in Darwin at Frances Bay is on land which is partly owned and partly leased by Toll. If the Proposed Acquisition is authorised, Toll will be required to allow Sea Swift to use this facility for an interim period. The evidence of Toll’s officers is that whether or not the Proposed Acquisition was authorised, the Frances Bay facility will be closed and (subject to necessary approvals) the land will be re-zoned and sold for residential development.
·TML uses other common user facilities in the NT including the Groote Eylandt Mining Company Pty Ltd (“GEMCO”) facility at Groote Eylandt and various landing ramps in the remote communities.
·In FNQ, the landing facilities used by TML at Cairns, Seisia/Bamaga, Thursday Island and Horn Island are all common user facilities managed by Ports North. In Weipa, TML uses a common user facility managed by North Queensland Bulk Port Corporation.
·TML has no infrastructure or equipment in the remote communities where customers typically collect their freight from the landing point (usually a beach) when the barge arrives.
Staff – TML employs staff across the NT and FNQ, including management and administrative staff in Darwin, terminal managers and support staff in Darwin and Cairns, material handling officers and other staff to operate depots and handle freight, and crew to operate the vessels used to provide the services (other than the Bimah Tujuh which is manned by the vessel owner, Barge Express). Based on evidence given by Mr Scott Woodward (the General Manager of Toll Energy which incorporates TML), TML employed 128 staff of whom 17 live in remote communities and are employed as depot/terminal staff. Vessel crews are subject to an enterprise bargaining agreement between Toll, the Australian Maritime Officers Union and the MUA. None of TML’s staff will be transferred to Sea Swift under the Proposed Acquisition.
Large contracts – There are only a limited number of contracts which provide “base load” volume for scheduled services in the NT and FNQ. The routes (and therefore remote communities served) and the frequency of the scheduled services that TML provides is typically determined by the requirements of its base load customers. Due to the nature of much of the freight (for example, fresh produce and other perishable items and fuel) and customer requirements, TML services most destinations on a weekly basis. The exceptions are that TML services some destinations in the NT on a fortnightly basis and services remote communities in OTSI on a schedule “TBA” basis, due to low levels of demand in those locations.
At the time of the hearing, TML’s five largest contracts which provide base load for the provision of scheduled services (“Largest Contracts”) were:
(1)GEMCO (60% owned by South 32), which has manganese mining operations on Groote Eylandt in the NT;
(2)Rio Tinto, which has mining operations in Gove in the NT and Weipa in FNQ. TML has a contract with Rio Tinto in relation to Gove (Sea Swift has the contract for Weipa). In mid-February 2016, lest authorisation not be granted to the Proposed Acquisition, Rio Tinto put the Gove and Weipa contracts out to tender; XXXX XX XXX XXX XXX XXX XXX XXX XXXXX XXXXX XXXXX X XXXX XXX XXX XXXX;
(3)Arnhem Land Progress Aboriginal Corporation (“ALPA”), which operates retail stores in over 25 remote locations in the NT and FNQ. TML only provides scheduled services to ALPA in the NT;
(4)Puma Energy Australia (“PUMA”), which supplies fuel to remote communities in the NT, including under contract from the Northern Territory Power & Water Corporation (“NT Power & Water”); and
(5)Islanders Board of Industry and Service (“IBIS”), which operates stores and fuel depots in 15 remote communities in FNQ. This is the only large customer contract that TML has in FNQ.
The customers party to the Largest Contracts will be referred to as the “Largest Customers”.
TML charters the Bimah Tujuh and a crew from Barge Express to provide services under the ALPA and PUMA contracts to communities at Garden Point, Maningrida, Ramingining, Milingimbi, Goulburn Island and Croker Island. It has subcontracted the performance of its services in the FNQ under the IBIS contract to Sea Swift.
XXX XXX XXX XXX XXX XXX XXXXX XXXXX XXXXX X some have exclusivity provisions or rights of first refusal.
A full list of the customer contracts which TML will transfer to Sea Swift under the Proposed Acquisition is set out in Schedule 2 of the Annexure to the Determination; there are 28 in all (“Transferred Contracts”).
Competition between Sea Swift and TML
From 2013, there was a period of intense competition in the NT and FNQ with both Sea Swift and TML adopting a strategy of aggressive pricing in an attempt to gain market share in the territory in which the other was dominant. This resulted in reduced prices and improved service levels on some routes.
In January 2013, Sea Swift acquired a NT-based marine freight service provider, Tiwi Barge, and with the support of Caltex it commenced offering a full service scheduled service in competition with TML in the NT. It pursued a strategy of expanding its business in the NT by competing for TML’s contracts. In 2013, Caltex awarded a contract to Sea Swift previously held by TML in relation to the carriage of fuel in support of the contract Caltex had with NT Power & Water. TML also lost the Woolworths contract at Gove, the Rio Tinto Weipa contract and the Woolworths Weipa contract to Sea Swift, resulting in TML incurring heavy losses.
TML retaliated by expanding into the Torres Strait in FNQ in early 2014. TML won the IBIS contract from Sea Swift but it was not otherwise successful in winning large contracts in FNQ.
In October 2014, TML recovered the contract to carry fuel in the NT when PUMA won the NT Power & Water contract from Caltex.
As a result of aggressive competition, both TML and Sea Swift made heavy losses in the financial years 2014 and 2015. They both subsequently undertook cost-cutting measures, including abandoning or subcontracting some routes.
In March 2014, Toll’s senior management considered the various options for the TML business, including restructuring and cost cutting, divestment or merger and exiting the market. Mr David Jackson (CEO of Toll’s Resource and Government Logistics division, the division in which TML sits) says that he doubted that cost cutting would be effective because of TML’s underlying cost base, including enterprise bargaining agreements that resulted in a high cost of labour compared to other operators. Mr Jackson says that in taking a decision to exit the market, Toll would seek to minimise costs and disruption to TML’s customers. This was important because Toll wished to maintain its reputation with customers who were customers of the broader Toll group; it was therefore important to maintain continuity of supply and for the contracts to be performed on their current (or no less advantageous) terms. He was also aware of the social dimensions of the business conducted in the NT and FNQ.
On this basis, Toll made contact with CHAMP Ventures to see if there was interest in a merger between TML and Sea Swift. In August 2014, the Toll Board considered the options of winding up the business or selling to Sea Swift. Mr Jackson was authorised to pursue negotiations. In light of all of the factors and the scale of the losses incurred by TML, Mr Kruger (Toll’s Managing Director) and Mr Jackson were of the view that Sea Swift was the only realistic purchaser as only Sea Swift would be able to generate sufficient costs synergies to offset TML’s substantial operating losses. In Mr Jackson’s view, it would be a waste of time and money to seek another purchaser and Mr Kruger agreed that there was no other likely purchaser. Mr Scott Woodward also holds that view.
Timetable concerning the Proposed Acquisition
The Proposed Acquisition and the associated regulatory process developed as follows:
(1)On 8 September 2014, Sea Swift and Toll entered into a terms sheet in relation to a proposed transaction.
(2)On 24 November 2014, Sea Swift, Sea Swift Holdings, Toll and the relevant subsidiaries entered into an Asset and Share Sale Agreement (“Original Agreement”) relating to the shares and assets to be sold to Sea Swift. The Original Agreement contained a condition that Sea Swift obtain either formal or informal merger clearance from the ACCC or merger authorisation from the Tribunal before a sunset date of 31 May 2015.
(3)On 5 December 2014, Sea Swift and Toll sought informal merger clearance from the ACCC.
(4)By letter dated 26 February 2015, Toll advised its customers that if the transaction with Sea Swift was not approved, Toll would commence winding up TML’s operations in the NT and FNQ.
(5)The Original Agreement was varied on 26 June 2015 following renegotiation of the sunset date and to address concerns raised by the ACCC during the informal clearance process. A side deed was also executed.
(6)On 9 July 2015, the ACCC advised that it would not grant an informal clearance.
(7)On 21 September 2015, the Original Agreement (as amended) was varied and Sea Swift filed an application pursuant to s 95AU with the Tribunal seeking authorisation under s 95AT. Sea Swift withdrew that application on 16 November 2015 after it became apparent that there were issues surrounding the accuracy of its financial statements.
(8)By letter to its customers dated 21 October 2015, Toll reiterated its intention to exit the markets in the NT and FNQ and advised customers that it anticipated that if the Tribunal did not authorise Sea Swift’s acquisition of TML’s marine freight business in the NT and FNQ, it would cease providing scheduled services within approximately 60 days and wind up its operations.
(9)The Original Agreement was further varied on 17 March 2016 when a Deed of Amendment was executed. The Amended and Restated Asset and Share Sale Agreement (“ARASSA”) giving rise to the Proposed Acquisition was set out in Schedule 1 to the Deed of Amendment.
(10)A further application under s 95AU seeking authorisation under s 95AT was filed by Sea Swift on 4 April 2016.
(11)The Tribunal issued a memorandum as to the validity of the application under s 95AW on 8 April 2016.
(12)On 22 April 2016, the ACCC filed the “ACCC Issues List” in relation to the Proposed Acquisition and on 16 May 2016 it provided its Report to the Tribunal pursuant to s 95AZEA (“ACCC Report”).
Details of the Proposed Acquisition are summarised at [79]-[84].
Legal Principles
There was no contention between the parties as to the principles applicable to the Tribunal’s decision whether to grant authorisation.
Section 50 prohibits a corporation from acquiring shares or assets if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market.
The Tribunal may grant authorisation to a person to acquire shares in the capital of a body corporate or acquire the assets of another person and it may do so subject to such conditions as are specified in the authorisation, including a condition that a person must make and comply with an undertaking to the ACCC under s 87B: ss 95AT(1) and 95AZJ. Section 50 does not prevent an acquisition in accordance with an authorisation, so long as the conditions of any authorisation are complied with before, during and after the acquisition: ss 95AT(2) and (3).
Test to be applied – s 95AZH
The Tribunal must not grant an authorisation “unless it is satisfied in all of the circumstances” that the proposed acquisition would result, or be likely to result, in “such a benefit to the public that the acquisition should be allowed to occur”: s 95AZH(1).
Section 95AZH(2) specifies certain matters to which the Tribunal must have regard in determining what amounts to a public benefit. None of the matters set out in s 95AZH(2) is relevant to Sea Swift’s application.
“Net public benefits” test
This is the second time the Tribunal has had to consider s 95AZH. However, as noted by the Tribunal in Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1 (“Mac Gen”) at [156], it has, on a number of occasions, considered the expressions “benefit to the public” and “detriment to the public” appearing in s 90 which continue to apply to the evaluation of non-merger authorisations. Section 90(9) of the Trade Practices Act 1974 (Cth), which is in substantially the same terms as s 95AZH, was considered at some length in Re Qantas Airways Limited [2004] ACompT 9 (“Re Qantas”).
Unlike s 90, s 95AZH does not refer to detriment to the public as a factor in the Tribunal’s decision whether to authorise a proposed acquisition. Nonetheless, the Tribunal in Mac Gen found that in applying the test under s 95AZH(1), it must examine the likely anti-competitive effects of a proposed acquisition on the one hand and the likely public benefits flowing from it on the other and weigh them against each other: Mac Gen at [160]. This Tribunal adopts that position.
A public benefit arises from a proposed acquisition if the benefit would not exist without the acquisition or if the acquisition removes or mitigates a public detriment which would otherwise exist. If a claimed public benefit exists, in part, in a future without the proposal, the weight accorded to the benefit may be reduced appropriately. Public benefit is a wide concept and may include anything of value to the community generally so long as there is a causal link between the proposed acquisition and the benefit: see Application by Medicines Australia Inc (2007) ATPR 42-164; [2007] ACompT 4 (“Medicines Australia”) at [107], [118]-[119]. Benefits not widely shared may nevertheless be benefits to the public: Hospital Benefit Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369 at 375-377. However, the extent to which the benefits extend to ultimate consumers is a matter to be put in the scales: Mac Gen at [168].
A public detriment includes the reduction of competition arising from an acquisition as well as other matters contrary to the goals pursued by society, including the goal of economic efficiency; public detriment may not be confined to competitive detriment: see Medicines Australia at [108] and [115]; see also Re Australian Association of Pathology Practices Incorporated (2004) 206 ALR 271; ATPR 41-985; [2004] AComptT 4 at [93]-[94]; and ReVFF Chicken Meat Growers’ Boycott Authorisation (2006) ATPR 42-120; [2006] AComptT 2 at [66]-[67].
Future “with and without”
In assessing relevant public detriments and public benefits associated with a proposed acquisition, the Tribunal looks to hypothetical futures, one where the acquisition takes place and is in effect and one where it does not take place, the so called “with and without” test. The test is not to compare the present situation with the future situation: it is not a “before and after” test: Medicines Australia at [117]-[119].
Degree of satisfaction required
The Tribunal must be satisfied that a claimed benefit or detriment is such that it will, in a tangible and commercially practical way, be a consequence of a proposed acquisition if the acquisition is allowed to occur and that the applicant is commercially likely to act in a way which brings about the benefit or detriment. The benefit or detriment must be sufficiently capable of exposition (but not necessarily quantitatively so) rather than “ephemeral or illusory”: see Re Qantas at [156].
For a benefit or detriment to be taken into account, it must “be of substance and have durability”. Any estimate as to their quantification should be robust and commercially realistic. The assumptions underlying the estimates should be spelled out in such a way that they can be tested and verified. Care must be taken to distinguish between one-off benefits and those of a more lasting nature. The options for achieving claimed benefits should be explored and appropriate weighting given to future benefits not achievable in any other less anti-competitive way. The Tribunal must be satisfied that “there is a real chance, and not a mere possibility” of the benefit or detriment eventuating. While it is not necessary to show that the benefits or detriments are certain to occur, or that it is more probable than not that they will occur, claims that are purely speculative in nature should not be given any weight: see Mac Gen at [163]-[164] and the cases there cited.
The Tribunal’s decision must be based in the real world and not rest on speculation or theory alone: see Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317; [2003] FCA 1525 (“AGL v ACCC (No 3)”) per French J (as he then was) at [348]. While French J was considering the test in s 50, the parties accept that this proposition is equally applicable to the assessment which the Tribunal is required to make under s 95AZH(1).
In summary, the Tribunal is called upon to make a robust and commercially realistic judgment of the claimed public benefits and public detriments, exposed by its reasoning process: see Mac Gen at [172]; cf Re Qantas at [206]-[210].
Does s 95AZH(3) bar the grant of an authorisation?
An authorisation cannot be granted for an acquisition that has occurred: s 95AZH(3).
For completeness, the Tribunal mentions that shortly before the “readiness” case management conference held on 3 June 2016, it was drawn to the Tribunal’s attention that Sea Swift’s Application had been made on 4 April 2016, more than 14 days after the ARASSA was adopted by Sea Swift and Toll when they entered into the Deed of Amendment on 17 March 2016. This was relevant because of the combined effect of s 50(4) and s 4(4). While the Tribunal was satisfied that it had jurisdiction to hear the application which had been validly made, it sought submissions as to whether it was in a position to grant an authorisation if it was satisfied that the Proposed Acquisition resulted (or would be likely to result) in “such a benefit to the public that the acquisition should be allowed to occur”: see s 95AZH(1).
Section 50(4) provides:
Where:
(a)a person has entered into a contract to acquire shares in the capital of a body corporate or assets of a person;
(b)the contract is subject to a condition that the provisions of the contract relating to the acquisition will not come into force unless and until the person has been granted a clearance or an authorization to acquire the shares or assets; and
(c)the person applied for the grant of such a clearance or an authorization before the expiration of 14 days after the contract was entered into;
the acquisition of the shares or assets shall not be regarded for the purposes of this Act as having taken place in pursuance of the contract before:
(d) the application for the clearance or authorization is disposed of; or
(e) the contract ceases to be subject to the condition;
whichever first happens.
[Emphasis added]
Section 4(4):
In this Act:
(a)a reference to the acquisition of shares in the capital of a body corporate shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such shares; and
(b)a reference to the acquisition of assets of a person shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such assets but does not include a reference to an acquisition by way of charge only or an acquisition in the ordinary course of business.
[Emphasis added]
At the case management conference on 3 June 2016, Mr Burnside QC referred the Tribunal to AGL v ACCC (No 3) at [338]-[339] in which these provisions were considered by French J:
… Acquisitions of shares are defined by what amounts to a deeming provision in s 4(4)(a) of the Act. A reference to such an acquisition ‘shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such shares’. On that definition, one transaction may give rise to successive acquisitions for the purposes of s 50. A corporation which enters into a contract to purchase the shares of a body corporate may acquire an equitable interest prior to settlement and thereby acquire the shares pursuant to s 4(4). This will not necessarily attract the prohibition in s 50. Where the acquisition of the legal interest has not been completed and no right subsists in the acquirer as a shareholder in the target body corporate then forging any link to a substantial lessening of competition would be problematic.
In the case of a contract subject to a condition precedent, as in the present case, no interest is conveyed until satisfaction of the condition. Broken Hill Pty Co Ltd v Trade Practices Tribunal (1980) 47 FLR 384; (1980) 31 ALR 401 concerned an acquisition of shares conditional upon authorisation by the Trade Practices Commission. It conveyed no direct beneficial interest in the shares. A direct beneficial interest was acquired only when the contract became specifically enforceable by an order to convey or transfer. Prior to the condition being satisfied, the purchaser could seek an order to require the vendor to do what it must under the contract to secure fulfilment of the condition…
Clause 2 of the ARASSA states that the contract is conditional on the Tribunal authorising the Proposed Acquisition. Sea Swift and Toll submitted that Sea Swift’s only entitlement under the ARASSA was to specific performance of any steps required to fulfil the condition; no “acquisition” occurred as a result of entry into that agreement. It was further submitted that if it were to be found that Sea Swift had acquired a legal or equitable interest in the relevant shares or assets upon entry into the Deed of Amendment, Sea Swift did not seek authorisation of that interest; it sought authorisation of the acquisition of assets and shares that would occur if and when the agreement is completed. Accordingly, Sea Swift did not seek to rely on s 50(4).
The ACCC did not seek to contradict those submissions. As submitted by Mr Burnside QC at the case management conference, if s 50(4) operated as a time bar it would also have profound implications for the ACCC’s informal clearance process.
The ACCC submitted that any benefit conferred by this Proposed Condition is “uncertain, very limited in scope and will be of short duration” and “unlikely to result in any meaningful benefit to the community” and that it is incorrect to assume that transfer of the Transferred Contracts to Sea Swift will result in the preservation of prices determined in a period of intense competition.
It submitted that there is no evidence that favourable pricing for large corporations such as PUMA, Rio Tinto, and GEMCO is likely to flow through to the community. Of the not-for-profit organisations, the ALPA contract commenced in 2011, before the intense competition between Sea Swift and Toll. The ACCC conceded that evidence suggests that IBIS was able to negotiate favourable pricing. The ACCC submitted that these companies may be able to seek remedies for breach of contract if TML chooses to walk away and consequently their financial position is unlikely to be materially different with or without the Proposed Acquisition.
The ACCC also submitted that of the smaller customers, almost 40% of contracts were entered into before the period of intense competition. Of the remainder, the ACCC said it is “meaningful” that Mr Tourish of Gove & Beyond Pty Ltd (the company which operates Walkabout Lodge and Tavern at Nhulunbuy) and Mr Totten of the Maningrida Progress Association expressed concerns about the merger notwithstanding their contractual situation, fearing that it would result in higher prices and lower services, as has happened previously when there was a single provider.
The Tribunal does not accept these submissions.
First, in relation to GEMCO and Rio Tinto, the public benefit achieved by the Transferred Contracts Condition is that any exclusivity or right of first refusal in those contracts cannot be relied on by Sea Swift. Without authorisation subject to this Condition, there would be no assurance of the terms under which Sea Swift might be engaged or subcontracted to perform TML’s obligations, possibly limiting the contestability of contracts with the Largest Customers for an indeterminate period.
Second, in relation to PUMA, Mr Donnan has expressed a strong preference for authorisation. It is Mr Donnan’s evidence that the favourable pricing that PUMA secured under its contract with TML was achieved in a tender process lasting 18 months. The pricing enabled PUMA to secure the contract with NT Power & Water because it includes the cost of freight secured by the contract with TML. NT Power & Water is a government instrumentality which provides diesel and gas driven electricity generation and distribution services throughout the remote communities and water and sewerage services in the NT.
The Tribunal accepts that NT Power & Water need suffer no price detriment in the long run, even if XXXXX X XXXXX XXXXX XXX with PUMA. However, that does not mean that the remote communities served under the NT Power & Water contract would not suffer disruption while a new provider is engaged. Unless PUMA can make arrangements with an alternate supplier quickly, disruption may occur to services to the remote communities for fuel and the equipment necessary to supply electricity in those communities. Even though other providers may be willing to enter the market, PUMA would be at a negotiating disadvantage in those circumstances. It would certainly not be in a position to take the time and care it did during the 2014 tender process. It is most likely that PUMA would use Sea Swift as the full service provider most closely resembling TML, even though Teras and Barge Express might be suitable for some routes. While PUMA may have a cause of action against TML for any price difference, that may not compensate it in relation to other terms it might be required to accept, for instance in relation to exclusivity or length of contract. Authorisation enables an orderly transition for the remote communities of a scheduled service which supports continuity of electricity supply, while making the PUMA contract contestable.
Third, in relation to ALPA, Mr King has expressed a strong preference for the Tribunal to authorise the Proposed Acquisition having regard to the degree of disadvantage in the communities ALPA serves. While it is the case that the current contract was negotiated before the price war, Mr King expressed concern that if TML walks away, he will need to find another provider and that may not be possible on the same terms as to price or service levels as ALPA now enjoys. He is concerned that any disruption to services would threaten the regular supply of necessary food and other goods at sustainable prices to the disadvantaged communities which ALPA serves. He has indicated that if authorisation was not granted, he has a preference to XXXXX X XXXXX XXXXX XXX XXXXX X XXXXX XXXXX XXX XXXXX XXX, even though it might be able to provide the services he needs. However, he can have no assurance about the terms on which Sea Swift or any other provider might agree to contract and there is no assurance that that contract would be contestable during its term in the future without the Proposed Acquisition.
Fourth, Mr Woodward has indicated that TML would be unlikely to subcontract the IBIS arrangement to Sea Swift because of the losses TML would incur. IBIS is then in a similar situation as ALPA. That contract was negotiated during the price war and the Tribunal accepts the evidence of Mr Copeland of IBIS that the savings secured under its contract with TML are substantial and they are passed on to the communities IBIS services in the Torres Strait and FNQ.
Fifth, while it is true that if TML XXXXX X XXXXX XXX contracts with IBIS or ALPA or other similar organisations they may have legal remedies against TML which would preserve some of the price benefit which the customers enjoy. However, pursuing legal remedies while they seek out one or more other providers would involve executive time, disruption and expense which may be difficult to either afford or justify given the priorities of these organisations which are important to the well-being of the disadvantaged remote communities that they serve.
Finally, in relation to the Transferred Contracts with smaller community groups and businesses, the ACCC estimates that 60% have secured advantageous prices during the price war which they may not have otherwise secured. Of the other 40%, it is quite possible that many would take the same attitude as Mr King; it is a rational approach as it will give them price and service protection. At the same time, the contracts will be contestable so that the customer will be free to negotiate a better arrangement with another provider if that becomes feasible.
The Tribunal is satisfied that the assignment of the Transferred Contracts will minimise disruption to the remote communities who benefit from those contracts. For many of those communities it will also preserve costs for scheduled services at a level which they can manage or which was achieved during the price war, for periods up to seven years (depending on the contract). The communities value this benefit highly. Having regard to the need to ensure that remote communities obtain regular and timely supplies of essential commodities at the best price available, that is a substantial benefit. These are benefits of which they have no assurance in the future without the Proposed Acquisition following TML’s withdrawal of its services. The Tribunal does not accept that a period up to seven years is short; there is every prospect that in such a timeframe a significant competitor to Sea Swift might emerge.
It is the Tribunal’s view that the Transferred Contracts Condition confers public benefits.
Remote Community Service Condition
The ACCC’s objections to the Remote Community Service Condition and the Remote Community Price Condition are summarised at [110]-[111] above.
It is common ground that the frequency and reliability of freight deliveries are very important matters for remote communities and that a reduction in the frequency of services would have consequences for those communities. There is a substantial body of evidence that these communities are also highly sensitive to the price of services because of the disadvantage suffered by a high percentage of their populations.
The ACCC correctly points out that the Remote Community Service Condition only establishes minimum frequency requirements. There are no commitments proposed with respect to other aspects of service, including but not limited to the days and times of delivery, the waiting time for freight or the condition of delivered goods. Sea Swift also did not specify the capacity or type of vessels which will provide scheduled services post-acquisition.
While the defects identified by the ACCC are real, they apply whether or not the Proposed Acquisition was authorised. The Tribunal does not accept that the Remote Communities Service Condition will distort the market or lacks value. If Sea Swift does not provide an adequate service to the remote communities, that will provide an entry opportunity for another operator since the Condition does not preclude other operators from initiating a service should they wish to do so. If, some time later, that operator ceases to provide a service during the five-year period of the Condition, Sea Swift must resume the service.
The ACCC contends that all remote communities will continue to receive services in the future with or without the Proposed Acquisition because:
(1)other operators are ready, willing and able to provide services;
(2)the major contracts require service to all destinations; and
(3)the government is likely to step in if there were interruptions to scheduled services.
There is some force to this submission in that PUMA, ALPA, IBIS and Ergon Energy (a Sea Swift customer) do require service to nominated destinations under their current contracts. However, if the Proposed Acquisition is not authorised and TML walks away from some or all of its contracts, it will be a matter for negotiation with Sea Swift or another operator whether all of those communities are serviced, the frequency with which they will be serviced and at what price. In any event, not all of these contracts are for a period of five years during which the Condition will apply.
It is true that other operators (such as Shorebarge, Teras and Barge Express) have indicated interest in providing services to some communities if they obtain one or more of the Largest Contracts. However their evidence indicates that this interest is in contracting very much on their own terms (including price) and Shorebarge and Barge Express, as well as Sea Swift, have walked away from unprofitable routes in the past when it became necessary to cut costs. While a government may subsidise an essential service to a remote community where no commercial provider is willing to provide it, there is no guarantee of how long it might be before that would occur or the frequency or prices of any service it might provide.
With the Remote Community Service Condition, the remote communities are assured that, at a minimum, the services specified in Schedule 3 of the Annexure to the Determination will be provided by Sea Swift or another operator for a period of five years. Even if the ACCC is right in its assessment, the assurance has value to vulnerable and disadvantaged communities for a period of five years. That benefit is sufficiently durable and substantive.
If Sea Swift does not comply with this Condition it is open to the remote communities to make the ACCC aware of that fact and the ACCC has remedies under s 50 and s 95AZM(6). From its submissions, the ACCC appears to consider these remedies inadequate, among other reasons, because the remedies cannot have the effect of unwinding any structural changes effected by a merger once it has occurred. However, the Proposed Acquisition will not effect structural change which would not substantially occur in any event since TML is exiting the market and the base load customers will most likely utilise Sea Swift’s services in preference to its competitors, at least in the short term for reasons previously given.
While the Condition is not as extensive as the ACCC contends it might or should be, the Tribunal is satisfied that it will result in a benefit to the public due to the assurance it gives to disadvantaged remote communities and is one which is available only with authorisation.
Remote Communities Price Condition
The Remote Community Price Condition is designed for the benefit of uncontracted customers. It is summarised at [94]-[95] above.
The ACCC has a number of criticisms of this Proposed Condition including that:
(1)it does not cover some important items such as fuel or building materials;
(2)the calculation of the Maximum Charge is so complex that it is difficult for affected communities to discern breach with the result that it gives them little certainty;
(3)the prices which Sea Swift could charge under the Proposed Condition are significantly above what many customers of Sea Swift and TML already pay because of discounts given to regular customers;
(4)it is not likely to constrain Sea Swift’s scheduled prices to competitive levels;
(5)it is of limited duration;
(6)it does not give “effective, balanced and non-manipulable protection for non-contract customers from any substantial lessening of competition post-acquisition”; and
(7)the ACCC is not is a position to monitor compliance adequately.
The Tribunal accepts that the application of the Maximum Charge is complex which may make it difficult for customers to establish whether it is being complied with. It also affords Sea Swift latitude to increase prices since the capacity to raise prices is based on the broadly based national Consumer Price Index, rather than that which might apply locally and there are a range of other charges which Sea Swift can increase.
It is notable that the condition does not cover some essential commodities, primarily fuel. However, many remote communities derive significant price protection in relation to fuel and a range of other essentials because of the contracts held by PUMA, ALPA and IBIS, the benefit of which will be preserved when they are transferred to Sea Swift under the Proposed Acquisition so this “gap” in the protection afforded by the Remote Community Price Condition is not as significant as it might at first appear. Further, there is no indication that Sea Swift intends to cease its practice of giving discounts to regular or volume customers; the Tribunal accepts Mr Bruno’s evidence that that would be commercially short-sighted.
The Tribunal accepts that the Remote Community Price Condition would be inadequate if the intention was to establish a competitive pricing regime. That is not the intention; it is instead designed to set a cap on price rises that Sea Swift may instigate for a period of five years. Although it is not a tight “cap”, the Tribunal has formed the view that the Remote Community Price Condition has some benefit which would not exist but for the Proposed Acquisition. On a stand-alone basis, this Condition might not confer a benefit sufficient to justify the grant of authorisation but as part of a package of Conditions it should be taken into account.
Toll Commitments
The Tribunal accepts that the Toll Commitments give rise to minimal public benefits. However, the Toll Commitments were offered to the Tribunal as part of the basis on which authorisation might be granted. The Tribunal considered that it was appropriate to make it a condition of authorisation that TML’s assets be made available to the market in the manner in which it told the Tribunal that it would.
Other asserted benefits
In forming its view that the Proposed Acquisition should be authorised, the Tribunal gave no weight to the other benefits asserted by Sea Swift and Toll. The Tribunal was unpersuaded that TML’s orderly exit would have the effect of lowering barriers to entry. While there may be benefit to Toll’s shareholders in exiting via an acquisition, that is not a benefit which justifies authorisation. The Tribunal also saw no public benefit which would justify authorisation in the suggestion that the Proposed Acquisition would “foster dynamic efficiency in supporting the evolution of the market to a more efficient structure”; the Tribunal did not have to form a view on what the most efficient structure of the market is in the NT and FNQ.
Conclusion
The Tribunal was satisfied that authorisation of the Proposed Acquisition was justified having regard to the particular facts of this matter and an aggregation of circumstances including:
(1)the counterfactual of TML’s exit from the NT and FNQ in a short timeframe and the Tribunal’s view that Sea Swift would become the provider to base load customers in the short term so that its competitors were unlikely to compete effectively for those customers in that timeframe. Accordingly, save for competitive detriment addressed by the Gove Lease Undertaking, there is no competitive detriment with the Proposed Acquisition which would not exist without it;
(2)the public benefit being the pro-competitive effect of the Transferred Contracts Condition by ensuring that those contracts remain contestable by Sea Swift’s competitors during their term. It also addresses the entrenchment of Sea Swift as the provider to TML’s Largest Customers in the counterfactual so that in the long term, competition is enhanced;
(3)the public benefit of preservation of price and other terms of the Transferred Contracts which service providers to remote communities consider to be highly desirable because they will flow through to communities which are subject to substantial social and economic disadvantage;
(4)the public benefit of assurance to the remote communities that, for a period of five years, they will continue to receive a regular scheduled service and there will be a cap on prices charged for the most common items carried for uncontracted customers provided by the Remote Communities Service Condition and the Remote Communities Price Condition; and
(5)the public benefit of the maintenance of the Gove Lease Undertaking with provision for lower prices than those currently charged by TML and extension of the undertaking to the roll-on/roll-off ramp, the facility most useful to scheduled service operators at Gove.
I certify that the preceding three hundred and forty seven (347) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice Farrell (Deputy President), Mr RC Davey (Member) and Professor DK Round (Member). Associate:
Dated: 28 July 2016
ANNEXURE 1
List of Lay Witnesses
*Indicates the witness was not called for cross-examination at the hearing.
Lay Witnesses
Witness
Statement filed by
Category
1
Brian Kruger
Managing Director
Toll Holdings Ltd
Toll
Corporate
2
David Jackson
Chief Executive Officer
Toll Resources & Government Logistics
Toll
Corporate
3
Scott Woodward
General Manager
Toll Energy
Toll
Corporate
4
Trent Lonsdale
Toll Energy West and National Maritime Manager
Toll Energy
Toll
Corporate
5
Adam Martin*
Group General Manager of Legal
Toll Group
Toll
Corporate
6
Darren Rowland*
Commercial Manager
Toll Resources & Government Logistics
Toll
Corporate
7
Fred White
Managing Director & Chief Executive Officer
Sea Swift Pty Limited
Sea Swift
Corporate
8
Pasquale ‘Lino’ Bruno
Chief Operating Officer
Sea Swift Pty Limited
Sea Swift
Corporate
9
Paul Readdy
Executive
CHAMP Ventures Pty Limited & non-Executive Director
Sea Swift Pty Limited
Sea Swift
Corporate
10
Ken Conlon
Managing Director
Conlon Murphy Pty Ltd (trading as Barge Express)
Toll
Competitor
11
Loui Kannikoski
Managing Director
Bhagwan Marine
Sea Swift
Competitor
12
Terry Dodd
Managing Director
Pacific Marine Group & Director
Sealink Travel Group
Sea Swift
Competitor
13
Arthur Hamilton
Managing Director
Shorebarge Pty Ltd
ACCC
Competitor
14
Larry Johnson
Chief Executive Officer
Teras Australia Pty Ltd
ACCC
Competitor
15
Stephen Muller
Chief Executive Officer
MIPEC Pty Ltd
ACCC
Competitor
16
Vance Wallin
Director
Weipa Hire Pty Ltd trading as Carpentaria Contracting
ACCC
Competitor
17
David Slimming
Managing Director
Silentworld Shipping & Logistics Pty Ltd
Summons issued by the Tribunal pursuant to s 105(2) at the request of the ACCC
Competitor
18
Antony Perkins*
Director of Project Development
Qube Ports & Bulk
Sea Swift
Former Director Perkins Shipping
19
Alistair King
Chief Executive Officer
Arnhem Land Progress Aboriginal Corporation
Toll
Customer
20
Ian Copeland
Chief Executive Officer
Islanders Board of Industry and Service
Toll
Customer
21
Arthur Wong
General Manager, Chief Executive Officer and Director
Seisia Enterprises Pty Ltd
Sea Swift
Customer
22
Bruce Donnan
Key Account Manager NT, SA & Kimberley
Puma Energy Australia
Sea Swift
Customer
23
Christopher Foord
General Manager
Bamaga Enterprises Ltd
Sea Swift
Customer
24
Duncan Griffin
Senior Manager
NT Power and Water Corporation
Sea Swift
Customer
25
Greg Williams
Operations Manager
NQ Civil Engineering Contracting
Sea Swift
Customer
26
Joseph Elu
Chairman
Torres Strait Regional Authority
Councillor
Northern Peninsula Area Regional Council (member for Seisia)
Chairperson
Seisia Enterprises and Seisia Community Torres Strait Island Corporation
Sea Swift
Customer
27
Klaus Helms
Chief Executive Officer
Gumatj Corporation Limited / Gumatj Aboriginal Corporation
Sea Swift
Customer
28
Dania Ahwang
Chief Executive Officer
Torres Strait Island Regional Council
ACCC
Customer
29
Gordon Smith
Regional Manager Service Delivery
West Arnhem Regional Council
ACCC
Customer
30
John Japp
Chief Executive Officer
East Arnhem Regional Council
ACCC
Customer
31
John Tourish
Sole Director
Gove and Beyond Pty Ltd
ACCC
Customer
32
Alexandra Gibson*
Legal Advisor
Northern Land Council
ACCC
Customer
33
Ken Kahler
Procurement & Supply Superintendent
Rio Tinto Gove Operations
ACCC
Customer
34
Michael Luttrell
Supply Lead
Groote Eylandt Mining Company Pty Ltd
ACCC
Customer
35
Robert Totten
Store Manager
Maningrida Progress Association Inc
ACCC
Customer
36
Vince Lavery
Service Delivery Manager
Rio Tinto, Weipa & Gove Operations
ACCC
Customer
37
Bradley Smith*
Commodore
Gove Boat Club
ACCC
Facility provider
38
Thomas Mayor*
Branch Secretary
Northern Territory Branch of the Maritime Union of Australia
MUA
Intervener
ANNEXURE 2
Details of Competitors
Far North Queensland
Company
Scheduled Services
Charter Services
Landing facilities & depot in home port
Number of vessels suitable for coastal and community services
Carpentaria Freight
Provides regular weekly services to Mornington Island
Provides charter services
Karumba and Cairns
2 landing craft vessels: the Torres Venture and Carpentaria Venture
Palm Island Barge
Provides regular passenger and freight services to Palm Island
Provides charter services
Lucinda
2 landing craft vessels: MV Olympic and Lady Fraser
Carpentaria Contracting
Provided a weekly scheduled service between the communities of Weipa and Aurukun from January 2015 until May 2015
Provided a scheduled service from Cairns to Cape Flattery for one year in 2011 under sub-contract to Silentworld Shipping
Provides charter services
Cairns (adjacent to Sea Swift)
3 dumb barges (non-motorised), 4 tugs
MIPEC
Does not currently provide scheduled marine freight services, but has been awarded “preferred supplier” status by the Torres Strait Island Regional Council to provide a scheduled service
Provides charter services
Gladstone
4 tugs, 2 dumb barges and 3 landing craft: Kaleen, Karribi and Kogarah
Silentworld Shipping
Provided services from Cairns to Thursday Island and Horn Island in the Torres Strait; and also to Weipa and Townsville from 2011 to 2013
Provides charter services
Operational base in the Solomon Islands
Tug and barge set
Northern Territory
Company
Scheduled Services
Charter Services
Landing facilities & depot in home port
Number of vessels suitable for coastal and community services
Ezion / Teras
Provides twice weekly services from Hudson Creek (Darwin) to Tiwi Islands.
Provides regular scheduled services to Port Keats, but may have lost that contract to Shorebarge in May 2016Provides charter services
East Arm at Darwin
3 landing craft vessels: Lauren Hanson, Bandicoot and Centaur II
Shorebarge
Provides scheduled services to north east WA from its base in Darwin. Previously provided scheduled services across East and West Arnhem. May have won a contract to provide a regular scheduled service to Port Keats in May 2016
Provides charter services
East Arm at Darwin
2 landing craft vessels: MV Jane Virgo and MV Coomacooma
Barge Express (previously Sealink)
Provides services to the NT communities on behalf of TML pursuant to a time charter arrangement.
Previously provided regular service to Port KeatsProvides charter services
East Arm at Darwin
4 landing craft vessels including MDT Trader, Sealink Darwin, Bimah Tujuh
Bhagwan Marine
Provides charter services
East Arm at Darwin
4 landing craft; numerous tugs and barges
ANNEXURE 3
Map of NT Scheduled Marine Freight Services
ANNEXURE 4
Maps of FNQ and OTSI Scheduled Marine Freight Services
Map of FNQ - Zoomed In
ANNEXURE 5
List of destinations serviced by Sea Swift or TML and applicable large customer contracts
Northern Territory
Destination
Puma Energy/ NT Power and Water Corporation¹
ALPA
GEMCO
Rio Tinto / Woolworths
Bickerton Island (Milyakburra)
X
Croker Island (Minjilang)
X
X
Elcho Island (Galiwinku)
X
X
Garden Point (Pirlangimpi)
X
X
Goulburn Island (Warruwi)
X
X
Gove
X
Groote Eylandt (Alyangula)
X
Lake Evella (Gapuwiyak)
X
X
Maningrida
X
Milikapiti
(Snake Bay)
X Milingimbi
X
X
¹ Puma Energy is contracted to provide fuel to NT Power and Water Corporation, and TML currently holds a contract with Puma Energy for the delivery of fuel to NT Power and Water sites.
Nguiu
(Bathurst Island)
X Numbulwar
(Rose River)
X X Paru²
(see Nguiu above)
Port Keats (Wadeye)
X
Ramingining
X
X
Umbakumba
X
X
Far North Queensland
Destination
Caltex / Ergon Energy³
IBIS
TSIRC
Rio Tinto/ Woolworths
Aurukun
X
Badu Island
X
X
Bamaga/Seisia
X
X
Boigu Island
X
X
X
Coconut (Poruma) Island
X
X
X
Darnley (Erub) Island
X
X
X
Dauan Island
X
X
X
² Paru is not listed in the Puma Energy or ALPA contracts but is situated approximately 1.3km from Nguiu.
³ Caltex is contracted to provide fuel to Ergon Energy, and Sea Swift currently holds a contract with Caltex for the delivery of fuel to Ergon Energy sites. Sea Swift also holds a contract with Ergon Energy for the delivery of other freight services, however that contract is not a key contract.
Hammond Island
X
X
Horn Island (Wasaga)
X
X
Kubin
(Moa Island)
X
X
X
Lockhart River
X
Mabuiag Island
X
X
X
Murray (Mer) Island
X
X
X
Palm Island⁴
X
Saibai Island
X
X
X
St Pauls
(Moa Island)
X
X
Stephen (Ugar) Island
X
X
X
Thursday Island
X
X
X
Warraber Island
X
X
X
Weipa
X
Yam (Iama) Island
X
X
X
Yorke (Masig) Island
X
X
X
⁴Note: Deliveries to Palm Island are only as required, typically every 4-6 weeks.
ANNEXURE 6 - History of Scheduled Service Providers in the Northern Territory
Recent history – Northern Territory
Perkins Shipping Group Pty Ltd (Perkins Shipping) was the predominant operator of NT coastal freight services for 50 years, other than the Tiwi Island Service which was owned by the Tiwi Island traditional owners. Apart from Perkins Shipping, other barge operators that have been present include an operator named Barge Express in the late 1970's to early 1990's, Gulf Freight Services in the late 1990's. (Note that the “Barge Express” referred to here is a separate company to the “Barge Express” currently operated by Mr Ken Conlon).
Perkins provided coastal and community shipping services to remote communities and coastal towns, including:
(a)regular barge services to remote Aboriginal communities in the NT, FNQ and WA;
(b)regular fixed-day shipping services to the resource industry townships of Gove and Groote Eylandt.
For a number of years leading up to the late 1980s, Barge Express serviced some of the NT locations that Perkins Shipping did not service. Barge Express operated in respect of some locations and Perkins Shipping in respect of other locations:
(a)Barge Express went to Minjilang (Croker Island), Maningrida, the Tiwi Islands and Ramingining;
(b)Perkins Shipping went to Gapuwiyak (Lake Evella), Nhulunbuy (Gove), Umbakumba, Numbulwar and Alyangula (Groote); and
(c)both companies went to Galiwin’ku (Elcho Island).
In the early 1990s, Perkins Shipping expanded its scheduled service into the areas previously serviced only by Barge Express. Following Perkins Shipping’s entry into the further routes, Barge Express decided to exit and was acquired by Perkins Shipping in approximately 1994. Barge Express’ decision to exit appears to have been the result of it suffering losses due to Perkins entering its ports, and the deteriorating volume would not financially support its continued operation.
During the time Perkins Shipping was operating, a company called Tiwi Barge provided regular sea freight services to the Tiwi Islands (Bathurst Island and Melville Island). Perkins Shipping did not provide scheduled services to the Tiwi Islands (although Perkins did carry out spot work to the Tiwi Islands).
In approximately 2002, Gulf Freight Services, which operated a service out of Karumba in the Gulf of Carpentaria to the Gove Peninsula and then back to Weipa, sought to expand its operations to provide scheduled deliveries to some of the remote NT communities out of Darwin (including Maningrida, Elcho Island, Gove and Ramingining). It appears that Gulf Freight had been able to obtain some contracted work for delivery to those communities.
In around 2003, Gulf Freight Services decided to exit and was acquired by Perkins Shipping. It appears that the prices quoted by Gulf Freight Services were or may have been too low to be sustainable, i.e. too low to cover the costs of operating the barges (including vessel costs, labour and fuel) and all the associated costs involved in providing a liner barge service. Following its acquisition of Gulf Freight, Perkins Shipping commenced providing the coastal freight service to Weipa from Karumba (or from Cairns during the wet season if the road to Karumba was closed). In about the mid-2000’s, Perkins Shipping relocated the origin of its Weipa service, initially from Karumba to Townsville, then ultimately to Cairns in order to provide an uninterrupted weekly scheduled service to Weipa.
On 1 July 2009, Toll acquired Perkins. It was later renamed TML.
From 2009 until around January 2014, TML provided coastal and community shipping services predominantly in the NT. Its operations in FNQ were predominantly limited to servicing the Cairns-Weipa route pursuant to two contracts that it inherited through the acquisition of Perkins. TML expanded its services in FNQ, beyond the Cairns-Weipa route into parts of the OTSI in around early 2014 (on an ad-hoc basis). TML provides scheduled services on both coastal mainland or ‘trunk’ routes and to a wide range of remote islands and communities, in the NT and FNQ.
In around 2011, Shorebarge (a provider of charter services) expanded into scheduled services to Troughton Island and Truscott Air Base (in which it has an interest) in north east WA, which it provided from Darwin. For a short period from mid-2011, Shorebarge provided scheduled services to Port Keats and to remote communities across East and West Arnhem in the NT. After Sea Swift entered the NT in 2013, Shorebarge redeployed its vessels to provide scheduled services to Truscott, Troughton Island and Kalumbaru in north east WA, again from Darwin. The only scheduled service that Shorebarge currently provides is a fortnightly service from Darwin to Kalumburu, Troughton Island and Truscott in the Kimberley region of WA. It plans to commence a weekly scheduled service from Darwin to Port Keats through an arrangement with Northline. Although Shorebarge won that contract, there is a dispute between Mr Johnson and Mr Hamilton about whether that route is currently being serviced by Shorebarge or Teras.
Also in around 2011, Ezion/Teras (“Teras”) was formed. It acquired Top End Barge. To support development of the Port Melville port, Teras started running two small barges from the Tiwi Islands to Darwin to provide coastal and community shipping services. Teras says that it currently operates weekly scheduled services on two routes: the Darwin-Port Melville route and the Darwin-Port Keats route. As mentioned above, there is a dispute between Mr Johnson and Mr Hamilton about whether the Darwin-Port Keats route is currently being serviced by Shorebarge or Teras.
In late 2013, Sea Swift entered the NT through the acquisition of Tiwi Barge. Tiwi Barge had operated in the NT for around 40 years providing a scheduled service to the Tiwi Islands. Sea Swift’s expansion in the NT in 2013 was supported and assisted by Caltex, which awarded its NT Power & Water contract to Sea Swift. (Note that the ACCC does not agree with the statement that “Sea Swift’s expansion in the NT in 2013 was supported and assisted by Caltex”).
Around 2013, Bhagwan Marine established operations in Darwin when it acquired Workboats Northern Australia in the NT. Bhagwan Marine was originally established in 1998 from Geraldton in WA with a single vessel. Bhagwan Marine primarily services the oil and gas industry with project freight work. It does not provide any scheduled freight services and has no intention of doing so, unless there was no other opportunity for Bhagwan’s barges to be used, in which case it would consider providing scheduled services.
In 2016, Barge Express (formerly Sealink NT) indicated plans to commence a scheduled service in the NT in competition with Sea Swift irrespective of the outcome of Sea Swift’s Application to the Tribunal. Barge Express has not commenced any scheduled service despite stating in March 2016 that it intended to commence a service that month. (Note that this “Barge Express” is to be distinguished from the Barge Express operating in the 1980s).
ANNEXURE 7 – History of Scheduled Service Providers in Far North Queensland
Recent history – Far North Queensland
Over the last thirty years, a number of operators have provided marine freight services in FNQ.
Sea Swift has operated in FNQ for over thirty years. Having relocated from Karumba to Cairns in 1987, it commenced transporting fuel to the Torres Strait. Sea Swift acquired further vessels over time and, in 1990, commenced trans-shipments to the OTSI. It was the first operator to provide scheduled services to the OTSI.
Jardines Shipping operated in FNQ for some time in the 1990s, providing scheduled services to various FNQ communities until it was acquired by Brambles Shipping in 1999. Brambles Shipping entered FNQ in 1999 with its acquisition of the business of Jardines Shipping. Whilst in operation in FNQ, Brambles Shipping serviced Cairns to Thursday Island, Horn Island, Seisia and the OTSI. In May 2002, Sea Swift acquired some of the assets associated with Brambles Shipping's cargo business, which included vessels, plant and machinery, as well as the lease of a Horn Island facility.
Pacific Marine Group, a marine contracting company based in Townsville, commenced operating in 1991, and continues operating today. Pacific Marine Group specialises in marine contracting, commercial diving and vessel and barge hire, and regularly undertakes contract freight work throughout the coastal areas of FNQ.
Endeavour Shipping, an offshoot of Perrot Salvage and Tug, was established in about 1998 and progressively built up a cargo and charter shipping business in FNQ. Although Endeavour Shipping had established a line-haul service to the key destinations of Thursday Island, Seisia and Weipa, it did not establish a scheduled service to all OTSI communities. In 2008, Sea Swift acquired Endeavour Shipping’s assets.
Gulf Freight Services is another operator that provided coastal shipping services to Weipa (from either Karumba or Cairns) for a long period. As outlined above, in approximately 2002, it sought to expand its operations to provide scheduled services to some of the NT communities, however, in 2003 it was acquired by Perkins Shipping.
As a result of its acquisition of Gulf Freight, Perkins Shipping commenced providing coastal shipping services to Weipa from Karumba. Toll later acquired Perkins Shipping in 2009. Until January 2014, Toll’s FNQ operations were limited to the Cairns-Weipa route. Toll then expanded into the OTSI in around January 2014 after securing the IBIS contract, which it has since subcontracted to Sea Swift.
Another operator, Carpentaria Contracting, a privately owned Weipa business, began operating services in FNQ in 2005. To date, it has primarily operated in Cairns, the Torres Strait and the Gulf of Carpentaria. Carpentaria Contracting operated a scheduled freight service from Weipa to Aurukun for around four months in early 2015.
Palm Island Barge Company, established in 2007, provides a daily return vehicle, passenger and cargo freight service from Lucinda (south of Cairns) to Palm Island. In 2007, Palm Island Barge Company expanded its services to Palm Island to include a superior cold chain and dry goods logistical service directly from Townsville to Palm Island.
Carpentaria Freight, is an operator which commenced a freight service to the Gulf of Carpentaria Islands of Mornington, Sweers and Bentinick prior to 2008. It is currently a road freight and barge service operator located in Karumba.
In addition, Silentworld Shipping entered FNQ in 2010 and provided a scheduled service from Cairns to Thursday Island. Silentworld Shipping ceased operating that scheduled service in late 2012, and Sea Swift acquired one of its tugs and a barge set.
ANNEXURE 8
Diagram of Gove Wharf
Area Description A Landing ramp (roll-on, roll-off) B Public wharf (only for small fishing vessels) C Heavy lift Wharf (lift-on, lift-off) D Covered lay down E Lay down
1
7
2