The Australian Competition and Consumer Commission has proposed to grant authorisation* to a joint venture between GrainCorp and the Australian Wheat Board (AWB) to provide transport and logistics services to each of its parent companies in Queensland, New South Wales and Victoria for export bound grain.
GrainCorp and the AWB state the purpose of forming the joint venture company is to improve efficiencies and to achieve logistics cost savings for grain exports through improved coordination of export grain storage and transport activities and increased information to facilitate the export grain task.
The ACCC granted interim authorisation to the joint venture arrangements on 7 October 2004 and this remains in place. Interim authorisation allowed the joint venture to begin operating for the current harvest.
"The joint venture arrangements are likely to result in public benefit from improvements in economic efficiency from reducing export grain supply chain costs by improved coordination", ACCC Chairman, Mr Graeme Samuel, said today. "These benefits should result in additional investment in improvements to the infrastructure and increased returns to grain growers and exporters".
AWB and GrainCorp estimate efficiency savings of $10 to $30 million are achievable. The ACCC considers this is a reasonable estimate and notes there is potential for significant additional benefits through related cost savings.
"The ACCC also considers the joint venture arrangements are likely to result in public detriment as there is a potential for reduced competition between AWB and GrainCorp in grain storage and handling. The joint venture may also allow the parties greater access to information held on behalf of third party users of the storage and handling system which could be used to discriminate against those users as competitors", Mr Samuel said.
"However, the ACCC believes there are a number of factors in the proposed arrangements that mitigate against these detriments, including the restricted focus of the joint venture on export grain and ring fencing arrangements.
"While it is difficult to precisely gauge the size of the likely public detriment, the ACCC is currently satisfied that it is outweighed by the likely public benefits. As a result, the ACCC is proposing to grant authorisation until 31 December 2009".
The ACCC now seeks further submissions in response to its draft determination by 9 February 2005 and is providing interested parties with an opportunity to request a conference prior to issuing a final determination.
More information regarding the application and a copy of the draft determination are available from the ACCC website.