NSW Ports Unaware of Port of Newcastle Container ‘cap and fee’

The statement by NSW Ports – that it was unaware of the “cap and fee” on container traffic at the Port of Newcastle until this was revealed by “The Newcastle Herald” in July 2016 – has no bearing on whether the lease agreements for Port Botany and Port Kembla contain an illegal payment provision under the Competition and Consumer Act (CCA).

Pictured ~ A proposed container terminal for Newcastle. Image supplied by Port of Newcastle.

The ACCC alleges that NSW Ports contravened the CCA by signing the agreements on May 30 2013.

Bidders for the Port Botany and Port Kembla leases in 2013 were promised by the State Government that the lessee would be paid for container traffic at the Port of Newcastle above a minimal specified “cap”. The State’s intended source of funds was the developer of a container terminal at the Port of Newcastle, who would be charged a “fee”.

The “fee” would reimburse the State for paying the Port Botany and Port Kembla lessee.

The “cap” was precisely calculated.

The meaning of “container” was defined to cover almost anything carried by a general cargo ship.

Payment conditions were laid out in exhaustive detail.

The promised payment was a major inducement for the bidders to substantially raise their offers, and it worked.

As a marketing strategy, the payment promise was carefully thought through and executed, except for one aspect: it was not disclosed to the public, the Parliament or the ACCC.

The State knew that the Port of Newcastle “cap and fee” would make developing a container terminal uneconomic. It knew a container terminal at the Port of Newcastle would be able to successfully compete with Port Botany.

But still the State said, on August 22 2014: “Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption. As the container port did not proceed, there is no decision to review”.

The “decision to review”, obviously, is the “cap and fee”, starting with its legality.

The promised payment was not publicly disclosed because the State knew that its intended funding source – the Newcastle “cap and fee” – may have contravened the CCA.

The ACCC’s action against NSW Ports in the Federal Court alleges that the “cap and fee” is an anti-competitive consequence of the Port Botany and Port Kembla lease agreements. The ACCC is seeking a court order restraining NSW Ports from enforcing the payment provision.

A Case Management Hearing is set for May 22.

Greg Cameron