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CBH happy with case presented to ACCC

CBH Group chief executive officer Andy Crane said the key element to the potential dissolving of Grain Express was the impacts not taken into account by parties making the revoke claims. “In economic theory terms there are additional explainalities which are not taken into account by the marketers who are claiming they want to break down Grain Express, such as more grain going onto road,” he said.LATE last year the Pastoralists and Graziers Association (PGA) welcomed news that CBH Group chief executive officer Andy Crane would face the Australian Competition and Consumer Commission (ACCC) over the Grain Express system early in the new year.
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That day came on Thursday last week when Mr Crane was required to provide multiple reasons for the company’s Grain Express freight monopoly in WA at an ACCC pre-decision conference.

“The ACCC will now take into account the comments heard on Thursday and judge for itself whether there was anything there that would influence its draft decision which it has already published,” Mr Crane said.

“There was a panel, those that called the conference, CBH and the Freight Logistics Council who made opening statements to the conference and then verbal submissions from interested parties were asked for under a range of subjects.”

Mr Crane said the CBH Group presented strong documentary evidence that the storage and handling fee in WA was significantly lower than the equivalent on the east coast and that WA freight rates were also less on a “like-for-like” basis.

“We believe that a good proportion of that is due to Grain Express and that it would be under threat if the notification was repealed,” he said.

“I think the key element of this is around those impacts that are not taken into account by those who are making the claims that we should revoke the notification.

“The major claim of the opponents is that they wish to add their transport into our network on an ad-hoc basis when they think it could be cheaper.

“But our key argument was that the impact on the remainder of the efficiencies of that system would be greater than any savings made.”

Mr Crane said that nine times out of 10, any substituted transport would take place with road freight.

“They don’t have to account for that, which our growers and their communities do,” he said.

Two large grain acquirers attended the pre-conference along with a rail provider who had just lost a tender and representatives from both WAFarmers and the PGA.

“Grain Express is the growers taking care of their transport task as opposed to the marketers having the transport task and placing it,” Mr Crane said.

“I know from previous years when we operated under Grain Pool you would have a transport rate for the year and deduct that from the grain cheque, then if there was a surplus it wouldn’t necessarily be returned to growers.

“Whereas we now have nine directors who oversee us running a transparent freight fund.

“We don’t make a profit on it and if there’s a surplus CBH pays it back.

“So although it’s a big step for growers to start paying those transport cheques separately, rather than having it deducted from their grain cheque, they were always paying for it but now they get to see what it is.”

Mr Crane said growers had built the freight system to connect themselves to the market the most efficient way possible and that growers wanted to do that together in order the receive the gains of bulk buying power.

“We believe that is overriding any individual benefits that marketers are claiming,” Mr Crane said.

“So growers should be proud of it.”

“Growers have their own organisation, they should run their system and present their grain for marketing at the port.”

The PGA embraced last year’s draft notice issued by ACCC, which proposed to revoke the immunity from competition provided by CBH’s Grain Express’ exclusive dealing notification.

PGA Western Graingrowers chairman Rick Wilson endorsed the ACCC’s view that “the notified conduct allowed CBH to leverage its market power in supplying receival, storage and handling services to prevent competition to supply transport services to customers who use CBH’s up-country storage facilities.”

In a submission early last year to the ACCC, Western Graingrowers warned that CBH was using Grain Express to impede competitive investment and service delivery.

“Under the Grain Express system, there exists no incentive for supply chain costs to be driven down,” Mr Wilson said.

“CBH has been exploiting the arrangements by levying charges within an opaque environment, with some surcharges not even being known to the purchaser until after the event.”

In July, the Western Graingrowers Committee submitted that Grain Express had provided cover for CBH to impede new competition in the industry, had restricted effective competition that already existed and used its position of privilege granted under Grain Express to expand its share of both the export and domestic grain markets.

“We argue that they are doing this at the expense of grain growers,” Mr Wilson said.

“The ACCC obviously saw through CBH’s tactic to mount a fear-based campaign to prevent an objective review of the effectiveness of Grain Express in regards to the performance of the whole grains industry.

“Some of the advantages of deregulation have been lost through CBH’s free-riding at the expense of growers.

“ACCC’s decision will allow the bracing air of competition to begin to remedy this unfortunate loss.”

Mr Crane disagreed with the PGA’s position and said the nine grower-elected directors on the board were elected to oversee such things.

He said growers could always ask for explanation and clarity on anything if they so wished.

“And I certainly don’t think it’s opaque,” he said.

“Whilst I understand the PGA’s position is that the free market will always provide the best answer, there are exceptions that prove the rule and that is why there is an ACCC and that is why we originally applied for the notification.

“The ACCC agreed with our reasoning in 2008 and nothing has changed. The CBH Group now must await the ACCC’s final decision.

“We of course believe we have made a strong case now and that they should retain our notification,” Mr Crane said.

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