FEDERAL COURT OF AUSTRALIA
Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal
[2017] FCAFC 124
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The application for judicial review be dismissed.
2. The parties attempt to agree the appropriate order as to costs and if agreement is reached, the parties are to file consent minutes of order. If the appropriate order as to costs is not agreed, each party is to file and serve within 14 days hereof, a brief outline of written submissions not exceeding five pages in length setting out and expressing its proposed order as to costs. The issue of costs to then be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
THE COURT:
Introduction
1 This is an application by Port of Newcastle Operations Pty Ltd (PNO) for judicial review of a decision made by the Australian Competition Tribunal (Tribunal) on 16 June 2016. On that date, the Tribunal made an order setting aside a decision of the Minister not to declare a service under s 44H of the Competition and Consumer Act 2010 (Cth) (the Act) and an order declaring the following service pursuant to s 44K(8) of the Act, commencing on 8 July 2016 and expiring on 7 July 2031:
the provision of the right to access and use the shipping channels (including berths next to wharves as part of the channels) at the Port of Newcastle (Port), by virtue of which vessels may enter a Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct.
(Application by Glencore Coal Pty Ltd [2016] ACompT 6 and Application by Glencore Coal Pty Ltd [2016] ACompT 7).
We will refer to the service identified in the Tribunal’s order as the Service.
2 In its application for judicial review, PNO seeks orders that the Tribunal’s decision be set aside and the matter be remitted to the Tribunal to be determined according to law. PNO relies on the jurisdiction conferred on this Court by s 16 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act), ss 39B(1) and 39B(1A)(c) of the Judiciary Act 1903 (Cth), s 163A of the Act and ss 23 and 32 of the Federal Court of Australia Act 1976 (Cth).
3 The Court raised with the parties in the course of submissions the question of whether the Tribunal’s decision and order is a decision of an administrative character within s 5 of the ADJR Act or had the characteristics of a legislative act. This question is relevant to whether PNO can rely on the grounds of review in the ADJR Act or is limited to the grounds of review available in the case of an application under the Judiciary Act. PNO’s response was that the issue did not need to be resolved because, on any view, the error it alleged was an error of law which went to jurisdiction. We did not understand any party to argue to the contrary and we think that, having regard to the terms of the relevant section, PNO’s characterisation of the error it alleges is correct.
4 It is well-established that it is not the Court’s function on an application for judicial review to examine the merits of the Tribunal’s decision. As this Court said in Pilbara Infrastructure Pty Ltd and Another v Australian Competition Tribunal and Others (2011) 193 FCR 57 (Pilbara Full Court) at [16], it is not this Court’s function to resolve the difficult and complex matters of judgment the Tribunal may be called upon to resolve, but to ensure the decision of the Tribunal accords with the law.
5 The Tribunal has filed a Submitting Notice in the proceeding before this Court. The other party to PNO’s application, Glencore Coal Pty Ltd (Glencore) opposes the application and, in addition, it has filed a Notice of Contention. The efficacy of Glencore’s Notice of Contention is discussed later in these reasons. On 18 October 2016, the Court made an order that the Commonwealth of Australia (Commonwealth) and the Australian Competition and Consumer Commission (ACCC) be joined as the third and fourth respondents respectively. Both played an active part in the application. The Tribunal included a judge of this Court and, in those circumstances, the jurisdiction of this Court is to be exercised by a Full Court (s 20(2) of the Federal Court of Australia Act; and see, in any event, s 163A(4) of the Act). The Court is constituted of five justices because one of the grounds of PNO’s application for judicial review is that a previous decision of the Full Court of this Court in Sydney Airport Corporation Ltd v Australian Competition Tribunal and Others (2006) 155 FCR 124 (Sydney Airport Full Court) was wrongly decided and should not be followed.
Background Matters
6 On 13 May 2015, Glencore made an application to the National Competition Council (NCC) under Part IIIA of the Act for a recommendation that the Service at the Port of Newcastle (the Port) be declared. PNO is the operator of the Port and it is the trustee of the Port of Newcastle Unit Trust. PNO is, in turn, jointly owned by Hastings Funds Management and China Merchants Group. It operates the Port under a 98 year sublease, which commenced on 30 May 2014.
7 On 11 November 2015, the NCC recommended to the Minister that the Service not be declared. It did so on the basis that it was not satisfied of the criterion in s 44G(2)(a) of the Act.
8 The Minister decided not to declare the Service. He did so on the basis that he was not satisfied of the criterion in s 44H(4)(a). This criterion mirrors the criterion in s 44G(2)(a) of the Act.
9 On 29 January 2016, Glencore applied to the Tribunal under s 44K of the Act for a review of the Minister’s decision not to declare the Service. The review by the Tribunal under that section involves a reconsideration of the matter based on the information, reports and things referred to in s 44ZZOAA (s 44K(4)).
10 The Tribunal gave its reasons on 31 May 2016 and, as we have said, it made its orders on 16 June 2016.
The Tribunal’s Reasons
11 The Tribunal set out a clear and concise statement of the background matters which it said were largely uncontentious. The Tribunal’s statement was not challenged on the application to this Court and it is convenient to set it out in full (at [7]-[16]):
7. The Port has been used for commercial shipping for many, many years. It is one of the larger coal export ports in the world. Shipping channels are the only means by which vessels can gain entry to and exit from the Port. It is not contested in submissions that the shipping channels at the Port are the only commercially viable option for the export of coal from the Hunter Valley region in New South Wales. Nor was there any dispute in the course of submissions that the shipping channels are a natural “bottleneck” monopoly. In practical terms, the Service is necessary for the export of coal from the Hunter Valley.
8. The Hunter Valley coal industry and associated supply chain are the largest coal export operations in the world. The Hunter Valley/Newcastle coalfields produce over 170M tonnes of saleable coal per year.
9. The Hunter Valley coal supply chain is made up of coal producers (or mines), above rail haulage providers, the Australian Rail Track Corporation which provides below rail (track) infrastructure, three export port terminals (being Carrington and Koorangang Island Terminals) operated by Port Waratah Coal Services (PWCS) and Newcastle Coal Infrastructure Group Terminal (NCIG), port managers and the Hunter Valley Coal Chain Coordinator. There are more than 30 operating coal mines in the Hunter Valley operated by 11 coal producers as well as other coal projects in various stages of exploration and development. There are three main rail haulage providers who transport coal from the mines to three terminals at the Port. Coal is then loaded onto vessels at one of the loading terminals.
10. Until May 2014, the Port was operated by the State of NSW. In the decade or so prior to that period, NGIC [sic] paid very significant sums to the State of NSW for dredging the channels and a further very substantial payment is anticipated from PWCS for the dredging associated with a proposed terminal T4 when it is developed.
11. As the NSW Mineral Council submitted to the NCC on 16 June 2015, the Hunter Valley coal industry is presently facing fragile market conditions. There has been more than a 30% drop in coal prices over the last two years or so, causing coal producers or many of them to re-evaluate their operations. As the mining boom has ended, both larger and smaller coal producers are focusing on the economic viability of their operations. It is said that this slowdown has had a considerable impact on the mining and related industries, workforce, local businesses and community in the Hunter Valley who depend upon the continued investment in mining projects. At a general level, of course, that is a sensible and understandable observation.
12. In May 2014, the joint venture parents of PNO, Hastings Funds Management and China Merchants Group entered into a long term lease arrangement with the State of NSW for the privatisation of the Port assets, including the shipping channels, that is the Service. The transaction generated gross proceeds of some A$1.75B to the State of NSW. PNO has subsequently revised its valuation of the channels in its accounts to A$2.4B.
13. As the new port operator from May 2014 onwards, PNO controls the terms and conditions of access to the Service. PNO has and may exercise the statutory powers conferred under Pt 5 of the Ports and Maritime Administration Act 1995 (NSW) (PMAA) in order to levy charges on the vessels which use the Service. On each occasion a vessel enters the shipping channels, it incurs liability to pay usage charges for use of the channels at rates determined by PNO. PNO has the express entitlement under the lease of the Port from the State of NSW to exclude access to the channels if the shipping charges are not paid.
14. In some cases of bottleneck infrastructure, there is a certified access regime or other effective regulatory framework for “managing” the prices set by the monopoly owner or operator of that infrastructure for the use of the particular infrastructure. There is no such structure in place in relation to PNO. The prices levied by PNO are subject to price-reporting to the relevant Minister of the State of NSW under Pt 6 of the PMAA, and the Minister may refer the pricing for investigation to the New South Wales Independent Pricing and Regulatory Tribunal (IPART). It is common ground that the IPART regime is not a certified or effective access regime: if it were, s 44G(2)(e)(ii) of the Act would mean that the NCC could not recommend the Service, because it would not be satisfied that there was no other appropriate access regime. That question did not arise in the NCC consideration or its recommendation.
15. Nor does the PMAA provide Glencore, or any access seeker in relation to the Service, with any right to negotiate the terms and conditions of access or to provide for any enforcement process if agreement as to the terms of access cannot be reached.
16. After PNO assumed the role of Port operator, the price for coal ships using the channels to enter and exit the Port was increased by between approximately 40% and 60% for some vessel types – particularly the larger more efficient vessels. Price increases also occurred for non-coal vessels. It is said, without demur, that those price increases were not accompanied by any change in the nature or quality of the Service. It is also said, again without demur, that the price increases were imposed by PNO without significant consultation with users of the Service.
12 Glencore’s application to the NCC for a recommendation that a service be declared contained more information about the current arrangements for access to the Port. We do not understand the following statements in the application to be contentious and it is convenient to set them out at this point:
The Port is one of the largest coal export ports in the world. It is essential to the Hunter Valley supply chain because it is the only commercially viable option for the export of seaborne coal from the Hunter Valley region.
Port of Newcastle Ops does not enter into agreements for the provision of access but instead relies on the statutory powers conferred on it under the Ports and Maritime Administration Act 1995 (NSW) (“PMAA”) in order to levy charges on the vessels which use the Service.
Therefore, on each occasion that a vessel enters the Port of Newcastle either the ship’s master acting on behalf of the owner or charterer (which may be the Applicant or one of the Applicant’s export customers) must effectively request access to the Service. The Service is provided by Port of Newcastle Ops including the vessel within the schedule that it provides to the Vessel Traffic Information Centre of vessels which are permitted to use the Facilities.
A navigation service charge is payable by the owner of a vessel or cargo in respect of the Service (s50 of the PMAA). The charge is generally payable on each entry by the vessel into the Port and is calculated by reference to the gross tonnage of the vessel. It is a usage based charge as opposed to a take or pay based charge.
Under section 51 of the PMAA the relevant port authority may fix the navigation service charges. The port authority has been declared to be the port operator. Port of Newcastle Ops is therefore entitled to fix the navigation service charge under statute, and has done so by publishing a Schedule of Port Pricing which sets the navigation service charge.
Whilst the Minister may issue directions to the Port Authority from time to time requesting information about the navigation service charges (s82 of the PMAA), there is no statutory oversight of these charges or the manner in which they are varied by the Port Authority.
13 We return now to the Tribunal’s reasons. The Tribunal discussed the rationale for the regime established by Part IIIA of the Act and its main features. It then set out the objects section (i.e., s 44AA) and the key section containing the matters of which the Minister must be satisfied before making a declaration (s 44H(4)). Those sections are as follows:
44AA Objects of Part
The objects of this Part are to:
(a) promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets; and
(b) provide a framework and guiding principles to encourage a consistent approach to access regulation in each industry.
44H Designated Minister may declare a service
(4) The designated Minister cannot declare a service unless he or she is satisfied of all of the following matters:
(a) that access (or increased access) to the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service;
(b) that it would be uneconomical for anyone to develop another facility to provide the service;
(c) that the facility is of national significance, having regard to:
(i) the size of the facility; or
(ii) the importance of the facility to constitutional trade or commerce; or
(iii) the importance of the facility to the national economy;
(e) that access to the service:
(i) is not already the subject of a regime in relation to which a decision under section 44N that the regime is an effective access regime is in force (including as a result of an extension under section 44NB); or
(ii) is the subject of a regime in relation to which a decision under section 44N that the regime is an effective access regime is in force (including as a result of an extension under s 44NB), but the designated minister believes that, since the Commonwealth Minister’s decision was published, there have been substantial modifications of the access regime or of the relevant principles set out in the Competition Principles Agreement;
(f) that access (or increased access) to the service would not be contrary to the public interest.
14 We will refer to the matter in s 44H(4)(a) as criterion (a) and the matter in s 44H(4)(f) as criterion (f).
15 The Tribunal set out the principles governing its role on a review, but we do not need to elaborate on the Tribunal’s description of its role because there was no suggestion in the submissions to this Court that the Tribunal misunderstood its role. The Tribunal noted that PNO had filed a Notice of Contention in which it claimed that the Minister’s decision should be affirmed on the ground that criterion (f) was not met in that it was not apparent that access (or increased access) to the Service would not be contrary to the public interest. PNO contended that the Minister should not have been, and the Tribunal should not be, satisfied of criterion (f).
16 The Tribunal identified three issues for its consideration by reference to two alternative submissions advanced by Glencore and the Notice of Contention filed by PNO.
17 Glencore’s first submission, which the Tribunal described as Issue 1, was that the matter should be approached on the basis that it did not presently have access to the Port, and that the proper comparison for the purposes of criterion (a) was between access to the Port and no access to the Port. If that be correct, then (so the submission went) criterion (a) was satisfied, having regard to the following three matters:
(1) in practical terms, access to the Service is an essential step in the dependent market of producing and exporting coal from the Hunter Valley region;
(2) PNO possesses monopoly power in relation to access and pricing for that market and other dependent markets; and
(3) there are no commercially viable alternatives to the use of the Service in order to compete in that dependent market.
18 The Tribunal determined Issue 1 in favour of Glencore and against PNO. In other words, it found, contrary to the Minister’s decision, that criterion (a) was satisfied.
19 Glencore’s alternative submission (assuming it failed as to Issue 1), which the Tribunal described as Issue 2, was that although it had existing access to the Service, increased access to the Service would nevertheless promote a material increase in competition in a dependent market, and it nominated six dependent markets. The difference between Issue 1 and Issue 2 turned on the proper construction of criterion (a). Existing access and likely future access without a declaration under Part IIIA of the Act was irrelevant under the construction of criterion (a) Glencore advanced in connection with Issue 1. According to that construction, the case was one of access, not increased access. Issue 2 involved Glencore’s alternative construction. It only arose if Glencore’s construction of criterion (a) was wrong. If so, existing usage and likely future access was taken into account and its case was one of increased access. Strictly speaking, the Tribunal did not need to address Issue 2 because of its conclusion in relation to Issue 1. Nevertheless, it did address the issue and it decided the issue against Glencore. In other words, the Tribunal would have held that if its approach to Issue 1 was not correct, then criterion (a) was not satisfied. The Tribunal’s conclusions in this respect are the subject of Glencore’s Notice of Contention before this Court. In other words, assuming the case was one of increased access, Glencore’s contention is that the Tribunal’s conclusions were erroneous. The third issue before the Tribunal arose because of PNO’s Notice of Contention. The Tribunal rejected the allegation in PNO’s Notice of Contention that criterion (f) was not satisfied.
Dependent Markets
20 There was no dispute before the Tribunal that there were five functionally distinct dependent markets, that is to say, five markets within criterion (a) which were markets other than the market for the Service. Those markets were as follows:
(1) a coal export market;
(2) markets for the acquisition and disposal of exploration and/or mining authorities;
(3) markets for the provision of infrastructure connected with mining operations, including rail, road, power and water;
(4) markets for services such as geological and drilling services, construction, operation and maintenance; and
(5) a market for the provision of shipping services involving shipping agent and vessel operations of which ships exporting coal from the Port of Newcastle are a part.
21 The Tribunal noted that for the purposes of Issue 1, Glencore’s primary focus was on the coal export market. It noted that, for the purposes of Issue 2, Glencore also relied on the other dependent markets.
22 The Tribunal rejected a submission by Glencore that there was a sixth dependent market, being a distinct market for the financing of coal mining projects (including the expansion of existing projects) in the Hunter Valley (at [111]). The correctness of the Tribunal’s conclusion in that respect is not challenged in this Court.
23 We turn now to the Tribunal’s resolution of the three issues which it had identified.
Issue 1
24 Glencore submitted to the Tribunal that despite the fact that it (and other users of the Service) had usage of the Service, it did not have “access” to the Service at all because it had “no legal (arguably statutorily enforceable) right to do so” (at [57]). Glencore submitted that, having regard to the decision in Sydney Airport Full Court, that was the correct conclusion on the facts.
25 The Tribunal examined the decision in Sydney Airport Full Court in detail. It also examined the Tribunal’s decision in the same matter (Re Virgin Blue Airlines Pty Ltd (2005) 195 FLR 242; [2005] ACompT 5 (Sydney Airport Tribunal)). We examine the decision in Sydney Airport Full Court in detail later in these reasons (at [61]-[82]). At this point in the reasons, it is not necessary for us to do other than identify the Tribunal’s main conclusion with respect to that decision. It was that the correct analysis for the purposes of criterion (a) did not involve any consideration of the nature and extent of the access or usage that Virgin had in the past and continued to have had during the period of the proceeding (at [78]).
26 The Tribunal then turned to consider whether amendments to the Act which were not in force at the time of the decision in Sydney Airport Full Court affected the reasoning of the Full Court or the extent to which the decision was binding on the Tribunal. It also considered whether the subsequent decision of the High Court in Pilbara Infrastructure Pty Ltd and Another v Australian Competition Tribunal and Others (2012) 246 CLR 379 (Pilbara High Court) affected the reasoning of the Full Court in Sydney Airport Full Court.
27 The amendments to the Act which were said to be relevant were effected by the Trade Practices Amendment (National Access Regime) Act 2006 (Cth) (the 2006 Amending Act). There were a number of amendments in 2010 effected by the Trade Practices Amendment (Infrastructure Access) Act 2010 (Cth), but they played no part in the reasoning of the Tribunal or in the submissions to this Court.
28 The 2006 Amending Act introduced s 44AA which is set out above (at [13]) and it provided by s 44H(1A) that in making his or her decision whether or not to declare a service, the Minister must have regard to the objects of Part IIIA. A similar obligation was placed on the NCC in deciding whether to recommend to the Minister whether or not a service should be declared (s 44F(2)(b)).
29 The 2006 Amending Act also amended criterion (a) by adding the words, “a material increase in”. At the time of Sydney Airport Full Court, criterion (a) read as follows:
(a) that access (or increased access) to the service would promote competition in at least one market (whether or not in Australia), other than the market for the service;
30 The Tribunal held that neither the amendments effected by the 2006 Amending Act nor the decision in Pilbara High Court affected the reasoning in Sydney Airport Full Court. We will address the arguments in more detail later in these reasons as they were largely repeated in this Court.
31 The Tribunal said that the decision in Sydney Airport Full Court meant that the expression “access (or increased access)” in criterion (a) precluded “the comparison with whatever usage or access the service provider does or will provide voluntarily or with the terms on which the service provider provides voluntarily such usage or access” (at [103]).
32 The Tribunal said that the case before it was very similar to the case in Sydney Airport Full Court. The Service was a natural monopoly and PNO exerted monopoly power. The Service was a necessary input for effective competition in the dependent coal export market as there was no practical and realistic commercial alternative. Access to the Service was essential to compete in the coal export market (at [113]). Subject to the application of the amendment to criterion (a) effected by the 2006 Amending Act, the Tribunal said that criterion (a) was satisfied.
33 The Tribunal turned to consider the “qualitative test” of a material increase in competition (at [115]). It said that it was required to consider whether there was an entitlement or opportunity for access or increased access under the existing state of affairs. It examined the provisions of the Ports and Maritime Administration Act 1995 (NSW) (PMAA) and concluded that that Act did not provide any potential user with a statutory right of access to the Service. The Tribunal also examined the provisions of the lease from the State of New South Wales and concluded that it did not oblige PNO to provide access to all users of the Port (subject to the payment of the prescribed rates).
34 The Tribunal adopted what it had said in Sydney Airport Tribunal (at [107]) that “the promotion of competition involves a consideration that if the conditions or environment for improving competition are enhanced, then there is a likelihood of increased competition that is not trivial”.
35 The Tribunal concluded that having adopted the approach mandated by Sydney Airport Full Court, “access to the Service would promote a material increase in competition in the market for the export of coal from the Hunter Valley”.
36 The Tribunal said that the capacity to serve the coal export market, in the absence of access (or increased access) was to be measured against entitlement to usage of the Service (to the extent it may exist) not actual existing usage (at [121]). The Tribunal said that there being no entitlement to access, there was no existing access for the purposes of criterion (a).
37 Applying the construction of criterion (a) which it held was the proper one, the Tribunal held that criterion (a) was satisfied.
Issue 2
38 Glencore framed Issue 2 in the following way. It accepted that it has access to the Service because PNO did provide access to shippers on the terms PNO had fixed. Glencore sought increased access by a declaration because a declaration would give it and any third parties as defined in the Act, the opportunity to negotiate the terms of access with PNO and, if necessary, to invoke the arbitration procedures.
39 The Tribunal addressed this issue by reference to the coal export market and said that that market was an appropriate starting point because the other four markets were derivative from that market (at [126]). The Tribunal said that if Glencore failed in relation to the coal export market, it followed that it would also fail as to the other four dependent markets (at [139] and [157]).
40 The Tribunal noted that it was accepted before it that the terms upon which PNO presently provided the Service did not amount to a constructive refusal to provide access (at [124]).
41 The Tribunal described the approach the Minister had taken to the issues and it described the submissions advanced by Glencore. It considered the evidence before it, including that of the expert economists. As to the latter, it is fair to say that the Tribunal found much of the material to be unhelpful.
42 The Tribunal found that PNO was not vertically integrated into any dependent market in any material way (at [149]-[150]).
43 The Tribunal reached two key conclusions. First, it concluded that PNO has an incentive to maximise its profits and it has a commercial objective to recover its efficient costs of providing the Service and a commercial imperative to maximise trade volumes through the Port. The Tribunal said that there is a practical constraint on PNO of ensuring that coal producers continue to supply into a highly competitive market. While PNO could act in an unconstrained fashion, it is more likely it will have the incentive to maximise the flow of coal through the Port so as to capture as much of the benefits from this coal export market as possible. The Tribunal said that it did not follow that PNO’s ability to increase prices would lead to a reduction in coal production that impacts competition in the coal export market because PNO has a commercial motivation to ensure that the Service supports the ongoing coal export market and its expansion (at [155]).
44 The Tribunal rejected the argument that removing uncertainty about Port access charges was likely to promote a material increase in competition in a dependent market. The Tribunal found that coal producers faced significant uncertainties in the form of changes in coal prices, ongoing costs (for example, labour costs) and changes in regulation, such as regulations dealing with carbon emissions compared with which the uncertainty surrounding Port access charges was likely to be “very small” (at [156]).
45 The Tribunal concluded that if it could have regard to existing and likely future use of the Service, it could not be satisfied that increased access to the Service would promote a material increase in competition in at least one market (whether or not in Australia) other than the market for the Service and, therefore, it could not be satisfied of criterion (a).
Issue 3
46 As we have said, PNO filed a Notice of Contention before the Tribunal and in it asked the Tribunal to reconsider the Minister’s decision to the effect that criterion (f) was satisfied.
47 The Tribunal upheld the Minister’s decision and its key conclusions were as follows.
48 First, it concluded that at present there were no direct regulatory constraints on PNO’s pricing structures. The coal miners supplying coal into the coal export market from mines in the Hunter Valley have no “real practical alternative” to using the Service, and in more profitable times they are vulnerable to changes in the charges imposed by PNO for access to the Service to absorb to a significant degree the profitability of exporting coal produced from the Hunter Valley (at [166]).
49 Secondly, the Tribunal concluded that any existing practical price constraints on PNO under the PMAA, Ports and Maritime Administration Regulation 2012 (NSW), Independent Pricing and Regulatory Tribunal Act 1992 (NSW) and under the contractual leasing arrangement between PNO and the State of New South Wales did not provide an effective substitute for access regulation (at [167]).
50 Thirdly, the Tribunal concluded that a declaration would not cause any adverse effect on incentives or obligations to invest or discourage efficient investment and costs to PNO as the provider of the Service.
51 Fourthly, the Tribunal concluded that there was no evidence that the costs associated with the processes available under Division 3 of Part IIIA would be of “particular overall significance” (at [167]).
52 Finally, the Tribunal noted that it should exercise caution before departing from the Minister’s decision concerning criterion (f) (Pilbara High Court at [112] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) and the Minister had held that criterion (f) was satisfied.
PNO’s Application for Judicial Review
53 There are five grounds in PNO’s application for judicial review. The first four grounds relate to criterion (a) and the fifth ground relates to criterion (f).
54 Grounds 1 and 4 concern the Tribunal’s interpretation of “access” in criterion (a) and in those grounds it is contended that the Tribunal erred in holding that access referred only to a legal right to make use of the Service and that led the Tribunal to conclude (incorrectly it is submitted) that Glencore did not currently have access to the Service and to ignore the usage or access PNO currently provides.
55 Grounds 2 and 3 concern the Tribunal’s interpretation of the decision in Sydney Airport Full Court and in those grounds it is contended that the Tribunal misinterpreted the decision as requiring the Tribunal to ignore access provided voluntarily or, if that be the effect of the decision, then it is contended the decision is wrong and should not be followed.
56 As we have said, the fifth ground relates to criterion (f) and is that, in considering that criterion, the Tribunal erred in failing to consider whether “access” to the Service, in comparison with the current and future expected usage of the Service, would promote a material increase in competition in a dependent market. In other words, if the decision-maker is not to consider existing and likely future usage or access without a declaration under criterion (a), it is a material consideration and should be considered under criterion (f).
57 PNO made submissions in support of these contentions. The Commonwealth strongly supported PNO’s construction of criterion (a). The Commonwealth made it clear that it was not interested in the result in this particular case, but it made a number of submissions as to the proper construction of criterion (a). Glencore made submissions in opposition.
Glencore’s Notice of Contention
58 As we have said, Glencore’s Notice of Contention relates only to Issue 2. In it, Glencore contends that the Tribunal ought to have found that criterion (a) was satisfied even on the assumption that Glencore’s application was one for increased access. The ACCC, which did not make any submissions in relation to Issue 1, sought to support Glencore’s position that the Tribunal had erred with respect to Issue 2.
Criterion (a) – Analysis
59 Both PNO and the Commonwealth structured their submissions in a similar way. First, they contended that the Tribunal had misinterpreted Sydney Airport Full Court. Secondly, they contended that the Tribunal should have distinguished Sydney Airport Full Court by reason of matters and events subsequent to the decision. Finally, assuming they failed as to the first two arguments, they contended that Sydney Airport Full Court was wrongly decided.
60 It is convenient to begin with an examination of the decision in Sydney Airport Full Court.
The Decision in Sydney Airport Full Court
61 The Full Court in Sydney Airport Full Court considered an application for judicial review of a decision made by the Tribunal under Part IIIA of the Act to set aside a decision of the Minister and to declare, in respect of an application by the second respondent, Virgin, a service in connection with the use of facilities at Sydney Airport for a period of five years from 9 December 2005 to 8 December 2010. Virgin had existing access to the service. The provider of the service, the Sydney Airport Corporation Limited (SACL) was the applicant for judicial review.
62 The Court said that the issue before it was the meaning and content of s 44H(4)(a) (for the Minister and the Tribunal) and s 44G(2)(a) for the NCC.
63 In the early part of its reasons, the Court examined the relevant statutory provisions and, in the course of doing that, referred to an issue which is of significance on this application. The issue is whether there are, or may be, considerations which, although not mentioned in s 44H, must be taken into account by the Minister in making his or her decision whether or not to declare a service, having regard to subject-matter, scope and purpose of the Act (Minister for Aboriginal Affairs and Another v Peko-Wallsend Limited and Others (1986) 162 CLR 24 at 39-40) per Mason J (as his Honour then was). The Court referred to s 44H(2) (and, in particular, the second sentence thereof which provides as follows):
In deciding whether to declare the service or not, the designated Minister must consider whether it would be economical for anyone to develop another facility that could provide part of the service. This subsection does not limit the grounds on which the designated Minister may make a decision whether to declare the service or not.
64 The Court expressed the view that there were such considerations and described them as “a wide range of considerations of a commercial, economic and other character not squarely raised by, nor falling within the necessary pre-conditions in s 44H(4)” (at [39]). The Court returned to this issue later in its reasons. We will return to this issue after outlining the substance of the Full Court’s reasoning with respect to the proper construction of criterion (a).
65 After examining the relevant statutory provisions, the Full Court addressed the facts. Sydney Airport was leased by a private consortium. The service in issue was the “Airside Service” and this included “the activities between passengers or cargo embarking, disembarking, loading or unloading and the aircraft becoming airborne or landing – that is, all movement between runways and passenger arrival and departure gates and maintenance, equipping and re-equipping of the aircraft”. Qantas and Virgin had different and opposing interests in the method of charging for aeronautical services. A change by SACL to the basis of charging significantly advantaged Qantas over Virgin.
66 Virgin applied to the NCC under s 44F for a recommendation declaring the Airside Service. The NCC refused to recommend that the service be declared and the Minister decided not to declare the service. Virgin applied to the Tribunal under s 44K for a review of the Minister’s decision. The Tribunal set aside the Minister’s decision and declared the service.
67 The central issue before the Full Court was the Tribunal’s approach to s 44H(4)(a). The market for the service was the market for aeronautical services in Sydney and the relevant dependent market was the carriage of domestic air passengers into and out of Sydney. The Full Court carefully considered the Tribunal’s approach. The Court’s detailed reference to the Tribunal’s reasoning which we set out below is important because it assists in understanding the submissions made to the Full Court and the Full Court’s approach to the matter. The Full Court noted the following passages in the Tribunal’s reasons (Sydney Airport Tribunal at [137]-[144]):
137. As noted above, the TPA does not define access or increased access. Looking to the common meaning of the term ‘access’, the Concise Oxford Dictionary (8th ed., 1990) defines access as, inter alia, ‘the right or opportunity to reach or use or visit’. The New Oxford Dictionary of English (2001) defines access, inter alia, as ‘the means or opportunity to approach or enter a place’. The Macquarie Dictionary (3rd ed., 1998) defines access as meaning, inter alia, ‘way, means or opportunity of approach’. It was generally agreed between the parties that the ordinary meaning of the terms meant that where ‘access’ is used in criterion (a), it is a noun meaning a right or ability or opportunity to make use of the service, and that ‘increased access’ is therefore an enhanced right, ability or opportunity to make use of the service.
138. In the present circumstances, Virgin Blue already has use of the facility of Sydney Airport. However, access is a concept that is broader than physical access, and includes the terms and conditions on which such physical access is available.
139. In our view, the notions of access and increased access include the terms and conditions upon which such access or increased access is made available at the facility. This is consistent with the view taken by the Tribunal in Re Duke Eastern Gas Pipeline Pty Ltd (2001) 162 FLR 1 where the Tribunal considered the meaning of ‘access (or increased access) to Services’ for the purposes of s 1.9(a) of the National Third Party Access Code for Natural Gas Pipeline Systems. There, the Tribunal rejected the applicants’ argument that the statutory criterion regarding access or increased access was not enlivened unless access to the service was either unavailable or limited in some way. The Tribunal stated at 16:
criterion (a) does not have as its focus a factual question as to whether access to the pipeline services is available or restricted. Put in that way, the question would not take sufficient account of the terms on which access is offered. Rather, the question posed by criterion (a) is whether the creation of the right of access for which the Code provides would promote competition in another market.
140. Such an interpretation is also supported by the legislation. Div 3 of Pt IIIA of the TPA explicitly recognises that access disputes in that Division cover aspects of access to a declared service: s 44S. Further, s 44V (2)(c) allows the ACCC in its determination of an arbitration of an access dispute to specify the terms and conditions of a third party’s access to a service. Although Divs 2 and 3 of the TPA operate independently, their operation should be complementary as they relate to the same subject matter and it is therefore desirable that the construction of terms that are common to both Divisions be consistent.
141. The definition in s 44B of the TPA of a ‘third party’, in relation to a service, as being ‘a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service’ (emphasis added) also supports this interpretation.
142. This interpretation is further supported by the fact that it gives a meaning to criterion (a) that reflects its origin, namely cl 6(1)(b) of the Competition Principles Agreement, dated 11 April 1995, which provides:
Subject to subclause (2), the Commonwealth will put forward legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities where:
...
(b) access to the service is necessary in order to permit effective competition in a downstream or upstream market.
143. In this proceeding, Virgin Blue is essentially seeking different terms and conditions for the use of the Airside Service; those terms and conditions being the opportunity for arbitration in default of commercial agreement between access seekers and the provider of the service in relation to matters and issues which affect Virgin Blue’s ability to engage in competitive conduct in the dependent market. Accordingly, this is a case of increased access, where Virgin Blue is seeking an enhanced right, ability or opportunity to make use of the Airside Service at Sydney Airport in the sense that it is seeking different terms and conditions upon which the use of that Service is made available to it which involve the opportunity for arbitration in default of agreement.
144. Increased access will occur if declaration is made because the terms and conditions of access will change and the right of access will be enhanced. In the present circumstances this will occur because, whereas prior to declaration a decision to impose a charge by SACL or impose a term and condition as a prerequisite to gaining or continuing use of the Airside Service could not be challenged or appealed in any way, subsequent to declaration such charge or term or condition could be challenged, made the subject of negotiation and, if it could not be negotiated to a mutually acceptable resolution, could be referred to arbitration by the ACCC.
(Emphasis added.)
68 The Full Court referred to the Tribunal’s consideration of the concept of the promotion of competition in a dependent market and the Court noted that the Tribunal said that the concept involved a comparison between the future with a declaration and the future without a declaration. The Tribunal made two points. First, following previous decisions of the Tribunal, the Tribunal said that promoting competition in a dependent market does not require a demonstration that there will be more efficient outcomes in the dependent market. Although a declaration may lead to greater efficiency, the critical issue is whether there will be an enhancement of the competitive environment and greater competitive opportunities in the dependent market. Secondly, and importantly, the Tribunal explained its approach to the comparison between the future with a declaration and the future without a declaration. The former involved an assessment of the impact the opportunity for arbitration will have, such that future commercial negotiation will be conducted in the context whereby arbitration will be available to the parties in the absence of agreement, and the latter was to be understood by reference to the current conditions of access and the current and past behaviour of the service provider projected into the future. The Tribunal carried out its comparison by examining SACL’s use of its monopoly power, whether there were any effective constraints on the exercise of that monopoly power and whether increased access to the Airside Service would promote competition in the dependent market.
69 In the Full Court, SACL submitted that criterion (a) was only engaged where there was evidence of a denial of access or a restriction on access. In response, Virgin sought to uphold the Tribunal’s approach, but also advanced a second approach which, although it had not been adopted by the Tribunal, led to the same result. The second approach was described by the Full Court as simpler and involved a comparison between the future with access (or increased access) to the service with the future without access (or increased access).
70 The Full Court rejected SACL’s submission that criterion (a) could only be satisfied where a denial or a restriction of access was established. It is not necessary to examine the Court’s reasoning. On this application, no party suggests that the Full Court’s rejection of SACL’s submission involved error.
71 The Full Court said that its rejection of SACL’s submission was sufficient to dispose of the application before it. However, it went on to consider Virgin’s second approach because it had been fully argued and because of “the central importance to the Australian economy and business life of the efficient and timely working of the Act” (at [80]).
72 The Full Court accepted Virgin’s submission that the Tribunal had adopted the wrong approach. The Court said that the Tribunal had construed “access” as if it meant “declaration under Part IIIA”. The Court noted that Part IIIA is entitled “Access to Service”, but also noted that the two stage process in Part IIIA does not necessarily lead to access or increased access for anyone. The Court said that “access” is an ordinary English word and that having regard to the context and background, the word is being used in criterion (a) in its ordinary English sense. The Court said that all criterion (a) required was a comparison between the future state of competition in the dependent market with a right or ability to use the service and the future state of competition in the dependent market without any right or ability or with a restricted right or ability to use the service (at [83]).
73 The Full Court addressed the issue of whether, in considering criterion (a), the Minister (and the Tribunal) was required to take into account the access Virgin has in fact had to the service. The Court said (at [84]-[85]):
84. We do not accept the Tribunal’s basis for rejecting the submission that it would be unrealistic to undertake a counterfactual analysis which discounts the fact that Virgin has access. That, with respect, is not the point. The terms of s 44H(4)(a) do not incorporate the requirement for comparison with what is factually the current position in any given circumstances. Once a declaration is made any potential user can take advantage of it. Thus, it is an unnecessary constriction of a provision by way of pre-condition, to engage in a detailed factual enquiry heavily dominated by the past and the present.
85. That is not to say that what has happened in relation to the service, how the provider has behaved and the degree to which it can be said that monopolistic behaviour has or has not impeded the efficient operation of the market in question may not be relevant considerations attending the making of the decision. For instance, if it can be demonstrated that the service has been provided in a manner that can be described as fair, even-handed and in a way most likely to maximise vigorous competition in the downstream market, that may be a powerful and relevant consideration as to why no declaration should be made. Thus, it may be that a with and without declaration counterfactual (or some aspect of it) can be seen as relevant to the decision at hand. That enquiry is simply not mandated by the pre-condition of satisfaction in s 44H(4)(a).
74 The Full Court referred to the purpose of Part IIIA as revealed by the background and context. That background and context included the Report of the National Competition Policy Review (Hilmer Report), the Council of Australian Governments (COAG) explanatory material and cl 6 of the Competition Principles Agreement which the Court had described earlier in its reasons. We will address that material later in these reasons. The Court said that none of this material revealed any necessity to examine the current state of access or to engage in an enquiry based on assessing the future with and without declaration. The essential pre-condition discussed was that access (that is, in its ordinary meaning) was necessary to permit effective competition in a downstream or upstream market. The Court said that the reference in criterion (a) to increased access did not lead to the conclusion that the basis for the analysis is the current state of affairs. The phrase “increased access” is not referred to in the background material and all it means is an increased or enhanced ability of buyers to purchase the use of essential facilities on fair and reasonable terms.
75 The Full Court said that the Tribunal’s test for the operation of criterion (a) was not justified by the words of the provision as understood in their context and the background to the introduction of Part IIIA. The Court made the following observation (at [89]):
89. In any given enquiry, there may be room in deciding whether or not to declare the service, to analyse the question whether the engagement of the regime under Part IIIA by the declaration will have an effect on the competitive process in the dependent market. But that enquiry, formalised in the way it was by the Tribunal, is not what is called for by s 44(H)(4)(a).
76 The Full Court then turned to consider the relief which was appropriate.
77 First, the Full Court said that the Tribunal’s decision should not be set aside on the basis of the arguments advanced by SACL. Secondly, the Court said that criterion (a) was clearly satisfied, having regard to the construction of criterion (a) which it considered was the correct one. Sydney Airport is a natural monopoly and SACL exerted monopoly power. The Airside Service is a necessary input for effective competition in the dependent market. Neither Bankstown nor Richmond Airport could provide the service. The parent company of SACL had the first right of refusal to build and operate any second major airport within 100 km of the Sydney CBD. In the circumstances, there could be no real debate that Sydney Airport is essential to compete in the domestic air passenger market. Thirdly, in the circumstances identified in the second point, there could be little doubt that criterion (a) was satisfied. Finally, the Court said that the decision of the Tribunal should not be disturbed and the Court made the following observations (at [94]):
94. … Whilst we consider that the Tribunal misconstrued s 44H(4)(a) by infusing an overly elaborate body of considerations into that criterion, the nature of those detailed considerations (the comparison of the future with and without declaration) are not such as to be irrelevant (as understood by reference to Peko-Wallsend) to the enquiry as a whole as to whether to declare the service, even though they were irrelevant to a consideration of s 44H(4)(a). In these circumstances, we would simply dismiss the application. …
78 In our opinion, it is clear that the Full Court held that an examination of current and likely future usage of the service was not part of the enquiry required by criterion (a). That emerges from paragraphs 84 and 85 (set out above at [73]) and the quoted passage from paragraph 94 (set out above at [77]). The Court adopted the ordinary meaning of the word “access” and had regard to the relevant background material. Access was the right or ability to use the service and the question was simply whether the right or ability to use the service (or an increased right or ability) would have the relevant effect compared with no right or ability (or a restricted right or ability). In our opinion, the Court did allow for the possibility that current and likely future access to the service (without a declaration) could be relevant to the decision whether or not to declare a service. That emerges from paragraphs 39 (summarised above at [64]), 85 (set out above at [73]) and 94 (set out above at [77]) of the Court’s reasons. However, that was not because that matter fell within criterion (a), but because the matter, although not expressly identified in the Act, is, or could be, a relevant matter having regard to the purposes, text and structure of the Act.
79 PNO put a number of submissions in support of its contention that the Full Court in Sydney Airport Full Court did not decide that current and likely future usage was immaterial to a consideration of criterion (a). First, it submitted that the Tribunal in Sydney Airport Tribunal had approached the case as one of an application for increased access recognising that Virgin already had access and that the Full Court at no point indicated that it disagreed with that approach. Secondly, it submitted that the Full Court excluded a detailed factual enquiry heavily dominated by the past and the present, not any factual enquiry into the past and the present. Finally, it submitted that one of the key matters identified by the Full Court was that “SACL exerts monopoly power” and this involves an examination of how SACL has and is behaving and, therefore, of the existing circumstances. We reject each of these submissions.
80 With respect to the first submission, it is true that the Tribunal in Sydney Airport Tribunal approached the case as one of increased access. It is also true that the Full Court did not expressly say that the Tribunal erred in treating the case as one of increased access. Nevertheless, it would be contrary to the whole tenor of the case to suggest that the Full Court approached the case as one of increased access (and therefore existing and likely future access were relevant) and that its comments were directed to the extent of the factual enquiry and the weight to be placed on it.
81 With respect to the second submission, we think the reference to “heavily dominated” is later clarified by the Full Court when it makes it clear that criterion (a) did not necessitate or mandate an examination of the current state of access, although the Court accepted that the current state of access and behaviour of the parties might be relevant for the purposes of the exercise of a residual discretion.
82 With respect to the third submission, we think that, read in context, the Full Court’s reference to SACL exerting monopoly power is not a reference to the past and current behaviour of SACL, but rather a reference to the fact that simply, as the operator of a facility which is a natural monopoly, SACL exerts monopoly power.
83 We turn to consider the Tribunal’s application of Sydney Airport Full Court.
The Tribunal’s Application of Sydney Airport Full Court
84 Both PNO and the Commonwealth submitted that rather than apply the ordinary meaning of the word “access”, the Tribunal restricted the meaning of the word to a right or an entitlement to access. This is an error because it is inconsistent with the approach of the Court in Sydney Airport Full Court.
85 We agree that to restrict the meaning of the word “access” to a legal right or entitlement would be to depart from its ordinary meaning. We also agree that such an approach would be inconsistent with the approach of the Full Court in Sydney Airport Full Court and, in fact, would have features of, although not be identical with, the approach of the Tribunal in Sydney Airport Tribunal (the future with a declaration and the future without a declaration) which was rejected by the Full Court.
86 However, it seems to us that the real question is what was the Tribunal doing when it made its references to a legal right or entitlement. There is an assumption in the submissions of PNO and the Commonwealth which needs to be exposed. It may be accepted that “access” is to be given its ordinary and grammatical meaning and that that meaning is not restricted to a legal right or entitlement. It is the next step that is crucial. Criterion (a) requires the decision-maker to be satisfied that if an event or circumstance (access or increased access to the service) happens, then a state of affairs will follow (the promotion of a material increase in competition in a dependent market). The decision-maker is required to make a prediction or forecast of the conditions or environment for improving competition in a dependent market with access or increased access on the one hand, and without access or increased access on the other. The latter circumstance is often referred to (perhaps not entirely accurately) as the counterfactual.
87 The difference between what the Full Court said in Sydney Airport Full Court and what PNO and the Commonwealth submit to this Court relates to the counterfactual. In a sense, it does not turn on whether access is given its ordinary and grammatical meaning. The Full Court said that the counterfactual to access is no access and the counterfactual to increased access is restricted access. Criterion (a) does not direct attention to what is in fact happening and is likely to happen should “access” to the service not be provided. By contrast, PNO and the Commonwealth submit to this Court that the counterfactual is the existing situation with a prediction or forecast as to what is likely to happen in the future.
88 We do not think that the Tribunal adopted a different approach from that taken in Sydney Airport Full Court. It excluded from its consideration of the counterfactual a consideration of whatever usage or access the service provider does or will provide voluntarily or with the terms on which the service provider provides voluntarily such usage or access (at [103]). The decisive facts adapted to the particular parties and service in this case were very similar to the decisive facts in Sydney Airport Full Court. We do not think the Tribunal adopted a narrower or specialised meaning of “access”. What the Tribunal did was to allow for the possibility, when considering the counterfactual, of taking into account an existing entitlement or legal right to access. There was no entitlement or legal right in this case so that the fact that it allowed for the possibility that such an entitlement or legal right may be taken into account is immaterial.
89 We will come to consider whether the Tribunal should have distinguished Sydney Airport Full Court because of subsequent events and matters and, subject to that, we are of the opinion that the Tribunal correctly applied the decision. As we have said, it held correctly that the effect of that decision was to preclude, in a consideration of criterion (a), a comparison with whatever usage or access the service provider does or will provide voluntarily or with the terms on which the service provider provides voluntarily such usage or access (at [103]). It correctly concluded that the application of the principles enunciated in Sydney Airport Full Court to the case before it was quite straightforward. The Service providing access to the shipping lanes is a natural monopoly and PNO exerts monopoly power. The Service is a necessary input for effective competition in the dependent coal export market as there is no practical or realistic commercial alternative and it follows that access to the Service is essential to compete in the coal export market (at [113]).
90 PNO asked the Tribunal to distinguish Sydney Airport Full Court on the basis of the amendments made by the 2006 Amending Act and the respective decisions in Pilbara Full Court and Pilbara High Court. Rather than consider those matters through the lens of the Tribunal’s decision we will consider the challenge to the correctness of the decision in Sydney Airport Full Court and then the effect of those matters.
The correctness of decision in Sydney Airport Full Court
91 Before addressing the respective submissions of the parties, a reasonably detailed description of the background to the introduction of Part IIIA and of the scheme established by Part IIIA is necessary.
92 The background and context to Part IIIA of the Act consists of the Hilmer Report, the package of draft legislation released by COAG in 1994 which includes an outline, draft legislation and a draft intergovernmental agreement between all Australian governments dealing with and entitled “Competition Principles”, the Explanatory Memorandum to the Competition Policy Reform Bill 1995 (Cth) and an intergovernmental agreement which was executed by all Australian governments in April 1995.
93 This material was considered exhaustively by the Full Court in Sydney Airport Full Court (at [3]-[21]). It is not necessary to repeat all of what was said by the Full Court and it is sufficient to note a number of key matters.
94 In 1993, Professor Hilmer and Messrs Taperell and Rayner prepared the Hilmer Report. That report dealt with access to essential facilities, among other things.
95 The authors of the Hilmer Report discuss access to essential facilities in the executive overview of the report. They propose a new legal regime “under which firms could in certain circumstances be given a right of access to specified ‘essential facilities’ on fair and reasonable terms”. The authors refer to the central role which would be played by the NCC in the proposed scheme and then say (at (xxxi)-(xxxiii)):
The regime would only be applied to the limited category of cases where access to the facility was essential to permit effective competition and the declaration was in the public interest having regard to the significance of the industry to the national economy and the expected impact of effective competition in that industry on national competitiveness.
96 Chapter II of the Hilmer Report addresses “access to Essential Facilities” and describes the “Problem” in a way which includes the following:
Some economic activities exhibit natural monopoly characteristics, in the sense that they cannot be duplicated economically. While it is difficult to define precisely the term ‘natural monopoly’, electricity transmission grids, telecommunication networks, rail tracks, major pipelines, ports and airports are often given as examples. Some facilities that exhibit these characteristics occupy strategic positions in an industry, and are thus ‘essential facilities’ in the sense that access to the facility is required if a business is to be able to compete effectively in upstream or downstream markets. For example, competition in electricity generation and in the provision of rail services requires access to transmission grids and rail tracks respectively.
Where the owner of the ‘essential facility’ is not competing in upstream or downstream markets, the owner of the facility will usually have little incentive to deny access, for maximising competition in vertically related markets maximises its own profits. Like other monopolists, however, the owner of the facility is able to use its monopoly position to charge higher prices and derive efficiency. In these circumstances, the question of “access pricing” is substantially similar to other monopoly pricing issues, and may be subject, where appropriate, to the prices monitoring or surveillance process outlined in Chapter 12.
97 The authors recommend that a declaration should only be made where certain criteria are satisfied, including the following (at 251-252):
I Access to the facility in question is essential to permit effective competition in a downstream or upstream activity;
II The making of the declaration is in the public interest, having regard to:
(a) the significance of the industry to the national economy; and
(b) the expected impact of effective competition in that industry on national competitiveness.
III The legitimate interests of the owner of the facility must be protected through the imposition of an access fee and other terms and conditions that are fair and reasonable, including recognition of the owner’s current and potential future requirements for the capacity of the facility.
IV The creation of such a right must have been recommended by an independent and expert body.
98 The only comment made by the authors with respect to the first criterion is that clearly access to the facility should be essential, rather than merely convenient. The Committee’s recommendations include the following (at 266):
11.4 A right of access to a facility only be created if:
(a) the owner agrees; or
(b) the designated Commonwealth Minister is satisfied that:
(i) access to the facility in question is essential to permit effective competition in a downstream or upstream activity;
(ii) such a declaration is in the public interest, having regard to:
(1) the significance of the industry to the national economy; and
(2) the expected impact of effective competition in that industry on national competitiveness; and
(iii) the legitimate interests of the owner of the facility will be protected by the imposition of an access fee and other terms and conditions that are fair and reasonable.
Where the owner of a facility has not consented to a declaration, the Minister may only make such a declaration if recommended by the National Competition Council and only on terms and conditions recommended by that body or on such other terms and conditions as agreed by the owner of the facility.
(Emphasis added.)
99 Later in Chapter II, the Committee states (at 272):
Given the risks associated with regulatory responses, the “first best” solution is to address the underlying cause of monopoly pricing by increasing the contestability of the market. This might be achieved by removing or reducing regulatory barriers to entry; restructuring public monopolies; or providing rights of access to certain “essential facilities”.
100 In the outline to the package of draft legislation released by COAG in 1994, the following is said:
The term “access” means the ability of suppliers or buyers to purchase the use of essential facilities on fair and reasonable terms. An essential facility is a transportation or other system which exhibits a high degree of natural monopoly; that is, a competitor could not duplicate it economically. A natural monopoly becomes an essential facility when it occupies a strategic position in an industry such that access to it is required for a business to compete effectively in a market upstream or downstream from the facility. Possible examples of such facilities are electricity transmission lines, gas pipelines, water pipelines, railways, airports, telecommunication channels and sea ports. Such facilities can be owned by private or public sector organisations.
(Emphasis added.)
It is also appropriate that an access regime would only apply where access to the facility is essential to permit effective competition in a dependent market (that is, one downstream or upstream from the facility) given that such linkages would provide the prime anticompetitive motive for denying or impeding access.
(Emphasis added.)
101 The draft package of legislation included a proposal which was a precursor to s 44G of the Act which addresses the circumstances in which the NCC can recommend that a service be declared. It included the following:
(3) The Council cannot recommend the declaration of a service unless it is satisfied of all the following matters:
(a) that access (or increased access) to the service would promote competition in at least one market (whether or not in Australia), other than the market for the service;
(b) that no other facility exists that can economically provide the service;
(c) that it would be uneconomical for anyone to develop another facility to provide the service;
(d) that the facility is of national significance, having regard to:
(i) the size of the facility; and
(ii) the importance of the facility to constitutional trade or commerce;
(e) that access to the service can be provided without undue risk to human health or safety;
(f) that access to the service is not already the subject of a single, effective access regime;
(g) that access (or increased access) to the service would be in the public interest.
(Emphasis added.)
102 Clause 6(1) of the draft intergovernmental agreement was in the following terms:
Subject to sub-clause (2), the Commonwealth will put forward legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities (other than facilities which are products, production processes or intellectual property) where:
(a) it would not be economically feasible to duplicate the facility;
(b) access to the service is necessary in order to permit effective competition in a downstream or upstream market;
(c) the facility is of national significance having regard to the size of the facility or its importance to substantial interstate or overseas trade (or both); and
(d) the safe use of the facility by the person seeking access can be ensured at an economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist.”
(Emphasis added.)
103 The intergovernmental agreement as executed included a clause 6(1) in the same terms as clause 6(1) in the draft intergovernmental agreement.
104 Finally, the Explanatory Memorandum to the Competition Policy Reform Bill 1995 (Cth) (which contained cll 44G and 44H in the same terms as ss 44G and 44H in the Act as passed) included the following:
165. This regime establishes two mechanisms for the provision of third party access, namely:
(a) a process for declaration of services which provides a basis for negotiation of access. This is backed up by compulsory arbitration where the parties cannot agree on an aspect of access; and
(b) a procedure whereby service providers can offer undertakings which set out the terms on which a provider will grant access to third parties.
…
181. The Council cannot recommend that the service be declared if the service is the subject of an operative access undertaking. Also, there are a number of matters all of which the Council must be satisfied on before it can recommend that the service be declared. These are:
(a) that access to the service would promote competition in a market (other than the market for the service);
(b) that it would be uneconomical for anyone to develop another facility to provide the service;
(c) that the facility is of national significance having regard to its size, the importance of the facility to constitutional trade and commerce, or its importance to the national economy.
(d) that access to the service can be provided without undue risk to human health or safety.
(e) that access to the service is not already the subject of an effective access regime; and
(f) that access to the service would not be contrary to the public interest.
182. In determining whether access would promote competition, the Council may consider Australian and international markets. For example, access may facilitate the entry of Australian businesses into overseas markets.
…
187. The designated Minister cannot declare a service if the service is the subject of an operative access undertaking. Further, the designated Minister cannot declare a service unless satisfied of all the following matters:
(a) that access to the service would promote competition in a market (other than the market for the service);
(b) that it would be uneconomical for anyone to develop another facility to provide the service;
(c) that the facility is of national significance having regard to its size, the importance of the facility to constitutional trade and commerce, or its importance to the national economy;
(d) that access to the service can be provided without undue risk to human health or safety;
(e) that access to the service is not already the subject of an effective access regime; and
(f) that access to the service would not be contrary to the public interest.
188. Once the designated Minister is satisfied of all these matters, he or she has a discretion whether or not to declare the service. As is the case for the Council, the Minister must consider whether it would be economical for anyone to develop another facility to provide part of the service.
105 The Full Court in Sydney Airport Full Court made two observations about the context and history of Part IIIA which were clearly relevant to the Court’s decision. In considering the background material, and in particular cl 6(1)(b) of the Competition Principles Agreement (i.e., access to the service is necessary in order to permit effective competition in a downstream or upstream market), the Full Court said (at [37]):
37. Thirdly, in none of the various materials was there any discussion of any complexity of notion or anticipated complexity of assessment involved in respect of the consideration contained in cl 6(1)(b) of the Competition Principles Agreement: that access to the service is necessary in order to permit effective competition in a downstream or upstream market. Rather, the essential notion to be derived from the Hilmer Report, the outline of legislation issued by COAG, the Explanatory Memorandum and the Competition Principles Agreement is that it is necessary for the fact of access (in its ordinary meaning) to be relevant to effective competition in another market (upstream or downstream).
Later the Court said (at [86]):
86. This construction of s 44H(4)(a) conforms to the purpose of Part IIIA revealed by the background and context: see in particular the Hilmer Report, the COAG explanatory material referred to above and clause 6 of the Competition Principles Agreement referred to above. None of this material reveals any necessity to examine the current state of access or to engage in an enquiry based on assessing the future with and without declaration. The essential precondition discussed was that access (that is in its ordinary meaning) was necessary to permit effective competition in a downstream or upstream market.
(Emphasis added.)
106 In Pilbara High Court, the High Court referred to the large body of extrinsic material available in relation to Part IIIA (at [71] and following) and warned against the dangers of relying too heavily on selected passages from or selected parts of the extrinsic material. The plurality (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said (at [74]):
74. With this volume of extrinsic material available, it is unsurprising that those advocating competing constructions of the disputed provisions emphasised different parts of the extrinsic material and suggested that the use of particular expressions or phrases found in the material supported the particular construction being urged. Subject to one possible qualification concerning the relevance of the assumptions that underpinned the 2006 amendments, little is to be gained by trawling through the extrinsic material with a fine gauge net. The resolution of the contested question of construction of criterion (b) is not to be found by noticing no more than that the Hilmer Report referred more than once to “essential facilities” and “natural monopoly”. Neither is a phrase that appears anywhere in the text of Pt IIIA. Nor can the contested question of construction be resolved by selecting particular quotations from the Hilmer Report and then attempting to construe the different and particular words of criterion (b) on the assumption that they give effect to those isolated passages. It is necessary to give meaning to the relevant statutory text and demonstrate why that meaning is to be adopted.
107 Part IIIA provides for a two-stage process. The Part itself is entitled “Access to Services”. The word “access” is not defined in the “Definitions” section (s 44B) or elsewhere in Part IIIA. The word “service” is defined as follows:
service means a service provided by means of a facility and includes:
(a) the use of an infrastructure facility such as a road or railway line;
(b) handling or transporting things such as goods or people;
(c) a communications service or similar service;
but does not include:
(d) the supply of goods; or
(e) the use of intellectual property; or
(f) the use of a production process;
except to the extent that it is an integral but subsidiary part of the service.
108 Division 2 of Part IIIA deals with the declaration of services. Any person may make an application to the NCC asking it to recommend that a particular service be declared (s 44F). Division 2 contains the sections addressing the exercise of the power in the NCC to recommend whether or not to declare a service (s 44G), the power of the Minister to decide whether or not to declare a service (s 44H) and the Tribunal’s power to reconsider a decision of the Minister.
109 Division 3 deals with the second stage of the process which is access to declared services. It gives rights to “third parties” and that term is defined in s 44B to mean in relation to a service “a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service”. Division 3 gives a third party who is unable to agree with the provider on one or more aspects of access to a declared service the ability to engage in arbitration before the ACCC (s 44S). The ACCC must make a determination, but that determination does not have to require the provider to provide access to the service by the third party (s 44V(3)). The ACCC must not make a determination having certain effects (s 44W) and there are a list of the considerations the ACCC must take into account (s 44X). In the case of each of those sections, subsection (1) gives an indication of the scope of the sections and is as follows:
44W Restrictions on access determinations
(1) The Commission must not make a determination that would have any of the following effects:
(a) preventing an existing user obtaining a sufficient amount of the service to be able to meet the user’s reasonably anticipated requirements, measured at the time when the dispute was notified;
(b) preventing a person from obtaining, by the exercise of a pre notification right, a sufficient amount of the service to be able to meet the person’s actual requirements;
(c) depriving any person of a protected contractual right;
(d) resulting in the third party becoming the owner (or one of the owners) of any part of the facility, or of extensions of the facility, without the consent of the provider;
(e) requiring the provider to bear some or all of the costs of extending the facility or maintaining extensions of the facility;
(f) requiring the provider to bear some or all of the costs of interconnections to the facility or maintaining interconnections to the facility.
44X Matters that the Commission must take into account
Final determinations
(1) The Commission must take the following matters into account in making a final determination:
(aa) the objects of this Part;
(a) the legitimate business interests of the provider, and the provider’s investment in the facility;
(b) the public interest, including the public interest in having competition in markets (whether or not in Australia);
(c) the interests of all persons who have rights to use the service;
(d) the direct costs of providing access to the service;
(e) the value to the provider of extensions whose cost is borne by someone else;
(ea) the value to the provider of interconnections to the facility whose cost is borne by someone else;
(f) the operational and technical requirements necessary for the safe and reliable operation of the facility;
(g) the economically efficient operation of the facility;
(h) the pricing principles specified in section 44ZZCA.
110 In Pilbara High Court, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ in joint reasons made a number of general observations about the operation of each of the matters in s 44H(4) which are pertinent. First, their Honours said that whereas criterion (f) and criterion (c) direct or may direct attention to matters of broad judgment of a generally political kind, criterion (a) about competition and criterion (b) about development of another facility were of “a more technical kind” (at [43] and [44]). Their Honours referred to the expert advice given by the NCC about the more technical criteria of which the Minister had to be satisfied before a declaration could be made (at [47]). Secondly, their Honours said that the construction of criterion (b) (and there is no reason to treat criterion (a) any differently) must give due weight to the attainment of the large and national objectives of Part IIIA (at [97]). Thirdly, their Honours said that enquiries required by Part IIIA necessarily look to an extended period into the future and the decision to declare a service under Part IIIA must hold good for the whole period of the declaration (at [99]). Finally, their Honours said in relation to criterion (f) that there are many different kinds of considerations which may be relevant to an assessment of what is “contrary to the public interest” (at [111]) and the Tribunal should ordinarily be slow to find to the contrary if the Minister has not found that access would not be in the public interest (at [112]).
111 In its written submissions, PNO referred to what the Full Court said in Sydney Airport Full Court in connection with Virgin’s second approach as obiter. However, neither it nor any other party addressed any substantial argument to the Court on this topic. This was probably because the parties recognised that the Full Court had expressed a considered view with detailed reasoning on this matter and, whether part of the ratio decidendi or obiter dicta, the Full Court’s view was likely to be accorded considerable weight. It is arguable that the ratio decidendi of the decision in Sydney Airport Full Court is limited to the proposition that it is not correct to say that criterion (a) can only be satisfied where there is or has been an actual denial or restriction of service. After all, the Full Court itself said that rejection of that proposition was sufficient to dispose of SACL’s application for judicial review (at [79]). As the authorities make clear, it is not always easy to distinguish between the ratio decidendi and obiter dicta of a decision (see, for example, the discussion in Wu v Minister for Immigration and Multicultural Affairs (2000) 105 FCR 39 at [24]-[28]). If the reasoning is part of the ratio decidendi it will be followed unless it is shown to be clearly or plainly wrong (Jones v Daniel (2004) 141 FCR 148). If the reasoning is not strictly part of the ratio decidendi, but is a considered view of the Full Court with detailed reasoning (as it is here at the very least), then it should be accorded considerable weight.
112 We turn now to summarise the principal submissions made by the parties.
113 PNO submitted that “access” should be given its ordinary meaning. It referred to the relevant meaning of the word in the Oxford English Dictionary (Oxford University Press) as follows:
a. The power, opportunity, permission, or right to come near or into contact with someone or something, admittance; admission.
b. The right or opportunity to benefit from or use a system or service.
114 The Macquarie Dictionary (7th ed, MacMillan, 2017) contains a definition of “access” which includes, relevantly, the following:
1. way, means, or opportunity of approach or entry …
2. (sometimes followed by to) the act or privilege of coming; admittance; approach: to gain access to a person.
115 These definitions indicate that the word involves or invites a factual enquiry and PNO submitted that in the comparison it is appropriate to take into account the existing usage as a matter of fact and a prediction or forecast of likely future access on the basis of that existing usage.
116 PNO submitted that the Full Court’s interpretation of access gives the words “increased access” very little work to do and that that could not have been the intention of Parliament. On the Full Court’s approach, all cases would be cases of access except perhaps (following the Tribunal) in those cases where there is a legal right or entitlement to access and proposed users wanted increased or additional access. The Commonwealth made a similar submission.
117 PNO submitted that the Tribunal’s construction of criterion (a) renders it largely a formality in the case of a bottleneck monopoly service facility. It was submitted that this could be seen by the ease with which the service provided by Sydney Airport in Sydney Airport Full Court satisfied criterion (a) and the service provided by the Port in this case was held by the Tribunal to have satisfied criterion (a). The error with the Full Court’s construction of criterion (a) was said to be that it mandates an undemanding test at a high level of generality. PNO described the enquiry which follows from the Full Court’s construction of criterion (a) as an “abstract competition analysis” or an “abstract competition assessment” while the Commonwealth described it as a “stylised analysis”.
118 The Commonwealth submitted that criterion (a) involved a suppressed comparison, being a forward looking counterfactual assessment. That involved a real world comparison in considering the promotion of competition in a dependent market.
119 The Commonwealth submitted that access means access as a matter of fact and that other sections in Part IIIA showed that when Parliament meant a right of access, it used different words. The Commonwealth referred to ss 44V(2)(a) and (3), 44X(1)(c) and (d), and 44Y(1)(d).
120 The Commonwealth submitted that in this case the dependent markets are effectively competitive and that that is shown by the Tribunal’s decision in relation to Issue 2.
121 The Commonwealth submitted that as early as 2001, the Productivity Commission was expressing concern about the fact that decisions concerning criterion (a) had set the hurdle too low and was discussing an amendment to criterion (a) by adding a reference to the promotion of a “substantial increase in competition” (Productivity Commission Report No 17, 28 September 2001).
122 The Commonwealth submitted that in approaching the construction of criterion (a), the Court is entitled to take into account the fact that the making of a declaration is a serious step and that the costs of regulation under Part IIIA can be substantial.
123 PNO and the Commonwealth submitted that if the Full Court’s construction of criterion (a) is correct, then it would have what they contended were unforeseen and unintended consequences in the application of criterion (f). Criterion (f) also uses the phrase “access (or increased access)” and if it is given the same interpretation as in criterion (a), then it would be satisfied in almost every case leading to a declaration and the substantial costs which may follow a declaration in circumstances where the relevant dependent market is in fact effectively competitive. PNO and the Commonwealth submitted that on this approach the decision-maker would not be able to put in the scales the extent of the increase in competition and balance it against, for example, the costs of regulation which is a public interest consideration.
124 PNO and the Commonwealth submitted that Pilbara Full Court was inconsistent with the proposition that existing and likely future usage was immaterial to the enquiry under criterion (a). That followed (so it was submitted) from the fact that, albeit in the context of considering criterion (f), the Full Court said the following (at [112]):
112. It may be accepted that, in applying criterion (f), the Tribunal should proceed on the footing that “access” in criterion (f) is access on such reasonable terms and conditions as may be determined in the second stage of the Pt IIIA process. But nothing in the Tribunal’s reasons suggested that it did not proceed in this way: indeed, it expressly said that it did: [1066].
125 We note what the Full Court said at [111] and [116] as follows:
111. But to say these things is not to demonstrate that the matters addressed by the Tribunal were outside its purview under s 44H(4)(f). It cannot be the case, for example, that a declaration of access must be made by the Tribunal where only a modest improvement in competition in a minor downstream or upstream market is likely to ensue from access at great cost in the way of disruption to an incumbent’s operations in an important market simply because the ACCC can be expected to exercise its power under s 44V(3) to preclude access in order to give effect to s 44X(1)(a). To accept Fortescue’s argument would radically reduce the power and responsibility of the Minister and the Tribunal to reject applications which appear to them plainly to be contrary to the public interest.
116. The Minister and the ACCC may be obliged to consider the same evidence in relation to similar issues; but the perspective of each decision-maker will be different. Under criterion (f), the Minister may take into account the possibility that a material improvement in competition in a dependent market does not outweigh, in terms of the public interest, the likelihood of a countervailing cost to the Australian interest of the making of a declaration in terms of, for example, the national economy, security, or the environment.
126 On the one hand, there is force in the submission of PNO and the Commonwealth because ordinarily, the same words in the one section (“access” or “increased access”) would receive the same interpretation and taking into account the extent of the improvement in a dependent market (“modest improvement”) is suggestive of a test which takes into account actual conditions in the market, including existing and future usage. On the other hand, there is no suggestion at all by the Full Court that it was departing from a previous Full Court decision. In fact, in a number of respects it closely followed Sydney Airport Full Court. It quoted with approval statements made by the Court (at [15]), followed Sydney Airport Full Court on the existence of a residual discretion (at [36]) and the use of extrinsic material (at [61]) and quoted with approval the Full Court’s warning against “unduly complicating the conceptual framework of Pt IIIA” (at [77]). In our respectful opinion, having regard to these matters it cannot be said that the Full Court in Pilbara Full Court was intending to depart from Sydney Airport Full Court by what it said in paragraph 112.
127 PNO and the Commonwealth submitted that the effect of the amendments made by the 2006 Amending Act was to show that the decision in Sydney Airport Full Court was wrong or, in the alternative, was now to be distinguished. PNO and the Commonwealth submitted that the significance of the amendments is that they indicate that the decision-maker must focus on what is actually happening in the relevant markets and that includes existing and likely future access. That follows (so the argument proceeds) from the reference in s 44AA(a) to the economically efficient operation of, use of and investment in the infrastructure and the promotion of effective competition and the fact that those matters cannot be properly considered without regard to existing usage. The point is also made that the objects section refers to activities, not rights. Similar points are made about the amendment to criterion (a) by the addition of the words, “a material increase in”. The argument is that one cannot consider and understand the conditions or environment in the dependent market (or markets) without making an assessment of the existing and likely future usage of the facility.
128 The Explanatory Memorandum to the Bill which became the 2006 Amending Act said of the introduction of the objects section:
1.34 The objects clause in section 44AA is a statement of principle. Decision makers will continue to apply existing specific statutory criteria (such as consideration of public interest and promotion of competition) in regard to the declaration and undertakings access routes, and the principles outlined in Clause 6 of the CPA (such as promotion of competition) in relation to certifications.
129 As far as the amendment to criterion (a) is concerned, the Explanatory Memorandum contains the following:
4.7 The Government has agreed to amend the ‘promote competition’ declaration criteria contained in paragraph 44G(2)(a), to ensure that access declarations are only granted where the expected increase in competition in an upstream or downstream market is not trivial.
Item 23 – Paragraph 44H(4)(a)
1.38 Item 23 amends paragraph 44H(4)(a), to provide that the designated Minister cannot declare a service unless he or she is satisfied, inter alia¸ that access (or increased access) to the service would promote a material increase in competition in at least one market (whether or not in Australia) other than the market for the service. In responding to the Productivity Commission’s report, the Government indicated that while the current declaration criteria (such as ‘the national significance’ test) preclude declaration where the relevant infrastructure and subsequent public benefits are not significant, this does not sufficiently address the situation where, irrespective of the significance of the infrastructure, declaration would only result in marginal increases in competition. The change will ensure access declarations are only sought where increases in competition are not trivial.
130 PNO and the Commonwealth submitted that the decision of the High Court in Pilbara High Court affected the reasoning in Sydney Airport Full Court. That case raised a number of issues, including the nature of the Tribunal’s task under s 44K of the Act. The Court held that the Tribunal had not performed the task attributed to it. The remaining issues were the meaning of criterion (b), the matters the Minister may take into account when considering criterion (f) and whether, if satisfied of all the criteria in s 44H(4), the Minister nonetheless has a discretion to refuse to declare the service in question. Of present relevance, is the last of these issues.
131 Their Honours in the joint reasons said that there was no residual discretion and that the Minister must declare the service if he or she is satisfied of all of the six criteria specified in s 44H(4). Their Honours said (at [116]):
116. … If the Minister is satisfied of all of the six criteria, including in particular that access (or increased access) to the service would not be contrary to the public interest, no satisfactory criterion or criteria could be devised which would guide the exercise of some residual discretion. Though drafted very differently, the provisions of s 44H are not different in effect from provisions of the kind considered in Finance Facilities Pty Ltd v Federal Commissioner of Taxation. That is, if the Minister, having considered the matter, is satisfied of all of the six criteria, the Minister must declare the relevant service.
(Footnote omitted.)
132 Their Honours referred to Sydney Airport Full Court, but were not persuaded by that decision to take a different view. With respect to the effect of the second sentence of s 44H(2), their Honours took the view that that was limited to that subsection and had no relevance to the existence or otherwise of a residual discretion (at [118]).
133 Justice Heydon in separate reasons reached a similar view to that of their Honours in the joint reasons and in the course of his reasons said that the decision in Sydney Airport Full Court was incorrect on this point (at [193]).
134 PNO and the Commonwealth submitted that the Full Court in Sydney Airport Full Court proceeded on the basis that there was a residual discretion to take into account matters other than those identified in s 44H(4) and that the High Court’s decision that there is no residual discretion affects the soundness of the Full Court’s decision.
135 Glencore submitted that the decision of the Full Court in Sydney Airport Full Court was correct and it largely relied on the reasons which the Court gave. It made the point that a declaration under Part IIIA gave rights to all potential users and not just the applicant. It suggested that a reason not to take into account existing and likely future access is that circumstances may well fluctuate over the period of a declaration. It submitted that the “increased access” limb of the “access (or increased access)” test will have work to do on the construction of criterion (a) it advanced in those cases where there was an existing access regime which was not an effective access regime under Part IIIA. Glencore pointed out that Pilbara High Court did not address the proper construction of paragraph (a).
136 In our respectful opinion, the Full Court’s construction of criterion (a) in Sydney Airport Full Court is correct and is unaffected by the amendments made by the 2006 Amending Act or by the decision in Pilbara High Court.
137 The starting point in the process of construction is the ordinary and grammatical meaning of the words in criterion (a) having regard to their context and legislative purpose (Australian Education Union v Department of Education and Children’s Services (2012) 248 CLR 1 at [26] per French CJ, Hayne, Kiefel and Bell JJ). The Full Court in Sydney Airport Full Court and all parties to this application agree that the word “access” is to be given its ordinary meaning and there is no suggestion that in context the word is to bear a specialised meaning. The Full Court’s description of the ordinary meaning of access in the context of access to a service as a right or ability to use a service is, with respect, an appropriate one.
138 In our respectful opinion, the Full Court in Sydney Airport Full Court was correct to reject the proposition that access meant a declaration under Part IIIA. That is not the ordinary meaning of the word and as the Full Court said, and as the Act expressly provides, a declaration under Part IIIA does not necessarily lead to access for anyone. It can be seen how reading the word “access” as meaning a declaration under Part IIIA readily leads to the conclusion that existing and likely future usage is to be taken into account. The comparison becomes one between a future with a declaration and a future without a declaration and the latter readily invites a consideration of likely future access where things remain the same. That was the approach adopted by the Tribunal in Sydney Airport Tribunal and it was the approach rejected by the Full Court in that case.
139 We do not understand PNO and the Commonwealth to be seeking to revive that construction of criterion (a). Their point is that access has its ordinary meaning and that includes access as a matter of fact. The difficulty with that argument is as follows. Criterion (a) does call for a comparison between two circumstances in order to assess whether one of those will promote a material increase in competition in a dependent market. The difficulty with the construction advanced by PNO and the Commonwealth is to state what those two circumstances are and to avoid re-entering the territory of a future with a declaration and a future without a declaration. With respect we think the Full Court’s construction, which involves a comparison between access and no access and increased access and restricted access, is the more natural one.
140 The Full Court’s construction is supported by two further matters. We hasten to add that neither matter is decisive or compelling. First, the access referred to in criterion (a) is not access by a particular person, but rather is access by any third party. The whole point of the regime in Part IIIA is to provide access to third parties to a facility of national significance in certain circumstances. The rights of a particular existing third party user are not the focus of the enquiry or of Part IIIA. Secondly, we respectfully agree with the Full Court that the extrinsic material supports this construction of criterion (a). Whilst we would not describe the level of support in quite the same terms as the Full Court did in the passages set out above (at [106]), the extrinsic material does provide a degree of support for the construction adopted by the Full Court.
141 It may be accepted that this construction of criterion (a) creates a lower hurdle for an applicant than the construction advanced by PNO and the Commonwealth. That can be seen in this case where PNO would have succeeded by reference to its construction of criterion (a). It may also be accepted that this construction may well lead to a more limited operation for criterion (f) than would be the case were the construction advanced by PNO and the Commonwealth adopted. However, we think the construction is the correct one and that these matters are consequences of the construction, rather than reasons for adopting a different construction. The same may be said of the fact that this construction leads to a more limited operation for the “increased access” limb of the “access (or increased access)” test. As Glencore pointed out the increased access limb is not left with no work to do because there may be a case where there is an existing access regime which is not an effective access regime under Part IIIA.
142 We turn to consider the effect of the amendments introduced by the 2006 Amending Act and the High Court’s decision in Pilbara High Court.
143 Unsurprisingly, the objects section (s 44AA) is very general in its terms. Neither construction of criterion (a) is inconsistent with the objects section and we do not think it assists in resolving the issue of the proper construction of criterion (a).
144 There is more substance in the argument that the amendment to criterion (a) favours the construction advanced by PNO and the Commonwealth. There must be not only a promotion of competition, but a promotion of a material increase in competition. It is necessary to consider the extent to which competition is likely to be promoted and this may be taken to suggest an examination of the existing interaction between the market in which the service operates and the dependent markets. However, two points against this proposition are to be noted. First, as Glencore submitted there was no amendment made to the words “access (or increased access)” or the word “promote”. Secondly, if, as the Explanatory Memorandum suggests, the intention behind the amendment was to exclude increases in competition which are trivial, then the construction adopted by the Full Court in Sydney Airport Full Court can operate without difficulty to give effect to that intention. Not without some hesitation, we are not persuaded that the amendment made to criterion (a) means that the construction of criterion (a) adopted by the Full Court in Sydney Airport Full Court was wrong or that a different construction should be adopted as a result of the operation of the amendment.
145 We do not think that the Full Court’s construction of criterion (a) in Sydney Airport Full Court was dependent on the existence of a residual discretion under which existing and likely future usage could be taken into account. It is true that the Full Court did proceed on the basis that there was such a discretion and that the High Court has subsequently said in Pilbara High Court that there is no such discretion. However, we think the Court would have reached the same view absent a residual discretion because of its clear and firm view as to the meaning of the words in criterion (a). We too reach the same conclusion. The short point is that it is not obvious to us that existing and likely future usage must be taken into account to the point that if it is not done under a residual discretion, then it must be done under criterion (a).
146 For these reasons we do not think that the Tribunal erred in concluding that criterion (a) was satisfied.
Criterion (f) - Analysis
147 PNO and the Commonwealth submitted that if they are wrong about the proper construction of criterion (a), then the existing and likely future usage of participants in the dependent markets is a relevant consideration under criterion (f). It will be recalled that criterion (f) also uses the words “access (or increased access)” to the service and the requirement is that the Minister be satisfied that that would not be contrary to the public interest.
148 The submissions of PNO and the Commonwealth with respect to criterion (f) were quite brief.
149 PNO pointed to the Tribunal’s conclusion that to the extent that it is said that criterion (f) also requires the competitive analysis required by criterion (a), the Tribunal does not agree that such duplication is intended. PNO submits that if in fact there is no duplication because existing and likely future usage is not taken into account in considering criterion (a), then there is no bar to considering existing and likely future usage under criterion (f). At one level, this submission misstates the Tribunal’s approach. In the sentence in the Tribunal’s reasons which follows that identified by PNO, the Tribunal states that criterion (f) directs attention to whether there are matters other than those specified in criteria (a)-(e) which might involve a detriment to the public interest and so might be a contra-indicator to the making of a declaration. What the Tribunal was saying was that if a competitive analysis carried out in a certain way was to be undertaken under criterion (a), then it is unlikely Parliament intended another competitive analysis was to be undertaken under criterion (f). PNO appeared to recognise this in its written submissions describing the result for which it contended as “slightly incongruous”.
150 The Commonwealth submitted that existing and likely future usage should be taken into account under criterion (f) assuming it is not taken into account under criterion (a) otherwise the costs and uncertainties associated with the application of a regulatory regime under Part IIIA could be introduced despite the fact that the Part IIIA regime would not be expected to materially increase competition in the already effective competitive coal market. In its written submissions the Commonwealth submitted:
This is precisely the type of practical, real world consideration that is addressed in s 44A(a) of the objects of Part IIIA. If it is not to be considered under criterion (a), then it ought properly be regarded as a relevant consideration under criterion (f).
151 There is force in this submission, but in the end, in our opinion, it is a submission directed to the proper construction of criterion (a), not criterion (f). This can be seen in the tension such an approach would give rise to. The decision-maker is asked to take into account under criterion (f) the fact a declaration will introduce the costs and uncertainties associated with the application of a regulatory regime under Part IIIA in a case where the regime would not be expected to materially increase competition in the already effective competitive coal market in circumstances in which the decision-maker has already decided under criterion (a) that access (or increased access) to the Service would promote a material increase in competition in the coal market. Such an approach could not have been intended. The High Court in Pilbara High Court did not address this particular problem. However, it did address the scope of criterion (f) and the Court’s comments suggest that the submissions of PNO and the Commonwealth should be rejected. In the joint reasons their Honours said that criterion (f) should not be used to call into question the results obtained by application of criteria (a)-(c) (at [188]).
152 PNO’s challenge to the Tribunal’s decision with respect to Issue 1 and Issue 3 must be rejected and its application for judicial review must be dismissed.
153 Although it is not strictly necessary to address the Notice of Contention and Glencore’s challenge to the Tribunal’s decision with respect to Issue 2, we think it is appropriate to do so in case we are wrong in our approach to Issue 1.
notice of contention – Analysis
154 Glencore’s Notice of Contention is in accordance with Form 124. In the notice, Glencore states that it contends that the decision of the Tribunal should be affirmed on grounds other than those relied on by the Tribunal. Glencore states that it does not seek to cross-appeal from any part of the decision.
155 The Notice of Contention challenges the Tribunal’s conclusion with respect to Issue 2 and has been filed in the event that PNO is successful with respect to Issue 1. In other words, Glencore wishes to contend that, should the proper construction of criterion (a) mean that the decision-maker should take into account existing and likely future usage, the Tribunal erred in deciding that criterion (a) was not satisfied. Glencore invites this Court to conclude that criterion (a) was satisfied even on the construction advanced by PNO.
156 There are a number of difficulties with Glencore’s use of a Notice of Contention. Rule 36.24 of the Federal Court Rules 2011 (Cth) provides as follows:
If a respondent does not want to cross-appeal from any part of a judgment, but contends that the judgment should be affirmed on grounds other than those relied on by the court appealed from, the respondent must, within 21 days after the notice of appeal is served, file a notice of contention, in accordance with Form 124.
157 PNO’s Originating Application engages the original jurisdiction of the Court. The Tribunal is not a “court appealed from” and PNO has not served a “notice of appeal” within r 36.24. There is a further difficulty. In the Notice of Contention, Glencore asks this Court to affirm the Tribunal’s decision on grounds other than those relied on by the Tribunal. Glencore accepts that this Court would not interfere with the Tribunal’s decision in relation to Issue 2 unless it could show a judicially reviewable error within the ADJR Act or by reference to the remedies in the Judiciary Act. The difficulty for Glencore is that this Court would not go on and make the opposite decision to that made by the Tribunal with respect to Issue 2. Even if this had been an application for judicial review by Glencore and Glencore had established a judicially reviewable error, the matter would normally be referred back to the Tribunal for it to reconsider the matter according to law. The procedure adopted by Glencore is not apt.
158 PNO accepted that even if it identified a judicially reviewable error, this Court has a discretion not to grant relief and in perhaps a rare case Glencore might be able to resist relief on the basis of some other aspect of the Tribunal’s decision. However, PNO submitted that that is not this case because this Court would not make the decision on the merits with respect to Issue 2 even if Glencore established a judicially reviewable error.
159 Glencore is in something of a dilemma. It has succeeded on Issue 1, but failed on Issue 2. If it failed on Issue 1 in this Court, it perhaps quite reasonably anticipated that PNO would point to the fact that it has succeeded with respect to Issue 2 and that the matter need not be remitted to the Tribunal, or alternatively, the remittal to the Tribunal will be no more than a formality. It was not unreasonable for the Tribunal to decide as many issues as it could and it is not unreasonable for Glencore to bring forward its challenges as promptly as possible. We have considered the matters raised in the Notice of Contention and we have reached the clear view that no judicially reviewable error is made out. In those circumstances, we propose to address the Notice of Contention without trying to resolve the procedural dilemma.
160 As we understood it, the particular ground of judicial review advanced by Glencore in relation to Issue 2 is that the Tribunal failed to take into account relevant considerations.
161 Unless a consideration is identified in express terms in the statute under consideration, there is an issue as to whether the consideration is a relevant one and, assuming the answer to that question is yes, whether it is a mandatory consideration in the sense that a failure to consider it means that the decision is invalid. Both of those questions turn on the proper construction of the statute and involve a consideration of its subject matter, scope and purpose. The nature of the decision-maker may also be relevant. In Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323, McHugh, Gummow and Hayne JJ said at [73]-[74]:
73. It is, of course, essential to begin by considering the statutory scheme as a whole. To that extent the submission is right. On analysis, however, the asserted duty to make findings may be simply another way of expressing the well known duty to take account of all relevant considerations. The considerations that are, or are not, relevant to the Tribunal’s task are to be identified primarily, perhaps even entirely, by reference to the Act rather than the particular facts of the case that the Tribunal is called on to consider . In that regard it is important to recall, as Brennan J said in Attorney General (NSW) v Quin:
The duty and the jurisdiction of the courts are expressed in the memorable words of Marshall CJ in Marbury v Madison: ‘It is, emphatically, the province and duty of the judicial department to say what the law is.’ The duty and jurisdiction of the court to review administrative action do not go beyond the declaration and enforcing of the law which determines the limits and governs the exercise of the repository's power. If, in so doing, the court avoids administrative injustice or error, so be it; but the court has no jurisdiction simply to cure administrative injustice or error. The merits of administrative action, to the extent that they can be distinguished from legality, are for the repository of the relevant power and, subject to political control, for the repository alone.
74. This does not deny that considerations advanced by the parties can have some importance in deciding what is or is not a relevant consideration. It may be, for example, that a particular statute makes the matters which are advanced in the course of a process of decision making relevant considerations for the decision maker. What is important, however, is that the grounds of judicial review that fasten upon the use made of relevant and irrelevant considerations are concerned essentially with whether the decision maker has properly applied the law. They are not grounds that are centrally concerned with the process of making the particular findings of fact upon which the decision maker acts.
(Citations omitted.)
162 In this case, the statute expressly identifies the relevant considerations to the exercise of the Minister’s power. The Minister must have regard to the objects of Part IIIA (s 44H(1A)). The Minister must consider whether it would be economical for anyone to develop another facility that could provide part of the service (s 44H(2)). The Minister must be satisfied of each of the five criteria identified in s 44H(4) before he or she can declare a service. Each criterion itself involves a number of relevant matters which might for the purposes of clear analysis be separately identified. For example, relevant matters in criterion (a) are: access or increased access to the service; the promotion of competition; a material increase in competition; and those matters occurring in at least one dependent market.
163 Before considering Glencore’s submission that a careful analysis of the Tribunal’s reasons reveals that it failed to take into account a number of relevant considerations, it is important to note two general matters. First, the Tribunal is an administrative body and it is well settled that the reasons of such a body “are not to be construed minutely and finely with an eye keenly attuned to the perception of error”: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287; Minister for Immigration and Ethnic Affairs v Wu Shan Liang and Others (1996) 185 CLR 259 at 272. Secondly, in circumstances where an allegation is made that a Tribunal has failed to consider an issue, it is necessary to bear in mind the observations of the Full Court of this Court in Applicant WAEE v Minister for Immigration and Indigenous Affairs (2003) 236 FCR 593 at [47]:
47. The inference that the Tribunal has failed to consider an issue may be drawn from its failure to expressly deal with that issue in its reasons. But that is an inference not too readily to be drawn where the reasons are otherwise comprehensive and the issue has at least been identified at some point. It may be that it is unnecessary to make a finding on a particular matter because it is subsumed in findings of greater generality or because there is a factual premise upon which a contention rests which has been rejected. Where however there is an issue raised by the evidence advanced on behalf of an applicant and contentions made by the applicant and that issue, if resolved one way, would be dispositive of the Tribunal's review of the delegate's decision, a failure to deal with it in the published reasons may raise a strong inference that it has been overlooked.
164 The Tribunal dealt with Issue 2 in paragraphs 122-158 of its reasons. Glencore submitted that in a number of these paragraphs, the Tribunal did no more than set out the submissions made by the respective parties. As a general observation, that is correct. Glencore submitted that the Tribunal’s reasoning is set out in paragraphs 155-156 of its reasons. Those paragraphs are as follows:
155. In its Final Recommendation, the NCC accepted that coal producers have limited ability to pass on increases in port charges, and that demand for the shipping channel service is relatively inelastic. However, there is a practical constraint on PNO of ensuring that coal producers continue to supply into a highly competitive market. That is, if price rises imposed by PNO made some coal producers uncompetitive globally, and led to some operations ceasing in the Hunter Valley, this could reduce volumes and revenues for PNO. While it is possible that this may not constrain PNO if other producers remained that could absorb the price increases, it is more likely that PNO would have an incentive to maximise the flow of coal through the Port so as to capture as much of the benefits from this coal export market as possible. Consequently, it does not necessary follow from an ability to increase prices that there will be a reduction in coal production that impacts competition in the coal export market because PNO has the commercial motivation to ensure that the Service supports the ongoing coal export market and its expansion.
156. As to uncertainty in relation to PNO’s future charging increases, the Tribunal agrees with the Minister that, compared to the significant uncertainty they face from changes in coal prices, other costs and regulation, any such uncertainty is likely to be very small. It would concern charges that are a very small component of the overall cost of delivered coal, while coal producers also face significant uncertainty from changes in the price of coal, ongoing costs (for example labour costs) and changes in regulation, such as those dealing with carbon emissions. Removing the uncertainty about Port access charges is not likely to promote a material increase in competition in a dependent market.
165 In our opinion, in these paragraphs, the Tribunal is making two points. First, in paragraph 155, it is examining whether there is a practical constraint on PNO of ensuring that coal producers continue to supply into a highly competitive market. The Tribunal notes that it cannot be certain as to what might happen in the future, but its assessment is that it is more likely that PNO would have an incentive to maximise the flow of coal through the Port so as to capture as much of the benefits from this coal export market as possible. In other words, as we would read the Tribunal’s assessment, PNO is unlikely to increase its prices to uncompetitive levels. The Tribunal expresses its conclusion in the last sentence in paragraph 155 in the way in which it does because s 44H(4) is expressed in terms of the decision-maker having to be satisfied of the matters identified in that subsection. Secondly, in paragraph 156, the Tribunal is addressing an argument that there will be uncertainty in the market because of the ability of PNO to charge monopoly or uncompetitive prices and that the removal of that uncertainty is likely to promote a material increase in competition in a dependent market. The Tribunal’s assessment is that having regard to the uncertainties which bear upon the overall cost of delivering coal, this particular uncertainty is “very small”.
166 Glencore’s main submission consisted of two limbs. The first limb was that the Tribunal had failed to take into account that the use of the Port was essential to the operation of the coal export market. The Tribunal was assessing the effect on competition in the coal export market of access to the Service. In this context, as the Tribunal said in Sydney Airport Tribunal at [145]-[148], the notion of promoting competition involved a consideration that if the conditions or environment for improving competition were enhanced, then there is a likelihood of increased competition that is not trivial. Glencore submitted that a decision-maker could not consider the relationship between access to the Service and the effects on a competitive market without understanding the precise relationship between the two. In this case, the use of the Port was essential to the coal export market and the coal producers in the Hunter Valley region. We reject this submission. There can be no doubt that the Tribunal was at all times aware that access to the Service was essential to compete in the coal export market. We refer to the Tribunal’s reasons at paragraphs 7 and 14 in the Background, paragraph 113 in relation to Issue 1, and paragraphs 143 (“PNO as a bottleneck monopoly service provider”) and 147 (“a natural monopoly provider of an ‘essential service’”) in relation to Issue 2. In our opinion, the essentiality of the Service was a relevant consideration which the Tribunal was bound to take into account and the Tribunal did take it into account.
167 The second limb of Glencore’s main submission was that the Tribunal addressed the wrong question when it considered the relationship between a possible increase in future charges and the overall cost of delivered coal. We doubt whether this is a relevant consideration which the Tribunal was bound to take into account. Even if that is wrong, we think that Glencore’s submission proceeds on a misunderstanding of what the Tribunal was saying. Glencore had submitted that PNO’s ability to increase prices in the future created uncertainty in the coal export market which was not conducive to the promotion of competition. In response to that argument, the Tribunal said that that “uncertainty” was insignificant compared with the other uncertainties facing coal producers. It seems to us that that conclusion was open to the Tribunal. In any event, the Tribunal did make reference to this issue in paragraph 132 in its reasons and we think made a finding that monopoly or uncompetitive prices were unlikely and uncertainty about prices was not likely to have any material effect on expansion and new investment in the coal export market.
168 As part of its submission, Glencore took the Court to a letter from a small coal producer (The Bloomfield Group) to the NCC dated 2 September 2015 wherein Bloomfield made a submission to the NCC along the following lines:
As a comparatively small producer such increases may be problematic on their own, but as we explained in our letter of 16 June 2015, the issue is the manner in which this has been undertaken by [PNO], which appears to be representative of future, likely larger increases based on their purchase price for the Port.
Particularly as a small producer, [PNO]’s ability to increase charges to access the channel has a material impact on Bloomfield’s operations. That impact on our operations arises because the increase impacts our profit margin for the sale of coal. The NCC’s focus on overall costs of producing and exporting coal is not determinative of the impact on us – the impact is on our profit margin (in an environment where we are a price taker) and therefore the impact of this increase and future increases can have a material impact on our business. …
169 The Tribunal referred to the submissions made by The Bloomfield Group in two paragraphs of its reasons (at [132] and [152]).
170 The above was the main submission made by Glencore. There were a number of other submissions raised in its written outline of submissions. We will address them briefly.
171 First, Glencore submits that the Tribunal failed to consider that PNO’s already announced price increases for the use of the Service had eroded a substantial component of the profit margins of Hunter Valley coal producers. The Tribunal failed to have any regard to the material impact of the price increases on both the margins of coal producers in the Hunter Valley and the ongoing viability for some producers of their mines. We think that the Tribunal took this matter into account and again, we refer to paragraph 132 of its reasons.
172 Secondly, Glencore submits that the Tribunal failed to take into account the risk that future monopoly or uncompetitive price increases by PNO for the use of the Service would erode a further substantial component of the profit margins of Hunter Valley coal producers and potential new entrants. We reject this submission. As we read the Tribunal’s conclusion in paragraph 155, it did not think that that was likely to happen. The Tribunal has made a finding on the matter.
173 Thirdly, Glencore submits that the Tribunal failed to find and take into account that the existence of the risk of future unfettered monopoly or uncompetitive price increases engendered uncertainty and acted as a deterrent to expansion of existing mines and new investment. We reject this contention. The Tribunal was aware of the argument concerning “dampening” incentives to invest (at [143]), “blunting investment” and expanded production capacity (at [144]). Glencore made the following written submissions:
60. The Tribunal erred in concluding (at [156]) that removing uncertainty about Port access prices is not likely to promote a material increase in competition in a dependent market because the charges are a very small component of the overall costs of delivered coal. This analysis missed the key point. Whilst producers in the Hunter Valley do face other uncertainties in the production of coal, it does not follow that the risk posed by future increases in Port charges is immaterial to their decisions or the decision making of their financiers. This is especially so given the matters referred to above and because the risk of Port charge increases cannot be mitigated.
61. In contrast, if the Service were declared and became subject to the constraint of possible arbitration by the ACCC under Part IIIA, there will be greater certainty for investment in existing mines, expansion of those mines or the development of new mines, as there will be regulated price increases, which will provide conditions to make the dependent coal markets materially more competitive in the Hunter Valley region than if usage of the Service is subject to unfettered pricing power by PNO as a monopoly infrastructure provider. The continued or increased participation of coal producers would in turn result in an improvement in the opportunities and environment for competition in the bidding for the award of mining authorities and in the provision of the mining infrastructure and services in the Hunter Valley region.
(Footnotes omitted.)
174 We set these submissions out to illustrate the fact that a number of Glencore’s submissions were, in essence, a challenge to the merits of the Tribunal’s decision. Whether it be right or wrong in so concluding, the Tribunal reached a conclusion as to the effect of uncertainty about future increases in Port charges in paragraph 156 of its reasons and it is not the function of this Court to determine the merits of the matters before the Tribunal.
175 The ACCC also challenged the Tribunal’s findings in paragraph 155 of its reasons. The main submission the ACCC put was different from that put by Glencore. It submitted that the Tribunal failed to take into account the fact that PNO could charge different prices for the Service. It referred to s 51(3) of the PMAA by way of example. That subsection provides that the relevant port authority may fix different navigation service charges in respect of different ports or vessels or according to such other factors as the relevant port authority thinks fit. The ACCC submitted that PNO’s ability to fix different charges meant that it could fix monopoly or uncompetitive charges and, at the same time, maintain coal production volumes. This could be brought about by PNO retaining a discretion to lower the charges in the case of smaller producers who were struggling. In such cases, PNO could waive the charges or reduce the charges. In response to a suggestion that PNO would not know which producers were struggling because it would not have the relevant financial information, Glencore submitted that the prices could be fixed at a certain level with an indication that they could be reduced in certain circumstances. An application for reduction could be sought by the coal producer and relevant information could be provided with the application.
176 The ACCC submitted that the potential to charge different prices was raised before the Tribunal and needed to be addressed. It referred to the NCC’s final recommendation to the Minister and, in particular, paragraph 4.93 which is in the following terms:
4.93 The Council accepts that coal producers have limited ability to pass on increases in port charges, and the demand for the shipping channel service is relatively inelastic. Consequently, PNO could raise prices to recover its costs rather than rely on volume increases. However, some constraint may exist given that coal producers supply into a highly competitive market. That is, if price rises imposed by PNO made some coal producers uncompetitive globally, and led to some operations ceasing in the Hunter Valley, this could reduce volumes and revenues for PNO. While it is possible that this may not constrain PNO if other producers were to remain that could absorb the price increases, it is more likely that PNO would have an incentive to maximise the flow of coal through the port so as to capture as much of the benefits from this trade as possible. PNO may have some ability to price discriminate, for example, by setting different prices for different types of vessel. PNO could therefore price (or aim to price) its services in a way that maintains throughput volumes and maximises profits, for instance by bargaining directly with producers with mines at risk of closure, or their shippers. Consequently, it does not necessarily follow from an ability to increase prices that there will be a reduction in coal production that impacts competition in a market.
177 There are a number of similarities between paragraph 155 of the Tribunal’s reasons and paragraph 4.93 of the NCC’s recommendation, although paragraph 155 of the Tribunal’s reasons does not contain a reference to price discrimination.
178 The Tribunal referred to a letter from The Bloomfield Group dated 16 June 2015 in which (according to the Tribunal) The Bloomfield Group’s focus was on ensuring the charging structure did not lead to differential pricing for users of the Port. We note that in the letter, The Bloomfield Group states the following:
• Given the changes in rates to date, Bloomfield now has a concern that [PNO] may unilaterally make changes to the rating structure for different vessel sizes or producer throughputs as well. Any change of rates structure is more likely to disadvantage a smaller producer if the change in rate structure is designed to favour the larger vessels or larger throughputs.
179 We have no doubt the Tribunal was aware of the possibility of price discrimination.
180 We do not think that the ability to impose different charges was a mandatory relevant consideration such that a failure to take it into account results in the invalidity of the decision. In any event, it is not as if the Tribunal did not address the general topic. It made a finding that it did not necessarily follow from an ability to increase prices that there will be a reduction in coal production that impacts competition in the coal export market because PNO has the commercial motivation to ensure that the Service supports the ongoing coal export market and its expansion.
181 The ACCC submitted that the Tribunal misunderstood the concept of promoting a material increase in competition. It submitted that the Tribunal concentrated its enquiry upon whether PNO’s future pricing behaviour would have the shortrun effect of reducing coal production from the Hunter Valley rather than the creation of appropriate conditions or an environment for improving competition from what it would otherwise be in each of the relevant dependent markets.
182 We do not think that the Tribunal misunderstood the concept of promoting a material increase in competition. It certainly did not do so in examining Issue 1 because in that context it said (at [107]):
107. In identifying dependent markets for the purposes of criterion (a), what must be determined is whether any dependent market is distinct from the market for the service, and the effect access will have on the conditions for competition in that dependent market. This includes considering whether access will create or improve the environment in which competition may then flourish: see Sydney Airport FC at [107]. …
183 Furthermore, in our opinion, the Tribunal had that test in mind in considering Issue 2 and that that appears from the matters addressed in paragraph 156 of its reasons.
184 We reject the ACCC’s submission that the Tribunal’s rejection of the opinions of Synergies Economic Consulting and Dr Bishop of RBB Economics reveal error on the Tribunal’s behalf.
185 The ACCC submitted that the Tribunal failed to recognise that a monopolist can increase prices so as to harm the conditions or environment for competition notwithstanding that coal production levels did not immediately fall. The ACCC submitted that the Tribunal’s approach does not properly consider the question of price discrimination, nor allow for the consequences of increases in the world price for coal. We have already dealt with this submission.
186 The ACCC’s argument seemed to come down to what it put in paragraph 45 of its written submissions, namely, the following:
45. The threat of future expropriation of some of the profits of miners by PNO is likely to have a dampening or chilling effect on future investment in the Hunter Valley coal mines which in turn is damaging to the conditions and environment for competition in one or more of the dependent markets.
187 This submission must be rejected. Two observations may be made about it. First, it appears to be a challenge to findings of the Tribunal on the merits and we refer to the findings in paragraph 156 of its reasons. As we have said, it is not for this Court to review the Tribunal’s conclusions on the merits. Secondly, stripped to its essentials, the ACCC’s submission seemed to come down to the fact that even on the test which forms the basis of Issue 2, criterion (a) will be satisfied where there is a bottleneck monopoly and no legal constraints on the fixing of prices by the service provider. Such an approach would bring the alternative test a great deal closer to the construction of criterion (a) adopted by the Tribunal in its treatment of Issue 1 and does not seem to accord any real content to the test which formed the basis of the Tribunal’s consideration of Issue 2.
188 We are not satisfied that Glencore has established a judicially reviewable error in relation to the Tribunal’s treatment of Issue 2.
conclusion
189 PNO’s application for judicial review must be dismissed. The parties should seek to agree costs. If they cannot agree, each party should file and serve within 14 days hereof a brief outline of written submissions not exceeding five pages in length setting out and explaining its proposed orders on costs. The issue of costs will then be determined on the papers.
Associate:
NSD 1147 of 2016 | |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION |
