Glencore rail business goes off the tracks

The Australian Competition and Consumer Commission is still considering bids from Aurizon and Pacific National over the acquisition of Glencore’s rail business in the NSW Hunter Valley.

Glencore announced the sale of GRail earlier this year as part of a wider plan to pay down billions in debt, with Aurizon and Pacific National submitting proposals to the ACCC in August this year.

In a Statement of Issues released yesterday, the Commission argued that having the two competitors would “substantially lessen competition” in the coal haulage market.

Section 50 of the Competition and Consumer Act 2010 bans acquisitions that would have the effect, or are likely to have the effect of substantially lessening competition in any market. The is ACCC considering what the competitive market will be like after the acquisition to determine whether competition will be affected.

“The ACCC’s preliminary view is that each of the proposed acquisitions may substantially lessen competition because in the future without the proposed acquisitions, an Alternative Purchaser may establish itself as a third competitor in the market by acquiring Grail,” the ACCC said.

“Market participants consider that competition in the market would be enhanced if a third competitor entered the market by acquiring GRail.”

Since its development in 2010, GRail has reportedly become the third largest haulage business in Australia. Last year it hauled 40 million out of the 53 million tonnes of coal the company produced, according to the Daily Mercury.

The ACCC is calling for public submissions and feedback on the bids, particularly over whether a third entrant would increase competition and whether Aurizon and PN would compete intensely even if one of them acquires the business.

Entries are open until December 15.