ACCC rejects Brookfield's undertakings

Similar BIP undertakings in relation to its operation of the Dalrymple Bay Coal Terminal in Queensland have also not been accepted.

The ACCC expects to announce in a fortnight its final decision on whether BIP's play for Asciano can proceed, but took the unusual step last Thursday of a preliminary announcement stating it did not accept Brookfield's undertakings.

The undertakings were made by BIP and its WA subsidiary Brookfield Rail after the ACCC flagged concerns about the Asciano acquisition in an issues paper on October 15.

Brookfield Rail chief executive officer Paul Larsen has previously said the undertakings were "very similar" to undertakings the ACCC approved of for other organisations "in similar sorts of transactions".

However, on Thursday the ACCC said part of its consideration was whether it was "appropriate" for the undertakings to rely, in part, on WA and Queensland rail access regimes.

The ACCC noted the access regimes "are subject to change and, in some cases, have been criticised for their lack of effectiveness in dealing with key issues such as vertical integration".

As previously reported in Farm Weekly, various aspects of the WA access regime are currently under review by the Economic Regulation Authority (ERA).

One aspect under review is the segregation arrangements designed to ensure Brookfield Rail keeps its below-rail responsibilities as network operator separated from any above-rail associations with possible corporate relative freight operators.

The submissions period for the ERA's draft report on segregation arrangements closes tomorrow.

The ACCC's concerns arose because acquisition of Asciano would give BIP control of interstate rail freight operator Pacific National which runs trains on the standard-gauge section of the WA freight network and transports coal to the Dalrymple Bay terminal.

The ACCC last week also noted "feedback from market participants about the inability of behavioural undertakings to address the competition issues that have been identified".

CBH Group and WAFarmers made submissions in response to the issues paper and representatives from both organisations had meetings with two ACCC officers dealing with it.

The ACCC said it also considered whether undertakings can address "the scale and complexity of vertical integration of Brookfield's monopoly infrastructure assets with Asciano's above-rail operations" and still provide "flexibility" for Brookfield to operate.

"While the ACCC does not generally make public its decision whether or not to consult on proposed undertakings, we considered it important to do so in light of the recent media reports that Brookfield has proposed long-term behavioural undertakings," ACCC chairman Rod Sims said.

"The undertakings seek to address potential issues arising from the vertical integration of above and below-rail assets in WA and the integration of port and rail assets in Queensland.

"After detailed consideration, the ACCC has concluded that the undertakings are not acceptable, and accordingly we will not be conducting third party consultation on the undertakings.

"The ACCC's review of the proposed acquisition continues and we are assessing the large volume of submissions from industry participants and the parties."

The ACCC started a review in August after BIP announced a scheme of arrangements valued about $8.9 billion to acquire ports and logistics operator Asciano.

On November 9 Qube Holdings, Australia's largest import/export logistics provider, in conjunction with Global Infrastructure Partners and Canada Pension Plan Investment Board, made a conditional counter bid for Asciano.

That bid was made with the aim of breaking up Asciano, with Qube taking its Patrick container terminals business and its partners taking Pacific National.

BIP responded by buying Asciano shares and announced a formal take-over bid to Asciano shareholders, coupled with a statement it would not quit its Asciano shareholding.