Federal Court Declares Anticompetitive Conduct by Cement Australia
Thursday 13 March 2014 @ 9.45 a.m. | Trade & Commerce
The Federal Court in Brisbane has made declarations in ACCC v Cement Australia Pty Ltd [2014] FCA 148, finding numerous contraventions of s 45 of the then Trade Practices Act 1974 (now the Competition and Consumer Act 2010 (Cth) (the Act)).
Section 45 of the Act "prohibits corporations from entering into, and giving effect to, contracts and arrangements that have the purpose or effect of substantially lessening competition".
The Australian Competition and Consumer Commission (ACCC) brought the proceedings against five corporate respondents:
- Cement Australia Pty Ltd (currently 50 percent owned by Holcim and 50 percent owned by the HeidelbergCement’s subsidiary Hanson)
- Cement Australia Holdings Pty Ltd
- Cement Australia Queensland Pty Ltd (formerly Queensland Cement Ltd)
- Pozzolanic Enterprises Pty Ltd; and
- Pozzolanic Industries Pty Ltd, and findings were made against all but Cement Australia Holdings Pty Ltd.
Background to Proceedings
The proceedings related to contracts that were entered into between 2002 and 2006 with the operators of the Millmerran, Tarong, Tarong North and Swanbank power stations in South East Queensland to acquire flyash (it is noted that allegations were not made against the power stations). Flyash is a by-product of burning black coal at power stations, and can be used as a cheap partial substitute for cement in ready-mix concrete.
Justice Greenwood found the respondents’ conduct had the purpose and effect of preventing a competitor from entering the market by obtaining direct access to a source of flyash in South East Queensland. As a result, his Honour found that the contracts had both the purpose and effect of substantially lessening competition.
In reaching this conclusion, Justice Greenwood observed that Pozzolanic Enterprises Pty Ltd and Cement Australia Pty Ltd enjoyed such a substantial market share and exercised such a substantial degree of influence upon pricing in the South East Queensland concrete grade flyash market, that the competitive impact of new entry by a competitor would have been significant.
Action by the ACCC
The ACCC also brought proceedings against two individuals. The proceedings against one individual were dismissed, but declarations were made that Mr Christopher White (a manager in the Cement Australia flyash business during the period) was knowingly concerned in the contraventions by Pozzolanic Enterprises Pty Ltd, which involved entering into contracts with the operator of the Swanbank power station in 2005.
ACCC Chairman Rod Sims said:
“These declarations are another significant step towards achieving the final outcome in these long-running competition proceedings for the ACCC. The extensive nature of the s 45 contraventions found, which encompass contracts with all four power stations in South East Queensland over a number of years, is particularly pleasing.
Anticompetitive conduct remains an enforcement priority for the ACCC. The ACCC took action in this matter originally due to its concern that a dominant player in a market appeared to be foreclosing, and preventing, competition. The declarations and findings made by the court demonstrate this concern was warranted.”
The ACCC had also alleged certain conduct relating to the Millmerran power station amounted to a misuse of market power in contravention of s 46 of the Act, but these allegations were dismissed.
The matter will return to the Federal Court later in the year for a hearing to determine the appropriate relief, including penalties, in respect of the breaches of the Act found by the Court, on a date yet to be determined.
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Sources:
ACCC Media Release NR 045/14
ACCC v Cement Australia Pty Ltd [2014] FCA 148
