April 29, 2016
Cement Australia and its associated companies have been fined $18.6 million – and a manager fined $20,000 – for anti-competitive behaviour in relation to their fly ash removal business in Queensland.
The company formerly had the contract to remove flyash from Stanwell’s Tarong and Tarong North power stations, as well as the Millmerran and Swanbank power stations.
Fly ash is a by-product from burning coal which is used in the manufacture of cement.
The Australian Competition and Consumer Commission originally launched proceedings against Cement Australia and related companies in 2008.
The case has been strongly contested by both parties since then.
In March 2014, the Federal Court declared Cement Australia had entered into anti-competitive contracts between 2002-06 with the four power stations.
No allegations were made against the power stations.
Cement Australia’s contract with Stanwell officially wound up in July 2014.
The Federal Court this week ordered penalties totalling $18.6 million against Cement Australia Pty Ltd and related companies for numerous contraventions of Section 45 of the Trade Practices Act 1974 (now called the Competition and Consumer Act 2010) which prohibits corporations from entering into, and giving effect to, contracts and arrangements that have the purpose or effect of substantially lessening competition.
A statement from the ACCC on Friday said the penalty judgement has been made available to the parties only on a restricted basis, pending resolution of confidentiality issues.
“It is extremely important for the ACCC to take action whenever the competitive process is damaged by any behaviour that substantially lessens competition. The operation of our market economy depends upon competition to drive innovation and benefit consumers,” ACCC chairman Rod Sims said.
“It has been a very long road for the ACCC, and the penalty judgement is an important milestone in the proceedings.”
However, Mr Sims later told the Australian Financial Review the ACCC was considering an appeal against the decision as it had been pushing for fines of $90 million.
The ACCC brought the proceedings against five related corporate respondents:
- Cement Australia Pty Ltd (currently 50 per cent owned by Holcim and 50 per cent owned by Heidelberg Cement’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
The Court found numerous contraventions of S45 of the Act by all companies but Cement Australia Holdings Pty Ltd.
Justice Greenwood found the conduct had the purpose and effect of preventing a competitor from entering the market by preventing them from obtaining direct access to a source of fly ash in south-east Queensland.
As a result, Justice Greenwood found 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 fly ash market, that the competitive effect of a new entry by a competitor would have been significant.
The ACCC also alleged that this conduct amounted to a misuse of market power but Justice Greenwood dismissed this claim because he found the ACCC had not established that the Cement Australia companies had taken advantage of their substantial market power.
The ACCC also brought proceedings against two individuals.
The case against one person was dismissed but declarations were made against Mr Christopher White (a manager in the Cement Australia flyash business during the relevant period) for his involvement in making the contravening contracts with the operator of the Swanbank power station in 2005.
A penalty of $20,000 was ordered against Mr White for his role in the conduct.