Thursday 13th Dec, 2018

INDUSTRY OPINION: Port surcharges – be careful how you respond

Photo: Jim Wilson
Photo: Jim Wilson

Article by Nathan Cecil*

The introduction of port terminal infrastructure surcharges, their subsequent significant increase and the significant increase of other surcharges in the road transport sector (i.e. road toll charges) is one of the hottest topics in transport and logistics in Australia at the moment.

The road transport and logistics sector has voiced significant displeasure at the introduction and increase in these charges – which are required to be paid, at least in the first instance, by road transport and logistics operators.

The commercial reality is that road transport and logistics companies cannot simply continue to absorb every such cost increase. Profitability dictates that at some point and to some extent, additional and increasing costs will have to find their way into increased costs to users of those services. Many industry advocacy groups and leaders have commented on this.

However, industry advocacy groups and individual road transport and logistics companies should be careful to avoid any suggestion that they ‘get together’ and ‘agree’ to pass on these charges.

Whilst this is undoubtedly sensible and a likely commercial outcome, road transport and logistics companies should remember that any pricing or charge structuring decisions need to be made individually and not in concert with other competitors.

Where competitors within a sector ‘get together’ and ‘agree’ on pricing or charge structuring, this may constitute unlawful cartel conduct in the nature of ‘price fixing’. Price fixing can result in prosecution and very significant penalties.

This is exactly what happened in the air freight sector. Between about 2004 to 2006, many international airlines came to an agreement on charges for fuel, security, insurance surcharges and customs fees. In actions commenced by the competition law authorities across the globe (including Australia), ‘getting together’ and ‘agreeing’ on surcharges was held to amount to cartel conduct in the nature of price fixing. Globally, fines for that conduct have amounted to the hundreds of millions.

Similar prosecutions have been brought in Australia in the power cable, egg and salmon sectors – see our article https://www.holdingredlich.com/competition-consumer/cartel-conduct-is-your-industry-association-sailing-too-close-to-the-wind.

So, whilst the commentary to date is probably on the money and very sensible, just remember that even if all industry operators end up getting to the same place, it is important that you do so on your own and not in concert with others.

* Nathan Cecil is a Partner (Transport Group) at Holding Redlich




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