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Cook Strait Freight Market Under Threat

Road Transport Forum NZ has identified serious concerns over the pricing policies used by Tranz Rail in the Cook Strait freight market and has asked Transport Minister Mark Goshe to pass the matter on to the Commerce Commission for urgent attention.

Forum chief executive Tony Friedlander said the rate structure since the introduction of increased competition suggested Tranz Rail had been exploiting their dominant position in the market. “With Tranz Rail services accounting for more than 80 percent of Cook Strait traffic capacity, they are able to exploit their dominant position by running targeted sailings at greatly reduced prices without having a major impact on their overall profitability,” he said.

Mr Friedlander said Tranz Rail seemed to have been running such sailings at times that were in direct competition with their major competitor, Top Cat, which began operations in May 1999. “When Top Cat entered the market, it charged the going rate of about $90 per lane metre for freight, but since it began, Tranz Rail have been heavily discounting their rates.”

In May this year, Tranz Rail offered all customers new rates of $60 per lane metre for four of its daily crossings, and an unprecedented $45 for two. This rate is less than half the real average charged by Tranz Rail less than two years ago. The $45 rate applies to the 6.30am sailing of the Aratere from Wellington and its return trip from Picton at 10.30am. “These both depart within an hour of Top Cat which suggests the targeted pricing structure is in place specifically to eliminate Top Cat from the market . This seems to indicate the rate is a temporary measure aimed at crippling Top Cat’s profitability and leading to a reinstatement of a Tranz Rail monopoly,” said Mr Friedlander.

Mr Friedlander said that if a monopoly was returned to the market, substantial rate increases would be likely, as would huge ramifications for the trucking industry and national economy.

Road Transport Forum NZ is also concerned at what appears to be price discrimination by Tranz Rail between trucks and cars. Trucks using Tranz Rail have historically paid about double the lane metre rate as cars. But a comparison of overseas car and truck pricing on the English Channel suggests that trucks should pay about the same as cars. “This suggests Tranz Rail have been discriminating against trucks to force up the cost trucking companies charge clients with the aim of diverting traffic to their own rail services,” said Mr Friedlander.

“Cook Strait shipping services are the critical link in the Interisland freight market. Competition and efficiency in the market are vital to the New Zealand economy and must be maintained. This is why these matters must be urgently addressed by the Commerce Commission before it’s too late,” said Mr Friedlander.

ENDS

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