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Decision Stuns Users Of Port Company Monopolies

24 December, 2002

Media Release

Decision Stuns Users Of Port Company Monopolies

The Captive Port Customers Group (CPC) says a Government decision that port companies are free to exercise their monopoly driven market power on captive users will reduce the competitiveness of New Zealand based shipping and captive export industries.

Paul Nicholas, secretary to the Captive Port Customers Group, says the case against the Ports was so strong that the Group is stunned by the Government decision to do nothing.

“After all the evidence we provided to the review, this decision was next to impossible. The Government has got it horribly wrong, and it is real business-people and consumers who will pay the price.

“We submitted case after case where ports took advantage of captive customers, and we submitted economic evidence which showed ports had earned at least $300m more than they were entitled to over the past decade.

“We also showed that the legal remedies available were impotent.

“The decision not to intervene frees port monopolies to act as they wish over their customers, and that guarantees that ports will be one of New Zealand’s most lucrative investment opportunities over the next few years. There are not many other businesses opportunities in New Zealand where the Government has given monopolies a right to charge their customers whatever they want,” Mr Nicholas said.

Mr Nicholas said the decision stymies one of the Governments own core economic aims of increasing New Zealand’s participation in shipping and maritime service provision.

He also labeled Transport Minister Paul Swain’s caution for Regional Council port owners to be sensitive to the impact of disputes between port companies and port users on regional development and employment as “feeble”.

“Port companies are regarded as cash cows by regional councils, so we have to ask what influence regional councils have exerted on government to let the current monopoly situation continue.

“It appears a new pricing regime for regional Councils to apply to port company monopolies will be to charge what you can until regional development and employment are threatened, then back your pricing off. No mention is made about fair and reasonable pricing,” Mr Nicholas said.

Mr Nicholas said the decision completely overlooked one of the main obstacles in dealing with a monopoly, which is monopolies do not have to negotiate or go to voluntary arbitration as the Commerce Minister suggests - monopolies just set prices.

“The Minister has received some bad advice on what actually happens in the industry. A recent case of a port company refusing to negotiate or accept arbitration required Pacifica Shipping to go to Court.

“The Government has taken no account of the national welfare cost of ports market power as the review undertaken by Charles River and Associates was purely qualitative no provision was made in the terms of reference to calculate the cost of the ports market power.”

Mr Nicholas challenged the Government to pass economic legislation covering the Port sector, with clauses reflecting the recent decision;

- Legislative obligation for ports to be successful businesses

- No economic regulation

- No consultation

- No information disclosure

- No dispute resolution

“The ridiculous contrast of such Ports legislation against legislation passed for other industries would expose the illogic of this recent decision.

“This issue will not go away and we can assure Ministers that they will be regularly reminded of the poor decision they have made and its costs to the sector and the country,” Mr Nicholas said.


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