November 16 2001 Media Statement

Ports Market Power Study

The Government will commission a study of the market power of New Zealand’s shipping ports, Commerce Minister Paul Swain and Transport Minister Mark Gosche announced today.

The study is a response to concerns most recently raised in the report of the Shipping Industry Review. The review recommended that the Government ask the Commerce Commission to investigate alleged anti-competitive practices and monopoly pricing by port companies.

The Ministers said the study would give the Government an overview of the ports’ market power issue and the information necessary to make an informed decision about the merits of a Commerce Commission inquiry or other possible courses of action. The study would not involve an in-depth analysis of individual ports’ financial performance.

“The study will include consultation with the industry. Comment and information will be sought from ports, port users and other key stakeholders such as unions,” Mr Swain said.

The study will be carried out by an independent consultant jointly contracted by the Ministry of Economic Development and the Ministry of Transport. The consultant will report directly to Ministers.

It is expected the study will start towards the end of November and take three or four months.

ENDS

TERMS OF REFERENCE - REVIEW OF PORTS MARKET POWER

Characteristics of the Ports Market
The consultant should produce a report which identifies and contains a
general analysis of the following:
- the relevant market or markets;
- the level of competition in the market/s (taking into consideration competition between different transport modes – ie rail, road, coastal shipping);
- the likelihood of new entrants or expansion imposing a competitive constraint;
- the extent and use of countervailing power in the market including by shippers and shipping lines;
- situations where market power may be exercised by port companies, either current or historical; and
- opportunities for abuse of market power by port companies.

Assessment of Factors Influencing Market Power
The consultant should assess the effectiveness of existing institutional or regulatory measures in constraining or influencing this exercise of market power in total. These factors could include:

- competition
- countervailing power
- barriers to entry
- Commerce Act
- Port Companies Act

Overview of Ports Market
The consultant should use the above information to develop an overview of the ports market in total, and in the light of this overview, develop a more specific description of the ports market with respect to market power characteristics, if any. This description could indicate the following:

- frequency of occurrences of market power;
- any pattern of these occurrences (e.g., wide spread or isolated across ports or port activities); and
- a comment on the implications for the efficiency of those markets.

ENDS

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