ACCC grants authorisation for gas field joint marketing arrangements

Background

Authorisation in Australia

Joint marketing and sale arrangements, such as those proposed by the Joint Venture, would ordinarily breach the cartel prohibitions contained within the Competition and Consumer Act (“CCA”). However, where businesses are concerned that their conduct may result in such a breach, they can seek an authorisation from the ACCC under s 88 of the CCA.

In general, the ACCC only grants an authorisation if the proposed conduct's public benefits outweigh its public detriment. To assess the public benefit, the ACCC routinely applies the “future with or without the proposed conduct” test.

The Joint Venture’s Proposal

The Joint Venture’s sole business is the production of oil and gas from the Mereenie field in the Northern Territory and it sought authorisation to:

• engage in the joint marketing of natural gas produced from the Mereenie field; and
• give effect to any contracts with customers that may arise out of the joint marketing of Mereenie gas. These contracts may involve common terms and conditions, including in relation to price (“Proposed Conduct”).

Balancing of public benefit against public detriment

According to the Final Determination published by the ACCC, it considered the following public benefits to be relevant in these circumstances:

• The Joint Venture will likely allow the Mereenie Field to be developed earlier, enabling additional gas supply to customers sooner than would otherwise occur.
• The Proposed Conduct is likely to result in reduced transaction costs and increase efficiency for customers of the Joint Venture as well as gas processing and transmission pipeline operators.

Conversely, the ACCC’s assessment recognised that the Proposed Conduct presents some risk of public detriment, though it is unlikely to be significant. While the ACCC noted that there is some risk that the Proposed Conduct could lead to a significant increase in market concentration or a reduction in competition, it determined that this risk is substantially mitigated because of the market conditions, including the existence of a number of other supply sources.

Accordingly, the ACCC considered that the public benefit likely to follow the Proposed Conduct would outweigh any public detriment.

Conclusion

The ACCC’s authorisation of the Proposed Conduct serves as a reminder that conduct prohibited by the CCA may still possess a public benefit. The authorisation process provides a mechanism by which the ACCC can balance such a public benefit against any public detriment of proposed conduct, thereby ensuring an outcome that is consistent with the objectives of competition regulation, including the promotion of economic efficiency.

For more information please contact Thomas Jones, Patrick Cordwell and Jeff Tian