Australia’s Competition and Consumer Commission (ACCC) has handed out a smack-down to the three main longshoremen companies in Australia, which were using their oligopoly market power to impose unfair terms on trucking companies. The stevedoring companies involved are DP World Australia, Hutchison Ports Australia and Victoria International Container Terminal.
Australian law renders void (i.e. of no legal effect) “unfair contract terms” in small business contracts. There are several pre-conditions that must be satisfied before a contract term can be rendered void. The term must be in a standard form, one of the parties to the contact must be a “small business” and the contract term must be “unfair”.
Stevedores effectively have monopoly power over their terminals – if a truck operator is told to pick up cargo at terminal X then that is where the truck must go. The Australian longshoremen companies produced a standard form contract called a “carrier access agreements” that were provided to trucking companies on a take-it-or-leave-it basis. If the truck operator wanted to do business inside the terminal then it had to agree to the carrier access agreement.
A “small” business, in this context, is a business that has less than 20 employees and which has entered into a contract which has an upfront payment of less than AU$300,000 (or, alternatively, lasts more than 12 months and does not exceed A$1 million). As there are 48,747 registered businesses in the road freight transport sector in Australia and the market leaders, Toll and Linfox, together only have a 12.4 percent market share between them, then there were very many small businesses within this definition.
Finally, a clause is “unfair” if it causes “significant imbalance” in the rights and obligations of the parties to the contract. The contract term must also be deemed to be unnecessary to protect the legitimate interests of the person who wants to rely on that contract term. The clause must also cause some kind of detriment, whether financial or other, to the other party to the contract.
The ACCC launched an investigation in early 2018 following complaints about alleged unfair terms in contracts between container stevedores and land transport operators, such as rail and trucking businesses.
According to sources, the trigger for the complaint to the ACCC happened when there was damage to a prime mover by a straddle carrier. A straddle is the large, upside-down “U” shaped movable crane that lifts containers from the stack onto trucks. Apparently, the straddle operator made an error and, instead of laying a 40-foot container onto the flatbed of a truck, accidentally drove the straddle forward and smashed the container into the prime mover. The accident caused over AU$50,000 (US$35,300) worth of damage.
Under what market sources describe as “all care and no responsibility”, the stevedore sought to limit its liability to AU$15,000 (US$10,600). As one source commented, “they wiped their hands.” We understand that the affected transport operator then contacted its local representative body, the Container Transport Alliance Australia, which then made complaints to the competition watchdog.
The ACCC revealed that it has required the three companies to rework clauses in their standard form contracts which, in the ACCC’s view, were unlawful because they were unfair contract terms. FreightWaves contacted the ACCC to find out exactly which terms were affected at each stevedore and what the longshoreman company had agreed to do.
Victoria International Container Terminal, or VICT, had required trucking companies to indemnify the terminal when VICT caused or contributed to losses without having any reciprocal obligation on VICT. The stevedore will remove that requirement.
DP World Australia has agreed to amend its contract to introduce a 30-day notice period to transport businesses of any proposed variation to its contract. It has also agreed to introduce liability limitations that are the same for both DP World and trucking businesses. It has further agreed to remove the contract term that required trucking companies to pay its legal costs and expenses.
Hutchison Ports Australia has entered into a court-enforceable undertaking. In that undertaking, Hutchison has agreed to remove from its future contracts a term enabling Hutchison to unilaterally vary its contract. It has also agreed to remove from its future contracts a term restricting Hutchison’s liability to transport businesses in circumstances where the transport businesses’ liability to Hutchison is not similarly limited. Finally, it has also agreed not to enforce these terms in its current contracts.
Commenting on the development, the Container Transport Alliance Australia’s CEO, Neil Chambers, said that the watchdog’s move has highlighted that carrier access agreements have “unfair elements.” He added that the development will “strengthen the arm” of the transport operators in seeking negotiations for a fairer, two-way service level agreement between the stevedores and the transport operators. However, he had a warning for the longshoremen companies.
“If they’re not prepared to negotiate, the transport operators will be off to the state governments to seek mandatory regulation,” Chambers told FreightWaves on April 2.
“This undertaking is historic as it is the first acknowledgment that the small business unfair contract terms regime… will make it difficult for transport service providers, including other stevedores, inland carriers, freight forwarders and warehouse operators to exclude their liability in relation to the transportation and storage of goods,” the lawyers wrote.
They note that the wording of the clauses under attack by the ACCC are “almost identically worded” to the exclusion clauses found in contracts of cargo carriers, handlers and storage providers across the country.
“There is a possibility that all transport industry stakeholders who have small business clients… will not be able to rely upon the exclusion clauses in their standard form contracts to exclude liability for claims by small businesses unless the company contracting with the freight forwarder or inland carrier can rely upon the same exclusion,” they wrote.