Small grain companies worried about access to Vancouver grain terminals
have been given a helping hand by the federal competition bureau.
The agency has ordered Agricore United to offer to handle at least
125,000 tonnes of grain a month from companies that don’t own elevator
facilities at the west coast port.
The company must also pay those companies a $2 a tonne “diversion
premium” for handling their grain.
And contracts that AU signs with them to handle their grain must be
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based on “reasonable commercial terms consistent with past practice.”
The order will remain in effect until a dispute over the future
ownership of AU’s Vancouver terminals is resolved.
The merger of Agricore and United Grain Growers into AU has given the
new company a 51 percent ownership stake in three terminals that
account for 63 percent of the total handling capacity at the port.
The competition bureau wants AU to sell one of its terminals, while AU
has offered to divest itself of part of one.
The bureau has asked the federal competition tribunal, an independent
quasi-judicial body, to decide the fate of the AU terminals. The
tribunal has not set a date to hear the case.
Competition bureau spokesperson David Ouellet said the latest order is
designed to provide a temporary solution to concerns about AU’s market
power at the port.
“The whole essence of our interest in this transaction is that we felt
in certain areas post-merger they’d be in a position to exercise market
power, which means raising prices.”
The bureau said that without the order, there will be “irreparable
harm” to grain handling companies that don’t own terminals at Vancouver.
“(AU) would be in a position to take actions that could adversely
affect the ability of those companies to compete for grain on the
Prairies, either by limiting access to the most important grain
handling market in Canada, namely Vancouver, or eliminating revenue
streams flowing from grain handling at Vancouver,” the bureau said.
Murdoch MacKay, AU’s managing director of terminal services, said the
order won’t disrupt the company’s normal business operations at the
port.
“I don’t foresee any problems,” he said. “We’ll do what has to be done
and we’ll make the required arrangements.”
He added it’s in AU’s financial interest to provide competitive grain
handling services to firms without terminal facilities.
The company owns a lot of terminal capacity at Vancouver and it’s
doubtful whether it can generate enough grain from its own network of
prairie elevators to keep them busy, said MacKay.
Ouellet said it’s not uncommon to implement this kind of interim order
when it appears likely to take some time to come to a permanent
“structural” solution.
In a Dec. 19 affidavit filed on behalf of the competition bureau,
Ouellet outlined concerns about the impact of the merger at primary and
terminal elevators:
n* The likelihood of a substantial increase in the handling cost of
grain at primary elevators in local markets with high AU market share.
n* The prospect of substantial increases in farmers’ transportation
costs as a result of reduced hauling benefits to farmers.
n* The likelihood of a substantial decrease in prices offered for
non-Canadian Wheat Board grain in local markets.
n* A likely substantial increase in handling costs at the port of
Vancouver through a reduction in the diversion premiums.
MacKay said such concerns are unfounded and AU will provide competitive
commercial services to companies wanting to use its facilities.
AU owns half of the Cascadia terminal, 70 percent of Pacific Elevators
Ltd. and all of the UGG terminal.
The bureau wants the company to sell its interests in either Pacific or
UGG. AU has offered to sell part of Pacific.
Ouellet said there’s no way of knowing when the competition tribunal
will hear the case, but it will likely be a matter of several months.
