ACCC won't oppose Freight Australia takeover

The competition watchdog says it won't oppose Pacific National's $285 million acquisition of Victorian rail operator Freight Australia.

The Australian Competition and Consumer Commission says it has accepted court-enforceable undertakings by Pacific National to hand over control of some of its rail tracks.

Pacific National - the rail company jointly owned by Toll Holdings Ltd and stevedore Patrick Corp Ltd - reached agreement to buy Freight Australia from RailAmerica Inc in March.

Freight Australia principally hauls grain in Victoria and provides rail track infrastructure services.

"The ACCC was concerned that the acquisition would cement Pacific National's large market share in rail freight between the eastern states and Perth," Mr Samuel said in a statement.

"In particular, the ACCC was concerned that the acquisition may make it more difficult for potential entrants to find rail terminal space in Melbourne."

That problem was addressed by an undertaking by Pacific National to hand over control of some of Freight Australia's rail tracks in the event of the acquisition.

Control of the tracks, between Melbourne's Somerton rail terminal and mainline interstate track, will be handed to the federal government-owned Australian Railtrack Corporation Ltd.

"The ACCC was also concerned that the current main competitor to Pacific National for freight between Melbourne and Perth, Specialised Container Transport (SCT) is presently reliant on Freight Australia to provide the locomotives and crew," Mr Samuel said.

"In response to the concern regarding SCT, the ACCC took into consideration evidence from Pacific National that it had very recently agreed with SCT to a longer contract on the existing terms.

"Also it would make changes that would lessen the effect of the acquisition on SCT."

Mr Samuel said Pacific National made several offers of undertakings to the ACCC before the commission finally accepted one.

He also noted that many market participants had raised concerns about the level of competition in parts of the rail industry, but he said the ACCC's was only able to consider the effects of competition arising from the Freight Australia acquisition.

"While these issues are important in the context of a competitive industry, the ACCC must limit its assessment of the acquisition to the requirements of section 50 (of the Trade Practices Act)," Mr Samuel said.

"A number of longer term policy issues, including access to infrastructure, need to be resolved."

He said particular concerns about access to Victorian rail infrastructure will need to be addressed by the relevant state governments "who are the ultimate owners of much of the infrastructure".

One market participant who was vocal in his opposition of the Freight Australia acquisition was trucking magnate Lindsay Fox, who had said there should not be a total monopoly on the rail system in Australia.

Shares in Toll Holdings last traded at $10.85, while shares in Patrick Corp were at $5.39.

AAP