The Essential Services Commission has reviewed whether the Port of Melbourne has power in relation to the process of setting and reviewing its land rents between 1 November 2016 and 31 October 2019.
The inquiry considered whether the Port of Melbourne has:
- power in relation to the process for setting and reviewing land rents
- exercised power in a way that causes material detriment to Victorian consumers (a misuse of market power).
As part of the inquiry, we examined the:
- process used to set and review land rents
- Port of Melbourne’s compliance with this process
- extent to which the land rents paid are ultimately passed through to Victorian consumers.
The commission handed its final report to the Assistant Treasurer in August and released a public report on 14 October 2020. Consultation on this review has closed.
The commission's key findings are:
- The Port of Melbourne has power in setting and reviewing rents. While its power is not unconstrained, reflecting a mix of market characteristics and legislative and contractual arrangements, we consider the Port of Melbourne retains a significant degree of control in relation to setting and reviewing rents.
- The requirement in the Port Concession Deed for rents to reflect a ‘reasonable market rent’ are not sufficient to constrain the Port of Melbourne from charging rents above an efficient level and its approach has contributed to significant rental inflation.
- The Port of Melbourne’s exercise of its power has caused material detriment. Tenants are incurring inefficient rental costs and higher transaction costs, evidenced by examples of deferred investment, and uncertainty impacting tenants ability to lock in new customer contracts. These impacts have flowed through to consumers.
- Remedial action is required to mitigate the Port of Melbourne’s ability to exercise its power and impacts. This includes an enhanced, independently oversighted negotiate-mediate-arbitrate framework.
How we engaged
The commission consulted on its scope and process paper and interim report. It also held an online public forum on 31 March 2020. Views expressed in submissions and the public forum were considered in developing the final report.
Port of Melbourne market rent inquiry 2020 forum
The Essential Services Commission is an independent regulator that promotes the long term interests of Victorian consumers with respect to the price, quality and reliability of essential services. We regulate Victoria’s energy, water and transport sectors, and administer the local government Fair Go Rates system.