Commission sees opportunity to boost competition Questions "cosy...

• Commission sees opportunity to boost competition
• Questions "cosy duopoly" of Aurizon, Pacific National
• Decision expected by Dec. 15

(Adds commission comments)

MELBOURNE, Oct 6 (Reuters) - Australia's competition watchdog raised concerns about bids from the nation's two biggest coal haulers for Glencore Plc's coal rail business and said it would decide by December whether to allow them to go ahead.

Glencore has attracted several bids for its GRail business, the third-largest coal haulage business in Australia, which could fetch as much as A$1.5 billion ($1.1 billion), including from top coal hauler Aurizon Holdings (AZJ), its arch rival Pacific National and U.S. company Genesee & Wyoming Inc .

The Australian Competition and Consumer Commission said the sale of GRail was a rare opportunity to boost competition in the rail business in the Hunter Valley, Australia's top coal-exporting region.

"The Hunter Valley coal haulage market appears to have high barriers to entry, so we would expect the addition of a third competitor to have a significant effect upon the market," commission Chairman Rod Sims said in a statement.

The commission said market participants had raised concern that if Aurizon or Pacific National, which is the biggest coal hauler in the Hunter Valley, were to take over GRail, it would lessen competition in the region.

"Market participants consider that competition in the market would be enhanced if a third competitor entered the market by acquiring GRail," the commission said in its statement of issues.

It is seeking comments on how aggressively Pacific National and Aurizon compete on price and performance, how often miners have switched providers, and what effect Aurizon's entry into the Hunter Valley had on Pacific National's approach to the market.

"Some market participants have described the level of competition between Aurizon and PN as a ‘cosy duopoly’ or similar," the commission said.

"On the other hand, feedback from some other participants suggests that they are motivated to compete vigorously," it said.

The commission said the major miners in the Hunter Valley are big and sophisticated enough to drive a hard bargain with the rail providers and have the resources to back new haulage providers if necessary.

"This means they are well-placed to exercise any countervailing power that they might have in commercial negotiations with coal haulers," it said. ($1 = 1.3141 Australian dollars)