Major companies including Qantas, Primary Health Care and Petstock have completed multimillion dollar acquisitions of rival firms without notifying regulators, putting the interests of consumers at risk, the competition watchdog has revealed.
Subscribe now for unlimited access.
or signup to continue reading
Mounting its case for a major overhaul of the nation's mergers regime, the Australian Competition and Consumer Commission has warned that current rules are failing to protect consumers, farmers and small businesses from the detrimental effects of increasing concentration in key sectors including retail, manufacturing, professional services and health care.
In a submission to Treasury's competition review, the ACCC cited examples of potentially harmful acquisitions that were completed without informing the regulator.
These included Qantas's 2019 purchase of a 19.9 per cent stake in Alliance Airlines, Petstock's accumulation of a "large number" of pet stores over five years to 2022 and Primary Health Care's 2015 acquisition of Healthscope collection centres.
Following the regulator's intervention, Qantas dropped plans to wholly own Alliance, while both Petstock and Primary Health were forced to divest stores and collection centres.
ACCC head Gina Cass-Gottlieb said these and many similar episodes corroborated Competition Review Taskforce findings that only a fraction of mergers are ever reported to the regulator under the current voluntary notification regime.
The taskforce has found that between 1000 to 1500 mergers are undertaken each year, but only around 330 are reported to the regulator.
It also determined that about half of all mergers are undertaken by the largest 1 per cent of businesses.
Ms Cass-Gottlieb said analysis showed that the rate of acquisitions by large firms was also accelerating.
"We are not being told of many mergers taking place, including by Australia's biggest corporations," the ACCC boss said.
"This means we do not have the chance to consider how they may harm competition and consumers."
She said much of the increase in merger activity was occurring in sectors that directly impacted on consumers, including retail, manufacturing, professional services and health and social services.
"This is particularly concerning given an ongoing and significant increase in market concentration in Australia's economy over the last decade," Ms Cass-Gottlieb said.
"This rise in market concentration has brought with it a noticeable weakening of the intensity of competition across a number of sectors."
Assistant Competition Minister Andrew Leigh highlighted some of the consequences of weakened competition in a speech on Tuesday.
Dr Leigh said research undertaken for the competition taskforce that involved ANU economist Robert Breunig showed that passengers flying on a route served by just one airline paid double the price of travellers on routes served by three carriers.
The government has also asked the ACCC to investigate supermarket pricing over concerns that falling wholesale prices for meat, vegetable and fruit are not being passed on to shoppers.
Ms Cass-Gottlieb said that, "without effective merger control, we are all likely to face higher prices, lower quality, less innovation, less choice and lower productivity across the economy".
The ACCC recommends that it be made mandatory for businesses to notify of planned mergers above a specified threshold, and that regulator approval must be obtained before the transaction can be completed.
The regulator said the "vast majority" of notifiable mergers were not contentious and would be assessed "expeditiously" under a fast-track process.
The competition review commenced in August last year and is expected to take two years.
Adrian Rollins
Adrian Rollins is economics correspondent for the Canberra Times
Adrian Rollins is economics correspondent for the Canberra Times
