Competition watchdog wants tighter anti-competition rules

Article published 16 February 2024

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ACCC fighting for better anti-competition rules

Currently, there are no hard-and-fast rules for notifying the ACCC about an acquisition or merger. It’s a voluntary process, and sometimes the ACCC gets the heads up far too late.

If the ACCC investigates and determines that a merger may breach competition laws, they must prove that to the Federal Court. There needs to be a lot of evidence, but it can prove a major stumbling block for a merger-to-be.

As these deals are often a lengthy, expensive process, it’s recommended that the parties involved take the route of seeking the ACCC’s approval before things get quite that far.

Of course, not everyone does that. It’s not an ideal regulatory framework, that’s for sure.

Petspiration put the ‘pet’ in anti-competition

Recently, it came to light that a large retailer that sells pet supplies had bought up several smaller chains and independent stores over several years, accumulating a large share of this lucrative market.

Petspiration Group operates under a range of names, including PETstock, Pet City and My Pet Warehouse. They own 63 vet hospitals across Australia, 276 retail stores, and have a booming online business as well as their own store brand range.

It’s estimated that Australians own nearly 30 million pets, and that we spend around $33 billion annually on our companions. It’s big business.

The ACCC was never notified that Petspiration had acquired any of these other brands, accumulating a large share of the market. In fact, these events only came to their attention when Woolworths Group attempted to acquire a 55% stake in the business, a deal worth something in the ballpark of $586 million.

In short, the ACCC was not impressed to discover that so many brands had already been acquired by one retailer.

In response to the ACCC’s concerns, Petspiration Group has sold a portion of its assets, including 41 of its retail stores and two of its online brands. After public consultation, the ACCC allowed the deal with Woolworths Group to go ahead.

However, this situation has drawn attention to the limit of the ACCC’s powers in its role as the competition watchdog.

ACCC strike back

As stated earlier, there’s no law that requires companies to disclose planned mergers or acquisitions. If the ACCC gets wind of something, they can investigate and seek remediation through the courts – but it’s not impossible that they might miss something that has significant long-term consequences.

The ACCC wants this to change, making it mandatory to notify them of mergers over a certain threshold. It’s unlikely that the small fries will be impacted at all.

Another idea is for the burden of proof to be shifted to the merging parties. This means that companies would have to convince the ACCC that their deal won’t significantly limit competition.

The ACCC also wants to introduce a ‘precautionary principle’. This means that they may be able to block a business deal on the grounds that any damage has the potential to be irreversible.

For an example of why large market shares are an issue, you only have to look to Australia’s most famous duopoly in the supermarket sector, who are currently accused of underpaying suppliers and overcharging customers.

Without competition, retailers can essentially set their own prices. Once smaller businesses are run out or bought out, there’s not much that can be done.

Once the butcher is closed, you’re stuck with the supermarket.

So, better anti-competition rules can’t be a bad thing, right?

So, who’s disagreeing?

There are some who are saying this is a step too far and that there’s no issue here to be solved.

Well, that really depends on your perspective. Or more likely, whether you are someone who’s paying the price due to concentrated market power.

Even if it were the case that there is no problem, our anti-competition rules are designed to protect consumers and small business owners. It’s far easier to prevent a monopoly than to break one up, as anyone who’s ever played the game will already know.

Unsurprisingly, the Business Council of Australia isn’t keen on any major changes. We’re sure that the rat council would be against tougher extermination rules, too.

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