05 August 2023
Being a usual sunny Friday for bankers but perhaps a gloomy day for the leaders of the Big4 bank ANZ and another key player in the banking industry, Suncorp, as the Australian Competition and Consumer Commission (ACCC) announced that it denies authorisation for ANZ’s proposed take-over of Suncorp’s banking division. This news immediately shocked the economy given this could have been the biggest banking transaction in the last 15 years.
So who is ACCC and what role does it play in this deal?
Australian Competition and Consumer Commission (ACCC) is an independent federal government body created under the Federal’s Competition and Consumer Act 2010. This is the legislation that contains the Australian Consumer Law which consumers often hear of.
ACCC’s main duty is to administer and enforce the Competition and Consumer Act 2010. The Competition and Consumer Act 2010 covers the law of competition between businesses on the Australian market and the consumer law which protects consumers.
Why does ACCC have such a huge power to stop a billions-dollar deal?
Before we understand the ACCC’s power, it is best to firstly look at how the Australian competition law works.
In short, section 50 of the Competition and Consumer Act 2010 prohibits any acquisitions from happening if such acquisitions would result in “substantially lessening competition” in the market.
If this section is breached, the acquisition will be stopped and the offending parties could also have to pay extremely hefty fines, such as $50 million dollars if they are companies or $2.5 million for individuals.
The problem is: only the Court can decide whether section 50 has been breached, and the Court will only decide this question if there is a party making an application to it. In most of the cases, that party is the ACCC using its enforcing function of the Competition and Consumer Act 2010.
However, section 88 allows for this prohibition to be lifted if the ACCC authorises the acquisition.
To avoid the risk of being “sued” by the ACCC which comes with enormous legal costs and years of wasted time, the acquirer in an acquisition will apply to the ACCC for a grant of Section 88 “authorisation” before proceeding with the proposed acquisition. This authorisation acts as an up-front confirmation that the ACCC will not attempt to stop the acquisition later using the Section 50 prohibition.
So what happened in the ANZ x Suncorp’s proposed acquisition?
In applying for a Section 88 authorisation, ANZ, as the acquirer of Suncorp, needed to argue why the Section 50 prohibition is not applicable to this acquisition. To do this, ANZ tendered a 258-page report detailing its arguments to convince the ACCC that:
1. The acquisition would not likely result in “substantially lessening competition” in the banking and finance markets.
or
2. The acquisition would be beneficial to the public, and, that benefit would outweigh the potential detriment (if any).
However, the ACCC opined that the proposed acquisition would likely result in “substantially lessening competition” in the national home loans market, the Queensland small to medium enterprise banking market and the Queensland’s agribusiness banking market.
ANZ argued that the acquisition would benefit the public by being able to help ANZ cutting operational costs and allowing Suncorp Group to focus on its insurance business. These were accepted by the ACCC, however, it disagreed that those benefits would outweigh the potential detriment on the competitiveness of the home loan markets which directly affect millions of residents.
Now, ANZ has announced that it will appeal the ACCC’s denial so this story will not end here and the public would have to wait for a few more years up until the court process is over to know its final result.
Key takeaways
- ACCC is an independent government body that administer and enforce Competition Law and Consumer Law in Australia.
- Section 50 of Competition and Consumer Act 2010 prohibits acquisitions that would result in “substantially lessening competition” in the markets, unless the ACCC authorises the acquisition according to section 88.
- ANZ Bank applied to the ACCC for authorisation of ANZ’s acquisition of Suncorp. ACCC refused the application.
- The reasons being provided were that there would be a substantially lessening of competition in the banking and finance markets and the likely detriments seem to outweigh the potential public benefits.
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