On 7 September 2005 the ACCC decided to oppose the proposed acquisition of FCL Interstate Transport Services Pty Ltd by Patrick Corporation Ltd.
Patrick is a publicly listed transport logistics company with a range of interests, including a 50 per cent shareholding in Pacific National, Australia's largest rail operator.
FCL is a large freight forwarding company. Its principal business is freight forwarding, with an emphasis on rail freight forwarding. FCL focuses on interstate freight and is particularly strong in east-west freight. The vast majority of FCL freight travels by rail, with the remainder going by road or sea. The main goods it transports are whitegoods, building materials, fertiliser, general manufacturing output, food and beverages.
As part of its investigation, the ACCC completed market inquiries with a large number of competitors, customers, suppliers, industry associations and government agencies. Market enquiries revealed significant competition issues in relation to the proposed acquisition.
In coming to its decision, the ACCC formed a view on the following specific issues:
that there will be a substantial lessening of competition in the market for the provision of Australia-wide rail freight forwarding services through foreclosure of the merged entity's freight forwarding rivals. The ACCC considers it likely that the proposed acquisition will increase Pacific National's ability and incentive to raise prices or otherwise discriminate against independent freight forwarders. In this regard, the ACCC considers that this is likely to occur primarily through the exercise of operational discretion in relation to train slot allocation practices and service pricing
that there will be a substantial lessening of competition through the raising of entry barriers in the market for east–west rail line-haul of non-bulk freight. The proposed acquisition will make it significantly more difficult for rival rail line-haul operators to enter this market in direct competition with Pacific National
that there will be a substantial lessening of competition through a reduction of competition between Patrick and Toll Holdings Ltd. The ACCC considers it likely that the proposed acquisition will significantly diminish the incentives for Patrick and Toll to aggressively compete post-acquisition.
Taking all of the above factors into account, the ACCC decided that the proposed acquisition of FCL by Patrick would be likely to result in a substantial lessening of competition, in contravention of s. 50 of the Trade Practices Act 1974. Section 50 prohibits mergers and acquisitions that will have the effect, or are likely to have the effect, of substantially lessening competition in a market. It should be noted that the ACCC is also aware of current market developments with the Toll Holdings takeover bid for Patrick.
A statement of reasons for the decision will be published on the ACCC website shortly.
