ACCC opposes proposed joint venture of PMP and McPherson's book printing businesses

The Australian Competition and Consumer Commission will oppose the proposed joint venture between Griffin Press, a wholly owned subsidiary of PMP Ltd, and McPherson's Printing Division, a division of McPherson's Ltd.

"After comprehensive investigation and conducting inquiries with industry participants, the ACCC has formed the view that the proposed joint venture is likely to substantially lessen competition for the supply of mono (black and white) offset book printing. The ACCC has particular concerns in relation to the trade (fiction and non-fiction or 'read-for-pleasure') segment of the market," Mr Samuel said.

"Griffin and McPherson's currently service the bulk of the domestic mono print requirements of Australia's medium and large trade publishers. They are the only two printers in the Australian market capable of competing across the full range of services required by publishers.

"Industry participants noted that Griffin and McPherson's currently compete vigorously to supply mono book printing services to publishers. A significant number of publishers expressed concerns about the impact of the proposed joint venture on the terms and conditions under which they would be able to source their printing requirements.

"While publishers print some books offshore (particularly colour books), and directly import others, market inquiries indicated that imports, both in terms of offshore printing and direct importation are unlikely to significantly constrain the joint venture. A substantial proportion of books printed in Australia have publishing requirements that are time sensitive and relying on imports for these titles would impose significant additional costs on publishers.

"The ACCC considers that entry or expansion into the market on the scale of Griffin or McPherson's is unlikely because of the size of the capital investment required relative to the size of the industry and because of existing excess capacity in the industry.

"The ACCC considers that the reduction in competitive tension in the market through the proposed joint venture will likely lead to higher book printing prices (or lower service conditions) for publishers, and, ultimately consumers.

"The ACCC took into consideration information provided by PMP, McPherson's and many other market participants, including customers and competitors," Mr Samuel said.

The ACCC will issue a Public Competition Assessment on its decision in due course.

Background

Section 50

Section 50 of the Trade Practices Act 1974 prohibits mergers and acquisitions that will have the effect, or are likely to have the effect, of substantially lessening competition in a market. Section 50(3) sets out a non-exclusive list of matters that must be taken into account in determining whether an acquisition is likely to substantially lessen competition.

The ACCC conducted an informal merger assessment process in relation to the proposed acquisition in accordance with its published guideline. The ACCC's Merger Review Process Guidelines is available on the ACCC website.

The joint venture parties

PMP Limited

PMP Limited is an ASX listed company which, according to its website, is Australasia's largest commercial printer. Its book printing is conducted through PMP's wholly-owned subsidiary, Griffin Press.

Griffin is based in Adelaide and operates an integrated book manufacturing facility which utilises web-fed and digital printing presses. Griffin produces only books and specialises in mono book printing. That is, soft and hardcover books printed in one colour with a full colour cover (and colour illustration section if required). These books are generally in the trade (or 'read for pleasure') category.

McPherson's Limited

McPherson's Limited (ML) is an ASX-listed company with the following business operations:

• McPherson's Consumer Products – which distributes household consumer products (such as kitchen utensils and glassware), and
• McPherson's Printing Division (MPL) – which focuses mainly on book production.

MPL is based in Melbourne and operates two manufacturing plants, one in Mulgrave and one in Maryborough, Victoria. Across these plants, MPL operates a range of cold-set and heat-assisted web presses, sheet-fed and digital presses.

MPL produces both mono and colour books, including trade, educational and professional reference books in a variety of formats. MPL also prints loose leaf publications, directories, puzzle and activity publications and race books.

The transaction

On 7 May 2007, PMP and ML announced to the ASX that they had executed contracts to merge MPL with PMP's book printing subsidiary, Griffin Press.

Under the agreement, a new entity was to be formed to operate the combined book printing business which would be 50 per cent owned by each of ML and PMP. The joint venture company was expected to have combined revenues of approximately $115 million and equal Board representation from ML and PMP. Griffin Press and MPL were to continue to trade under their respective brands following the joint venture.