ACCC to oppose proposed acquisition of Carter Holt Harvey's assets by Sumitomo
The Australian Competition and Consumer Commission will oppose the proposed acquisition of certain assets of Carter Holt Harvey Limited's Woodproducts Australia business by Sumitomo Forestry Company Limited, ACCC Chairman, Mr Graeme Samuel, said today.
After an initial investigation, the ACCC published a Statement of Issues on 16 January 2008 which identified a number of preliminary concerns in relation to the proposed acquisition.
In particular, concerns were raised as to the potential market power of the merged entity in the domestic supply of raw medium density fibreboard (MDF) and additionally the ability of the merged entity to utilise this power to foreclose downstream competition in the supply of value-added MDF products.
"After conducting extensive inquiries, the ACCC concluded that the proposed acquisition would, or would be likely to substantially lessen competition in the manufacturing and supply of raw MDF," Mr Samuel said.
"The merged entity would have a very strong position with respect to the manufacturing and supply of raw MDF in Australia in circumstances where barriers to entry are substantial.
"While the remaining alternative supplier would be likely to impose some competitive constraint on the merged entity, this constraint is likely to be weakened by its incentives with respect to supplying its own distribution channel in Australia.
In addition, the ACCC considered that current and potential raw MDF imports of comparable quality are unlikely to constrain the merged entity from implementing an increase in the price of raw MDF in Australia," Mr Samuel said.
Flowing from these conclusions, the ACCC considered that the merged entity would be likely to have the ability and incentive to foreclose downstream competition with respect to value-added MDF products.
A Public Competition Assessment with more detailed reasons for this decision will be available on the ACCC's website, under the Mergers public register in due course.
