ACCC grants informal clearance of Pact Group's proposed acquisition of Brickwood

The Australian Competition and Consumer Commission will not intervene in the proposed acquisition of Brickwood Holdings by the Pact Group, ACCC Chairman,
Mr Graeme Samuel, said today.

The ACCC opposed the same proposed acquisition in October 2007. On 6 February 2008, the Pact Group announced that it had entered into a new agreement to acquire Brickwood and sought a second informal merger clearance review, citing new information relating to entry and potential expansion into the market for the supply of Polyethylene Terephthalate (PET) bottles. The ACCC subsequently conducted another extensive assessment of all relevant markets.

The Pact Group, Visy and Brickwood are suppliers of PET bottles in Australia. The largest PET bottle customers in Australia are large beverage suppliers and these customers are predominantly supplied by Visy and Brickwood. In its assessment, the ACCC had regard to the commercial and family relationships between Pact Group and Visy, and their impact on the effectiveness of competition between Visy and Pact Group in the supply of PET bottles post acquisition.

Some market participants expressed concerns in relation to PET and the removal of Brickwood as the principal competitive constraint on the merged entity. Concerns by some participants were also expressed in relation to high density polyethylene (HDPE) bottles.

However, the evidence obtained from the ACCC's investigation, which included the examination of internal company documents and other information obtained from a range of market participants, led the ACCC to form the view that alternative sources of supply, including sponsored entry or expansion of existing suppliers, and self-manufacture by customers, are likely to prevent Pact and Visy substantially raising prices in future contract negotiations.

"The ACCC considers that the proposed acquisition will result in the removal of a very significant competitor in Brickwood, particularly in the market for the manufacture and supply of PET bottles," Mr Samuel said. "There is likely to be a lessening of competition, but, in light of the constraints we identified, the evidence does not indicate that lessening will be substantial, which is the threshold for a contravention of section 50 of the Trade Practices Act."

A Public Competition Assessment will be available on the ACCC's website in due course.