ACCC not to oppose BHP Billton's proposed acquisition of Rio Tinto

1 October 2008

The Australian Competition and Consumer Commission has concluded that the proposed acquisition of Rio Tinto Ltd and Rio Tinto plc by BHP Billiton Ltd is unlikely to substantially lessen competition under section 50 of the Trade Practices Act 1974.

"This conclusion was reached after conducting a comprehensive review of the proposed acquisition, including extensive market inquiries with a range of interested parties and careful consideration of the internal documents of the merger parties," ACCC Chairman, Mr Graeme Samuel, said.

"The merged firm would be a significant global supplier of a range of commodities, including iron ore, coal, bauxite, alumina, copper and uranium. In particular, the proposed acquisition would combine two of the three major global suppliers of iron ore," Mr Samuel said. "While significant concerns were raised by interested parties in Australia and overseas, the ACCC found that the proposed acquisition would not be likely to substantially lessen competition in any relevant market."

The ACCC issued its preliminary views in a Statement of Issues published on 22 August 2008 identifying the supply of iron ore lump and iron ore fines as a potential competition concern.

"The proposed acquisition would combine two of the three major global seaborne suppliers of iron ore lump and iron ore fines. While barriers to market entry are high, involving significant sunk costs, market inquiries indicated there has recently been significant new entry and expansion in response to high demand for iron ore," Mr Samuel said. "This increase in supply, which has included new large scale Australian operations with associated infrastructure, has frequently been supported by commitments or investments by steel makers.

"The ACCC considered whether the availability of alternative suppliers and the ability of steel makers to facilitate capacity expansions would be likely to undermine any incentive the merged firm may have to seek to influence the global supply and demand balance of iron ore in the future.

"The ACCC's inquiries indicated that the merged firm would be unlikely to limit its supply of iron ore given the uncertainty it would face in relation to the profitability of this strategy and the risk that limiting supply would encourage expansions by existing and new suppliers as well sponsorship of alternative suppliers by steel makers.

"In relation to the supply of iron ore in Australia, market inquiries indicated that steel makers in Australia are unlikely to face higher iron ore lump and iron ore fines prices, based on a move from export parity pricing to import parity pricing. The ACCC found that alternative suppliers are likely to be available to Australian steel makers, including alternative suppliers with established rail and port infrastructure in Australia."

In addition, further market inquiries confirmed that the proposed acquisition is unlikely to substantially lessen competition in the remaining relevant markets.

The basis upon which the ACCC has reached its decision will be outlined in a Public Competition Assessment, which will be available shortly on the ACCC's website, www.accc.gov.au/publiccompetitionassessments.

Related register records

Release number: 
NR 279/08
Media enquiries: 
Mr Graeme Samuel - 0408 335 555
Ms Lin Enright - 0414 613 520