The Australian Competition and Consumer Commission has advised ABB Grain Ltd that it will not oppose its acquisition of AusBulk Ltd and AusBulk's holding company United Grower Holdings Ltd subject to the parties providing acceptable court-enforceable undertakings which provide for fair and reasonable access to port storage and handling services for grains export post merger, ACCC Chairman, Mr Graeme Samuel, said today.
The ACCC carefully considered the competitive impact of the proposed acquisition in the relevant grains, storage and handling and malt markets and conducted extensive market inquiries during its investigation into the merger. It consulted with a number of South Australian growers, their representative bodies and other industry bodies, as well as competing grains traders and maltsters.
"The ACCC noted concerns about the current legislative restriction on barley exports which impedes competition in barley trading in South Australia and the fact that AusBulk controls AusMalt, one of Australia's main producers of malt.
"Other concerns identified included the high level of concentration in the various markets and the nature and extent of vertical integration that the merged entity would enjoy throughout the barley supply chain.
"Although the merged entity would virtually become the only domestic acquirer of malt barley in South Australia the ACCC considers it is unlikely that the merger would result in a substantial lessening of competition in relation to domestic malt barley acquisition and sales given the amount of malt barley that is exported, the limited demand in SA for malt barley for domestic consumption and the limited nature of competition which presently exists for the acquisition of malt barley in SA".
The ACCC also noted that there is already scope for domestic trading in feed barley and other grains both in SA and interstate, there are alternative purchasers of malt barley interstate and that some protection is offered to South Australian growers post merger given their ability to sell barley into the export pool where export parity pricing would apply.
Mr Samuel advised that ultimately the ACCC was concerned about the vertical integration of South Australia's main storage and handling provider, AusBulk, with ABB given ABB Grain Export Ltd's legislative monopoly over the bulk export marketing of barley from South Australia.
"In particular, the ACCC was concerned that the merged entity would use its market power in storage and handling at South Australian port terminals to deny access to, or discriminate against, competing traders and grain exporters", he said. "Competing grains traders are heavily reliant on AusBulk's storage and handling facilities at the ports, and this will also be the case should barley exports be deregulated.
"Any endeavours to deny or frustrate access could subject competitors to additional costs and delays and would deter new entrants from entering existing or future export markets sourced out of South Australia. The undertakings the parties have offered to provide are aimed at ensuring competitive access by all parties to the merged entity’s bulk storage and handling assets and services at ports in South Australia, in the foreseeable future.
"Following the offer of court-enforceable undertakings by the parties, the ACCC is satisfied that its concerns regarding access to the South Australian grain export facilities will be addressed. Therefore, providing the parties supply a suitable undertaking, the ACCC will not intervene".