The Australian Competition and Consumer Commission will not oppose the proposed merger of Grainco Australia Ltd and GrainCorp Ltd, ACCC Chairman, Professor Allan Fels, said today.
"This decision is based on the parties' submission that Grainco will not retain its interest in Australian Bulk Alliance".
ABA is a joint venture between Grainco and AusBulk Ltd which has interests in bulk grain storage and handling facilities, and an interest in the bulk export terminal at the Port of Melbourne.
"The ACCC considered whether the proposed acquisition would lead to a substantial lessening of competition in bulk grain storage and handling in eastern Australia and/or grain trading, in contravention of section 50 of the Trade Practices Act 1974. Section 50 prohibits mergers and acquisitions that will have the effect, or are likely to have the effect, of substantially lessening competition in a market.
"The ACCC did not believe that the proposed acquisition would substantially lessen competition in the relevant markets", Professor Fels said. GrainCorp is predominantly involved in the provision of bulk grain storage and handling services in NSW and Victoria, whereas Grainco's operations are predominantly in Queensland. Both have grain trading operations that operate more broadly.
The ACCC conducted extensive market inquiries regarding the proposal. The ACCC found that there is minimal overlap in the parties' storage and handling operations and that the parties' do not represent each other’s most likely competitor in the provision of these facilities, including grain export terminals. To the extent that there has been increased competition in the provision of such facilities, that competition has been largely driven by other market participants such as AWB Ltd and ABA.
With regard to trading, the ACCC found that, post-merger, a number of traders would remain in the market such that the merging of the parties' trading operations was not likely to lead to a substantial lessening of competition.
The ACCC thoroughly investigated whether or not the merged entity could use information gained as a consequence of its operation of storage and handling facilities to advantage its own trading operations and/or disadvantage rivals in trading. As separate entities, both parties are currently vertically integrated in storage and handling, and trading.
This information gained relates primarily to the knowledge of stock levels in the storage and handling network, and the flow of grain into and out of the system.
Market inquiries found that, in most instances, there are likely to be strong constraints on the merged entity's ability to use any information possessed by it in relation to these matters in an anti-competitive manner, such that the information possessed by the merged entity is of limited commercial advantage.
The ACCC therefore concluded that the proposed merger would not lead to a substantial lessening of competition in either bulk grain storage and handling, or grain trading in Australia.