The Australian Competition and Consumer Commission has issued a Statement of Issues on the possible acquisition of the Superannuation Administration Corporation (trading as Pillar) by Link Administration Holdings Limited (ASX:LNK) (Link). Pillar is being privatised by the NSW Government.
“The ACCC is concerned that the possible acquisition is likely to substantially lessen competition in the supply of superannuation administration services by entrenching Link’s dominant position, resulting in lower service levels or higher prices, which will ultimately be passed on to fund members,” ACCC Chairman Rod Sims said.
Link and Pillar both supply administration services to superannuation funds in Australia. They are the only two providers that currently service larger funds.
“The ACCC is concerned that the possible acquisition will remove the only alternative superannuation administration services provider with the demonstrated capacity to supply administration services to larger funds in competition with Link. Consequently, there would be one dominant administration provider facing limited competitive constraint in the outsourced market,” Mr Sims said.
“It would also remove the potential for an alternative owner to further invest in Pillar’s offering and make it an even stronger competitor to Link in the future.”
The ACCC is seeking to better understand the barriers to entry or expansion and the likelihood of new entry or expansion in the sector. Other issues include the extent to which insourcing superannuation administration services is a credible constraint on Link and the likelihood of self-administered funds providing administration services to other funds.
“The ACCC’s preliminary view is that a fund that currently outsources superannuation administration services is unlikely to switch to insourcing as a way of bypassing Link; it would be too costly and difficult,” Mr Sims said.
“The ACCC also considers that funds are unlikely to provide superannuation administration services to each other in a way that competitively constrains Link. It is beyond the remit of most funds to sell administration services, and, furthermore, many funds are likely to be reluctant to purchase administration services from their competitors.”
The Statement of Issues seeks further information on the competition issues which have arisen from the ACCC’s market inquiries to date. The ACCC invites further submissions from interested parties by 28 October 2016. The ACCC’s expected final decision date is 15 December 2016.
The Statement of Issues is available on the public register: Link Administration Holdings Limited - possible acquisition of Superannuation Corporation Administration (trading as Pillar)
The NSW Government has announced that it intends to privatise Pillar, and has commenced a competitive sale process. Link is one party who has expressed an interest in acquiring Pillar.
Link is the largest provider of services in Australia's fund administration industry, providing services to over 10 million superannuation member accounts through its businesses Link Super and Australian Administration Services. Link has its own proprietary IT platform (the aaspire platform), which it uses for the provision of administration services for most of its clients.
Pillar is a NSW state-owned corporation that provides administration services mainly to Government superannuation funds, pension funds, and defined benefit schemes.
Pillar administers more than 1.1 million superannuation member accounts, with assets totalling more than $100 billion. Pillar does not have its own proprietary IT administration platform and uses a number of IT platforms licensed from third parties.
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