The Australian Competition and Consumer Commission was advised this morning that IPMG had abandoned plans to pursue its merger with PMP Limited.
"This withdrawal was made despite the fact that no final decision had been made by the ACCC", ACCC Chairman, Professor Allan Fels, said today. "The company had been advised that the ACCC had continuing concerns with the proposal but further discussion was planned, including next week in Melbourne.
"The original proposal by PMP and IPMG to merge their printing, publishing and distribution businesses was brought to the ACCC in February this year. It opposed the merger in May as it would lead to a substantial lessening of competition.
"A new proposal by IPMG was made public in September. This included the divestiture of PMP's heat-set printing operations in Clayton, Victoria. ACCC analysis indicated that the proposed divestiture was unlikely, as a stand-alone facility, to sufficiently constrain the merged entity.
"Post-merger and post-divestiture the merged entity would have a market share in excess of 70 per cent in a market where there are significant barriers to entry and expansion, and very limited opportunity to import. Timeliness is a major consideration for publishers of many magazines and particularly catalogues, so imports are not viable for a large part of the market.
"The ACCC undertook extensive market inquiries in regard to both proposals and concluded that the relevant market was heat-set web printing. Heat-set web printing is required to print large volume, high quality colour magazines, newspaper inserts and catalogues. It is of a specialist nature. The ACCC's inquiries indicated that, while there has been new entry, this has been at the fringes of the market. That investment would not represent a significant competitive constraint upon the proposed merged entity.
"The market inquiries elicited a high level of concern from a wide range of users of printing services and competitors.
"Customers such as publishers and retailers cannot efficiently run heat-set printing operations to meet their own requirements. The high fixed cost nature of printing and the subsequent need for throughput means in-house operations are likely to be uneconomic, even in the face of a price rise or fall in service and quality. For publishers requiring high volume, high print quality publications, there would be essentially no alternative than to deal with the proposed merged entity.
"There is currently strong competition between two relatively evenly matched players, PMP and IPMG. The proposed merger would end these competitive forces".
The ACCC rejects the claim by IPMG advisor Mr Roger Featherston of Mallesons Stephen Jaques that the ACCC took a snapshot view of competition. The numerous submissions from Mr Featherston were tested with customers and other industry participants and analysed within the framework laid out in the Trade Practices Act and the Merger Guidelines. This includes a careful assessment of the dynamic characteristics of the market and of the time frames likely for a competitive response to the merged entity. The ACCC had concerns that new entry has remained small scale and that future opportunities for customers to provide their own printing were remote.
"This proposed merger was discussed with numerous business customers, many of whom were concerned the proposed merger would increase prices", Professor Fels said.