When three become two: Market concentration is a key factor

13 September 2012

The Australian Competition and Consumer Commission today made it clear that mergers and acquisitions in concentrated markets will be subject to close scrutiny.

"When a merger reduces the number of key players in a market from three to two - the parties should expect that the ACCC would take a long hard look at the merger," ACCC Chairman Rod Sims said today at the Australia Israel Chamber of Commerce WA.

"With only two principal players remaining in a market, each will learn to anticipate the actions and reactions of the other and consumers will have limited choices left. In these circumstances, the ability of the two remaining firms to raise prices or reduce quality for consumers generally increases."

Business leaders were also provided with a comprehensive overview of the ACCC's approach to assessing mergers and acquisitions including the steps the ACCC is taking to streamline the merger review process.

Separately, Mr Sims also spoke about the ACCC priorities in competition matters.

"At any one time the ACCC has between 40 and 50 cases in the Federal Court. Currently, around one quarter relate to competition issues."

"We currently have 35 separate investigations into misuse of market power, cartels, or cases involving lessening of competition," Mr Sims said.

On the Australian Consumer Law, Mr Sims said the ACCC has welcomed the new laws with enthusiasm and are using them to protect consumers.

"The ACCC are particularly pleased at the penalties we have achieved as these not only show consumers that their rights are being protected, but they also have a clear, profound and lasting impact on corporate behaviour."

"We now have achieved almost $18 million in pecuniary penalties, and six cases in which penalties of more than $1 million have been ordered by the Court–a higher benchmark than we have seen before for maximum penalties available," Mr Sims said.

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Release number: 
NR 196/12
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