SummaryRheem Australia Pty Ltd proposed to acquire Edwards Hot Water Pty Ltd
Market definitionThe ACCC considered that the relevant market was a national market for the supply of water heaters. The market was considered to include instantaneous, gas, electric and solar water heaters.
The issue of whether solar water heaters form a separate market was considered in detail by the ACCC, particularly since Edwards and Rheem each hold a significant proportion of solar water heater sales in Australia.
From a demand perspective, the ACCC noted the very significant up-front price differential between solar and other types of water heater. The ACCC also noted planning and environmental regulations/policies that encourage use of solar heaters, particularly for new houses. The ACCC took into consideration likely future changes in planning and environmental regulations. The ACCC also took into consideration preferences some consumers have towards solar for environmental reasons.
The ACCC did not reach a conclusive view in relation to demand-side substitutability between solar and other types of water heaters.
From a supply-side perspective, the ACCC considered that at this stage there are no significant barriers to prevent other water heater manufacturers from increasing their output of solar water heaters. The ACCC took into consideration the ability of other water heater manufacturers to import solar water heater components, including solar collectors or solar absorber sheets.
The ACCC also noted that nearly all major manufacturers of water heaters in Australia are now offering solar water heater products.
For the purpose of competitive analysis, products are considered to be in the same market if there is either sufficient demand-side substitution or sufficient supply-side substitution between the products.
On this basis, the ACCC concluded that at this time the relevant market is for all water heaters, not just solar water heaters.
Competition analysisFollowing inquiries with market participants, the ACCC considered that other manufacturers of water heaters will be likely to place competitive pressure on Rheem in the future for all types of water heater.
The ACCC took into consideration Edwards' relatively low market share in the water heater market.
The ACCC also took into consideration issues relating to access to plumbing retailers/wholesalers and investigated the effects that Rheem's strong position in the solar segment might have on its competitors.