Veda Advantage Limited - proposed acquisition of Australian Business Research Pty Ltd, National Tenancy Database Pty Ltd

Acquirer(s)

  • Veda Advantage Limited

Target(s)

  • National Tenancy Database Pty Ltd<br/> Australian Business Research Pty Ltd

Summary

Veda Advantage Ltd (Veda) proposes to acquire Australian Business Research Pty Ltd (ABR) and National Tenancy Database Pty Ltd (NTD) from Collection House Ltd (the proposed acquisition).

Veda is currently the dominant provider of consumer credit reporting services. It is also a major supplier of third party information brokerage services and "low-end" commercial credit reporting services. Veda does not presently supply "high-end" commercial credit reporting services.

Low-end commercial credit reports are automated credit reports generated predominantly from publicly available information, and may assess the likelihood of the occurrence of adverse events, or which provide payment analysis, basic scoring and other behavioural data. In contrast, high-end commercial credit reports are investigative reports that assess financial data, and may include the results of interviews with credit applicants and trade references.

ABR is a major supplier of third party information brokerage services, automated, low-end commercial credit reporting services and investigative, high-end commercial credit reporting services. ABR does not supply consumer credit reporting services.

NTD maintains Australia's largest tenancy information database for customers seeking to assess prospective residential and commercial tenants.

Market definition

For the purpose of conducting its competition analysis, the ACCC defined two markets as being relevant to the proposed acquisition:
- the national market for the supply of third party information brokerage services; and
- the national market for the supply of automated, "low-end" commercial credit reporting services.

Competition concerns were considered unlikely to be raised in respect of tenancy information services as Veda does not supply these services, and inquiries did not indicate a substantial level of demand-side complementarity between these and other services provided by the merger parties.

Competition analysis

On 22 August, the ACCC formed the view that the proposed acquisition was unlikely to result in a substantial lessening of competition in the relevant markets and decided to not intervene.

The ACCC considered that competition concerns were unlikely to be raised in the national market for the supply of third party information brokerage services as:
- there would remain a significant number of alternative providers to which customers could turn, including Espreon and Citec Confirm;
- barriers to entry appeared to be relatively low; and
- competition concerns were not raised in respect of the acquisition of reports and information from upstream information providers.

Although the proposed acquisition would reduce the number providers from 3 to 2, the ACCC considered that the proposed acquisition was unlikely to substantially lessen competition in the national market for the supply of automated, low-end commercial credit reporting services. Factors informing this view include:
- inquiries did not indicate that the merger parties have been particularly close competitors to one another. This reflected the substantially different customer segments predominantly supplied by the merger parties. Specifically, the merger parties were typically recognised by customers for different services; Veda for its consumer credit reporting and ABR for its investigative, high-end commercial credit reporting;
- inquiries indicated that Dun & Bradstreet (D&B) would remain an effective alternative to which customers could turn;
- vertical integration concerns were unlikely to arise; and
- the proposed acquisition was unlikely to significantly increase the likelihood of co-ordinated conduct as:
- inquiries did not suggest that ABR had been an industry "maverick" that was constraining potential co-ordinated conduct;
- significant market share asymmetry would remain between Veda and D&B for low-end commercial credit reporting, and other markets in which both D&B and Veda were present, thereby reducing the incentive for co-ordinated conduct;
- network effects arising from the need to develop comprehensive commercial credit databases of both public and privately held credit information were likely to reduce the incentive for co-ordinated conduct; and
- continued expansion by D&B into consumer credit reporting would also likely reduce the incentive of the merger parties to tacitly collude.

The ACCC also examined whether the proposed acquisition would give the merged firm increased ability and incentive to bundle, tie or otherwise link supply of its high-end commercial credit reporting services to its consumer credit reporting services for which it is a dominant supplier, so as to foreclose competition for high-end commercial credit reporting services.

The ACCC's inquiries did not suggest that such "portfolio effects" concerns were likely to be raised. Factors informing the ACCC's view in this regard, included:
- there was unlikely to be sufficient commonality between customers of consumer credit reports and high-level commercial credit reports; and
- customers are likely to prefer non-price features, such as accuracy and quality of the analysis, over price in respect of high-end commercial credit reports. Consequently, it was considered that customers would be less likely to accept the merged firm's bundle of products to the exclusion of rivals' high-level commercial reports on the basis of potential bundling or tying by the merged firm.

The ACCC considered whether the proposed acquisition was likely to remove a significant degree of potential competition between ABR and Veda for the supply of investigative, high-end commercial credit reporting services.

On balance, the information before the ACCC did not indicate that Veda was likely to have entered high-end commercial reporting absent the proposed acquisition, nor that Veda would have been likely to have provided a significant degree of competition, in the foreseeable future. This conclusion reflected the different nature of operations between automated and investigative commercial credit reporting and the considerable barriers to entry for the supply of the latter, such as the likely time and cost involved in establishing sufficient credibility amongst customers.

In addition, the ACCC considered that the proposed acquisition was unlikely to remove a significant degree of potential competition in respect of consumer credit reporting. This conclusion was based on the ACCC's view that barriers to entry for this market are likely to be substantial, evidenced by the experience of recent entrants to this market.

Accordingly, the ACCC formed the view that the proposed acquisition was unlikely to result in a substantial lessening of competition.

Timeline

DateEvent
02/07/2007ACCC commenced review under the Merger Review Process Guidelines.
06/07/2007ACCC requested further information from Veda. ACCC timeline suspended.
16/07/2007ACCC received further information from Veda. ACCC timeline recommenced.
18/07/2007Closing date for submissions from interested parties.
19/07/2007ACCC requested further information from Veda. ACCC timeline suspended.
26/07/2007ACCC received further information from Veda. ACCC timeline recommenced.
22/08/2007ACCC announced it would not oppose the proposed acquisition.