Company or individual details
- AP Eagers Limited009 680 013
- PPT Investments Pty Ltd80 000 868 860
- PPT Holdings No 1 Pty Limited13 078 207 333
- PPT Holdings No 2 Pty Ltd13 078 207 397
- PPT Holdings No 3 Pty Ltd30 078 207 468
On 25 July 2019, the ACCC announced it had accepted an undertaking (the Undertaking) from AP Eagers pursuant to s 87B of the Competition and Consumer Act 2010 (Cth) in connection with AP Eagers proposal to acquire all of the ordinary shares in Automotive Holdings Group Limited (AHG) that it does not already own (the Proposed Acquisition). The Proposed Acquisition was granted authorisation by the ACCC subject to a condition that AP Eagers divest its new car retailing business in the Newcastle / Hunter Valley region to an ACCC approved purchaser.
The ACCC considered that in the absence of the Undertaking, the Proposed Acquisition would raise significant competition concerns in new car retailing in the Newcastle / Hunter Valley region.
The ACCC was concerned that:
- The Proposed Acquisition would remove AP Eagers’ closest and largest competitor and create an enlarged dealership group in the Newcastle / Hunter Valley region which would be considerably larger than the next largest competitor in that region. In metropolitan Newcastle alone, considering only the top ten selling car brands, a combined AP Eagers and AHG dealership group would operate 17 out of 22 (or 77 per cent) of new car dealerships. In the broader Newcastle / Hunter Valley region, it would operate 46 per cent of new car dealerships.
- The combined dealership group would have the ability and incentive to increase prices or reduce discounting for new cars in the Newcastle / Hunter Valley region.
- While there would be potential constraints, none of these is sufficient to remove the combined group’s ability or incentive to increase prices, in particular:
- Competition between dealerships within the combined dealership group would not be sufficient to prevent a price rise.
- In relation to new car manufacturers’ ability to constrain the actions of dealerships, manufacturers’ focus is primarily on sales volumes and manufacturers have limited visibility over final prices negotiated by dealerships for their new cars. Therefore, manufacturers would be unlikely to constrain a price rise, provided overall sales volumes did not fall substantially.
- Limited price transparency means that consumers have limited ability to detect and respond to a regional price rise (especially where this is a decrease in discounting) and therefore are less likely to explore purchases outside the Newcastle / Hunter Valley region.
The objective of the Undertaking is to address the ACCC’s competition concerns, which it otherwise considers would be likely to arise as a consequence of the Proposed Acquisition.
The Undertaking aims to achieve this objective by placing obligations on AP Eagers to:
- ensure that the Divestiture Business is sold to an ACCC Approved Purchaser;
- create or strengthen a viable, effective, stand-alone, independent and long term competitor for the supply of new cars in the Newcastle / Hunter Valley region;
- ensure the purchaser of the Divestiture Business has all the necessary associated assets and rights to compete effectively with AP Eagers in the supply of new cars in the Newcastle / Hunter Valley region;
- maintain the economic viability, marketability, competitiveness and goodwill of the Divestiture Business prior to divestiture; and
- provide for the effective oversight of AP Eagers' compliance with the Undertaking.
Approved Independent Auditor
On 16 August 2019, the ACCC approved James Karekinian of EY as Approved Independent Auditor under the AP Eagers Undertaking. The ACCC is aware that other partner(s) at EY have an ongoing advisory relationship with AP Eagers on unrelated subject matters and that ring-fencing and other protocols will be put in place.
A short summary of Mr Karekinian's relevant experience in the automotive industry is attached below.