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ACCC outlines initial issues on AP Eagers’ AHG takeover

Focus in on regional new car retail rather than truck sales concentration

 

The Australian Competition and Consumer Commission (ACCC) has revealed its “preliminary concerns” about AP Eagers’ (APE) proposed acquisition of the shares in Automotive Holdings Group (AHG) it does not already own.

The ACCC is currently assessing an application for merger authorisation from automotive retailer AP Eagers.

One of the main concerns the competition watchdog’s highlights is the impact on competition in new car retailing in the Newcastle/Hunter Valley region.

Though both companies have strong truck-sales operations, this appears not to be in the ACCC’s sights despite it seeking comments from several truck brands.

“The ACCC is seeking further feedback from market participants about this proposed transaction, in particular regarding the Newcastle/Hunter Valley region,” ACCC acting chair Delia Rickard states.

“A combined AP Eagers and AHG would operate 46 per cent of new car dealership sites in the Newcastle/Hunter Valley region, including those for the ten most popular brands, and runs 54 per cent of the dealership sites selling those brands.

“In metropolitan Newcastle alone, the combined company would operate 77 per cent of dealership sites selling the ten most popular brands.

“We believe that local consumers generally don’t travel beyond the Newcastle/Hunter Valley region to buy new cars, and it is difficult to find out the final price for a car without visiting a dealership.”

The ACCC issued a market feedback letter last month setting out its preliminary views and summarising submissions received by then.


Read how the ACCC first flagged its interest in the move, here


The ACCC’s preliminary view is that the proposed acquisition is unlikely to substantially lessen competition for the supply of new cars in Melbourne, Sydney and Brisbane or nationally, the wholesaling and retailing of used cars, the acquisition of car dealerships or the supply and acquisition of finance and insurance products.

“We are now seeking further submissions in response to the concerns outlined in our market feedback letter, and will continue to examine what effect this level of concentration would have on the size of discounts customers could obtain when buying new cars in the Newcastle/Hunter Valley region,” Rickard says.

The ACCC is also investigating whether the proposed acquisition would reduce competition in the supply of authorised parts and the market for servicing of new cars there.

It is seeking submissions about whether a divestiture would address potential competition issues in the Newcastle/Hunter Valley region.  

“AP Eagers acknowledges the ACCC’s preliminary view that the proposed merger is unlikely to substantially lessen competition for the supply of new cars in Melbourne, Sydney and Brisbane or nationally,” that company says in response.

“AP Eagers is continuing to review the ACCC’s preliminary views, however, we continue to believe that the merger will not substantially lessen competition in any market.

Even in the few geographic areas where the activities of the two groups overlap, including Newcastle and the Hunter Valley, it is AP Eagers’ view that there will continue to be choice and competition.

“Since it lodged its application for merger authorisation with the ACCC in April 2019, AP Eagers has worked closely with the ACCC to assist it with its inquiries, including providing significant information to the ACCC. AP Eagers has actively engaged with its stakeholders, including its manufacturing partners, who have been supportive of the transaction.

“AP Eagers will continue to assess its options to maximise the prospects of receiving merger authorisation for the transaction. It believes it is well advanced in addressing the issues identified by the ACCC.”

The company is the largest shareholder of AHG, holding 28.84 per cent of AHG’s listed shares on April 5.

In a supplementary statement in early May, it revealed it represents 26 car brands and 10 truck/bus brands, which operate from 110 new car dealerships and 33 new truck and bus vehicle dealerships in Queensland, Northern Territory, NSW, Victoria, Tasmania and South Australia.

The merged entity is expected to have about 231 new car dealerships and 68 new truck and bus dealerships in Australia as well as 13 new car dealerships in New Zealand, representing 33 car brands and 12 truck brands.

Submissions from interested parties should be provided by no later than July 3. The ACCC must make a final decision by July 26, unless AP Eagers agrees to extend this period.

Further information, including a copy of the application for APE/AHG merger authorisation and submissions received by the ACCC, is available here

 

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