Delia Rickard

THE Australian Competition and Consumer Commission (ACCC) has flagged its concerns that the proposed merger of AP Eagers and Automotive Holdings Group (AHG) will significantly reduce competition in the Newcastle/Hunter Valley area and may lead to the group selling off some of its holdings in the region.

If responses sought from the industry are unfavourable and AP Eagers chief executive Martin Ward is unable to convince the regulator that competition in the area will not be significantly diminished, the ACCC is likely to place divestment orders on the table as a condition of its approval for the deal.

Such a development could see some prime dealership properties become available, which could significantly strengthen the portfolios of smaller dealer groups looking to increase their scale in the face of approaching disruption in the basic dealership business model.

The ACCC, which is currently assessing the competition implications of the merged AP Eagers-AHG group, has issued a call for industry players to comment specifically on the likely effect of the merger in Newcastle and the wider Hunter Valley region.

However, the regulator has virtually given the green light to other areas, saying that it does not believe the competition will be diminished in “Melbourne, Sydney and Brisbane or nationally”.

In a note to the industry, ACCC acting chair Delia Rickard said: “The ACCC is seeking further feedback from market participants about this proposed transaction, in particular regarding the Newcastle/Hunter Valley region.

“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 run 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.”

On June 24, the ACCC issued a market feedback letter setting out the its preliminary views and summarising submissions received by that point.

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,” Ms Rickard said.

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 in the Newcastle/Hunter Valley region.

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

Submissions from interested parties should be provided by no later than July 3, 2019. The ACCC must make a final decision by July 26, 2019, unless AP Eagers agrees to extend this period.

By John Mellor