Expert opinion on ANZ - Suncorp bank merger | Ashurst

20 February 2024

What was the challenge?

In 2022, ANZ Bank applied to the ACCC for authorisation of its attempted acquisition of the small, regional bank owned by Suncorp. Frontier Economics was retained by Ashurst, the lawyers for ANZ, to provide expert advice to the proceedings. In particular, concerning the likely effects of the acquisition on competition in various markets.

Using his decades of expertise, particularly in two sub-fields of economics: (i) industrial economics; and (ii) law and economics, Dr. Philip Williams was asked to provide advice on:

What economic principles should be used to define the markets relevant to assessing the likely competitive effects of the Proposed Transaction, in relation to the supply of banking products in Australia?
Applying the relevant economic principles identified, what are the relevant product and geographic dimensions of the markets, for the purposes of assessing the likely competitive effects of the Proposed Transaction in relation to the supply of banking products, and specifically commercially banking products, in Australia?

How did we complete the economic modelling and analysis?

The report was provided by Frontier Economics' Dr. Phillip Williams, with assistance from David Kontrobarsky, and submitted into proceedings.

Our report was based on the thresholds in the ACCC Merger Guidelines. These state that the ACCC typically measures concentration with reference to market shares, concentration ratios and the Herfindahl-Hirschman Index (HHI). The Guidelines proceed to say that the ACCC will generally be less likely to identify horizontal competition concerns when the post-merger HHI is:

Less than 2000, or
Greater than 2000 with a delta less than 100.

We were able to show in our report that, in almost all conceivable approaches to defining markets, these thresholds were not breached. The one possible market where these thresholds were breached was the Queensland agribusiness market. In that market, the breach of these thresholds was very small – and not of the order which would normally cause the ACCC any particular concern.

VIEW THE REPORT

What were the results?

Having provided the detailed report, Dr. Phillip Williams concluded:

It is my opinion that the Proposed Transaction is likely to cause a slight lessening of competition in the supply of loans to Queensland agribusiness; but this is unlikely to cause any increase in prices or decrease in the quality of service to agribusiness borrowers. For these reasons, I conclude that the Proposed Transaction is unlikely to substantially lessen competition in the market for the supply of loans to Queensland agribusiness.

The ACCC denied the authorisation in August 2023; but authorisation was granted by the Australian Competition Tribunal on appeal in February 2024.

VIEW THE 2024 ACCC PRESS RELEASE