Mike Taylor writes that the ACCC's initial veto of NAB's proposed takeover of AXA Asia Pacific failed to acknowledge the most important factor: bank dominance.
With the benefit of hindsight, there will be those in the financial services industry who will question whether the Australian Competition and Consumer Commission (ACCC) is handling National Australia Bank’s (NAB’s) proposed acquisition of AXA Asia Pacific (AXA AP) under the same rules it applied to Westpac’s acquisition of St George.
Because if concerns around NAB’s acquisition of AXA AP's diminishing competition in the platform space sounded a warning for the ACCC in April this year, then Westpac’s acquisition of St George should have sounded a cacophony of alarm bells when it occurred some 18 months earlier.
Westpac’s acquisition of St George delivered to it control of a significant slice of the Australian platforms market via BT, Advance and Securitor and at no stage did the ACCC express any deep concerns with respect to a diminution in competition, let alone suggest that Westpac should be required to divest any of the St George-owned platform assets.
Notwithstanding this apparent earlier double standard, the ACCC is acting appropriately by closely examining NAB’s revised bid for AXA AP and seeking further industry commentary. In particular, it is right to consider the broader implications of the lynchpin of the revised offer, AXA’s proposed divestiture of its North platform to IOOF.
Throughout the ACCC’s processes there will be an elephant in the room in the form of AMP.
Crucial to the ACCC’s consideration of NAB’s revised offer must be whether the broader interests of competition in the platform market and the broader financial services industry will be served by another major bank gaining control of another significant non-bank player.
AMP is the largest non-bank player and has asserted its continuing interest in acquiring AXA AP. Therefore, while IOOF’s ownership and control of the North platform will undoubtedly engender an element of competition, it will not be of the same magnitude as that which might be offered by a distributive giant such as AMP.
The problem for the ACCC is that its original veto of the NAB bid for AXA AP did not canvass the issue of bank dominance or ownership. Instead, the regulator focused on the far narrower and arguably more nebulous issue of competition in the platforms space.
In a court of law, any appeal is confined to evidence in the trial of the first instance. However, if the ACCC wants to get the competitive balance right, it needs to consider the broader evidence and just how much of the market is now controlled by the big banks.