Elders’ gets green light from ACCC on rural buying group deal

The Australian Competition & Consumer Commision will not oppose Elders’ takeover of rural wholesale buying group AIRR.

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Elders has gained the green light from the Australian Competition and Consumer Commission for its proposed takeover of rural wholesale buying group Australian Independent Rural Retailers.

ACCC deputy chairman Mick Keogh said while Elders was an important competitor in rural retailing, it currently had minimal operations in wholesaling to independent rural retail stores. Likewise, AIRR is an important wholesaler to independent rural stores, but has minimal assets of its own in rural retailing.

“The ACCC examined the proposed transaction closely, because it could give rise to vertical integration concerns. In particular, the ACCC assessed the risk that independent stores would be discriminated against by Elders in a way that harms competition,” Mr Keogh said.

“We tested these vertical issues closely with industry participants and independent retailers. Market feedback suggested that most independent retailers consider they have sufficient alternative supply options if Elders attempted to discriminate against them.

“It also appears that existing or potential new buying groups or wholesalers could expand in response to any future change in AIRR’s offering.”

The ACCC also considered whether the transaction could result in reduced competition in towns where Elders and independent stores supplied by AIRR are in close proximity to each other.

“The vast majority of locations impacted have other stores competing with Elders and the AIRR-supplied stores, which are likely to prevent a softening of competition,” Mr Keogh said.

“In those cases where there were limited alternatives to the Elders and independent AIRR-supplied store, market feedback indicated that there were alternative wholesale supply options for the relevant independent store.”

The ACCC also considered the issue of Elders’ bargaining power with manufacturers or importers of rural merchandise. The ACCC concluded that while Elders would be in a strong bargaining position, suppliers still generally had other channels through which to distribute their goods, and any increase in buyer power was not likely to be substantial.

“Ultimately we decided that there would not be a substantial lessening of competition in any relevant market,” Mr Keogh said.

“There is significant consolidation in the rural retail sector, given the Elders proposal and the Landmark-Ruralco deal. We will look very closely at any further consolidation.”

Elders chief executive Mark Allison announced the AIRR proposal in mid-July.

Mr Allison welcomed the decision by the Australian Competition and Consumer Commission. “It means both businesses can get on with delivering the transaction,” he said.

“Like Elders, AIRR is a business with a track record of driving Australian agricultural success. It has grown consistently since its establishment in 2006. It’s a track record we wish to continue and support.

“By preserving continuity of AIRR’s key management team and independent identity through a light touch integration, AIRR will continue to deliver the benefits to its independent members which have enabled it to achieve a track record of consistent growth.

“We look forward to further enhancing AIRR’s offering to its diverse customer base and continuing to grow the business together.”