ACCC ignored facts, was blinded by agenda on ANZ-Suncorp deal

The competition regulator lost on all three counts, bringing into question its motives for trying to block the $4.9bn bank deal in the first place.

The competition tribunal has concluded the $4.9bn merger between ANZ and Suncorp can move ahead. Picture: AAP Image

The competition regulator will need to ask itself some hard questions on how it had been blinded by its own instincts toward market intervention after a decision to block ANZ’s $4.9bn buyout of Suncorp’s bank was comprehensively overturned on every point.

The Australian Competition Tribunal reversed the ACCC’s firm rejection of ANZ’s efforts to buyout Suncorp’s regional bank, paving the way for the long-running merger to push ahead. The win by ANZ and Suncorp is a win for all banks: big and small. It has set the benchmark for a realistic assessment to the changes brought about by technology and mortgage broking that now underpin the today’s banking market.

The tribunal concluded under a merger of ANZ with Suncorp’s bank there was little chance that competition would be substantially lessened in home loans, small-to-mid-sized business lending and agribusiness. These were the three markets that the ACCC had sounded the alarm on. And the ACCC lost on all counts.

The ruling, headed by Federal Court Justice John Halley, will be felt across several fronts.

It tilts the competition dial firmly back towards an evidence-based assessment of how banking operates today, rather than the ambition of the ACCC looking to preserve its ideal of 1980s-style banking.

It is worth highlighting new ACCC chair Gina Cass-Gottlieb was not involved in the ANZ matter, the former competition lawyer removed herself from the outset over a potential conflict prior to being appointed to the top job two years ago.

Still Cass-Gottlieb said the regulator would reflect on the decision. The tribunal represents the “checks and balances” of a merger approval process, she added.

Suncorp CEO Steve Johnston, left, and ANZ boss Shayne Elliott on the announcement of the $4.9bn bank sale in June 2022. Picture: Arsineh Houspian

The finding badly tarnishes the regulator’s recently-concluded review of the deposit market, which is now being used by the Albanese government to shape banking policy.

The ruling also raises questions about why the ACCC either missed or deliberately ignored the overwhelming evidence presented to it about the structure of the banking market. In its initial ruling, the ACCC relied heavily on an assessment by London-based consultant Mary Starks, a former competition and energy regulator and policy analyst who has worked in the UK and New Zealand.

Indeed, it is fair to ask whether the ACCC’s judgement was clouded by the overwhelming desire to engineer a market outcome where Suncorp would give up and sell its bank to rival regional lender Bendigo Bank.

Bendigo had made an earlier approach to Suncorp and following the ANZ move appealed to the ACCC to consider disrupting the merger.

And the competition regulator was all too willing to entertain such an outcome by taking a purely academic approach to competition.

Even with a nil premium, this regional roll-up would have been deeply unsatisfactory for investors in both Bendigo and Suncorp. Arguably, it would be just as bad for their respective bank customers if costs needed to come out quickly.

A merger with Bendigo, while commercially possible, would face “significant execution challenges” the ruling from the competition tribunal concluded and this would put into doubt any financial returns from a deal.

Mortgage choice

While the ACCC fell short on its findings about the negative impact the merger would have on business lending and agribusiness, it was the regulator’s approach to the critical mortgage market that was the most damning.

In analysing the ACCC’s heavy reliance on the argument the ANZ deal will add to the invisible force of co-ordination – that is, where the big four banks refuse to compete in order to preserve their status quo – the tribunal again said no.

Indeed, the tribunal skewered the ACCC’s core assertions that the conditions for co-ordination “have recently reduced, and are likely to continue to reduce in the foreseeable future” due to the material differences in the market shares among the major banks as well as the emergence of Macquarie as a “maverick” in the market.

The tribunal also pointed out the increasing use of brokers that has allowed for greater customer switching.

All this evidence was simply ignored by the ACCC.

ANZ saw the buyout as being able to spend technology investments over a bigger customer base. Picture: NCA NewsWire/Kelly Barnes

Tuesday’s win for ANZ and Suncorp is a big hurdled passed in the long road for a merger, but by no means the last.

ANZ was initially cool on the acquisition knowing the pain and distraction of a bank integration. However it when spending on technology and regulation hit sky-high, the prospect of adding 1.2m Suncorp customers to help defray the cost of its investment program made the deal more compelling.

At the time ANZ chief Shayne Elliott said the deal represented the “equivalent of many years of organic system growth”. As the distant fourth-placed retail bank, ANZ lacks the financial muscle to secure a fraction of the customers behind players like Commonwealth Bank that has its own significant cost advantages.

The next step for the sales process that has been running for nearly two years a move into the political arena.

The Queensland government has to change legislation that was set up following the privatisation of the then Suncorp-Metway in the late 1990s. Queensland treasurer Cameron Dick has previously signalled his support, given ANZ’s stated promises to spend up big on technology jobs in the state and preserving branches. Then it is up to Federal Treasurer - and Queenslander - Jim Chalmers to give final approval.

It would be a big call for a treasurer to stand in the way of Queensland’s homegrown champion Suncorp wanting to shed its bank to become a more competitive insurer. It would also be tough to overturn a merger ruling that has so comprehensively challenged his own regulator.

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