Tabcorp (TAH) has spat the dummy at the hesitant approval last week from the ACCC for its $11 billion merger with Tatts Group (TTS) and applied to the Australian Competition Tribunal (ACT) to go ahead with its deal.
Tabcorp wants to take the proposed merger to the ACT after the ACCC identified competition concerns with two small areas of the business, poker machine monitoring and Queensland and the broadcasting of races by Tabcorp’s Sky Racing. But the commission didn’t find any obstacles to the merger from the point of view of the main businesses of both groups, wagering, so the news yesterday of the appeal to the ACT seems something of a sulk and a dummy spit because of the Commission’s finding a couple of problem areas, when the larger part of the deal seems fine.
Tabcorp’s announcement smacks of a pre-emptive strike to try and get the ACCC to approve the deal.
In its statement last week, the ACCC said it was satisfied punters have plenty of choice over where to place their bets (which is the substantive part of both companies operations and where they are facing the greatest competition from online gaming (mostly overseas) operators).
Tabcorp is the monopoly provider of retail betting outlets in NSW Victoria and ACT, while Tatts is the operator in all other states except Western Australia. On the face of it the combined company would have a stranglehold on punting on horses, trots, dogs and sports betting.
But the Commission made it clear that it was confident, the rise of online bookmakers like Sportsbet (Paddy Power), Ladbrokes, William Hill and Crownbet means a merger would not reduce competition in wagering.
The Commission says the $26 billion wagering industry is still dominated by Tabcorp and Tatts Group, but the online wagering is around $13 billion and growing, and is shared more broadly among the newer, mostly foreign-backed players
“It is our view that strong competition between online corporate bookmakers will mean recreational customers will continue to have choice about where to place their bets,” ACCC chairman Rod Sims said in last week’s release.
The ACCC noted there is limited competitive overlap between the retail (i.e. bricks and mortar) wagering operations of the merger parties which are exclusively held in separate states and territories. The ACCC considers Tabcorp and Tatts primarily compete for online and telephone customers.
Tabcorp says it has withdrawn its application for informal clearance from the ACCC and has lodged an application with the ACT, in the belief it has "a compelling case" for the tribunal, which considers a balance of public benefits rather than solely any lessening of competition.
Yesterday Mr Sims said "We completely respect their right to take whatever process they want," Mr Sims said on Monday. "Those processes are available. We are surprised they have done what they have done.”
The ACCC has forced Tabcorp to sell its Odyssey Gaming Services business to allay concerns about competition levels in the gaming monitoring sector – and Tabcorp said on Monday its sale process was “well advanced” – the gaming company has now "withdrawn its application for informal clearance by the ACCC".
Tabcorp claims the Tribunal process will allow it to better “ventilate” the support it has received for the Tatts merger, particularly from the racing industry, which has been promised more funding as the result of the deal, while, the ACCC is seen as being “limited to assessing whether a proposed acquisition is likely to substantially lessen competition, and is not able to take into account countervailing public benefits”.
Tabcorp also expects the deal will get cleared faster under the Tribunal process, with a decision on authorisation expected by June 13. The ACCC says it will have a final decision by May 4. Tabcorp shares are up 2.4% at $4.60 (after being higher), while Tatts has lost 1.1% to $4.23.
