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Matthew Smith has been a business and financial journalist for more than a decade. He previously worked with the Financial Times Group, reporting from New York on company buyouts and refinancing in the wake of the Global Financial Crisis. He started his career reporting on the funds management industry in Sydney.

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Rubber stamp ready? ACCC tick for Qantas-Emirates deal adds to list of approvals

Published 28 March 2013 11:34, Updated 05 April 2013 14:56

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Rubber stamp ready? ACCC tick for Qantas-Emirates deal adds to list of approvals

On the eve of some of the most important competition rulings to be made by ACCC chairman Rod Sims in his career thus far, a look back at his previous decisions shows he likes to say “yes” more than he likes to say “no”.

In the past 10 rulings Sims has made over merger and partnership agreements dating back to July 2012, he has given his tick of approval seven times.

The most recent approvals included the high-profile authorisation of the Qantas Airways and Emirates alliance; the authorisation for Qantas and Jetstar Airways to co-ordinate with Jetstar’s Asian brands; Commonwealth Bank’s acquisition of the remaining stake in mortgage broker Aussie Home Loans; and the tie-up between eRx Script Exchange and MediSecure in the electronic pharmaceutical prescription exchange systems space.

The most immediate piece of business before Sims is the ruling he will make over Virgin Australia’s proposal to buy 60 per cent of loss-making Tiger Australia airlines. Sims has likely made his last request for information and it’s near impossible to read which way this decision might go. Any reading between the lines can be done by watching his interview on the topic with BRW here.

Of course, the other high-profile decisions Sims will make this year will over the concentration of power among the supermarket chains. Sims will respond to complaints against Woolworths and Coles’ owner Westfarmers alleging misuse of market power. Even before that, the competition commission will rule on whether Coles and Woolworths’ use of shopper dockets is warping petrol pricing.

Some clues to how Sims thinks about these issues can be found in this recent interview.

1. Qantas/Emirates – tick

Authorisation granted subject to a condition for an alliance between Qantas Airways Limited and Emirates until March 31, 2018. Sims says the alliance is likely to provide Qantas and Emirates customers with increased access to a large number of existing frequencies and destinations under a single airline code, improved connectivity and scheduling, and access to each alliance partner’s frequent flyer programs.

2. Qantas/Jetstar – tick

Authorisation granted to Qantas Airways and Jetstar Airways for co-ordination involving four Asian-based Jetstar-branded joint ventures: Jetstar Asia, Jetstar Pacific, Jetstar Japan and Jetstar Hong Kong, until March 31, 2018. The authorisation allows Jetstar and the Jetstar joint ventures to co-ordinate with each other on passenger and cargo services, predominately on intra-Asian routes. It also allows the airline owners of the joint ventures to support and expand each joint venture and to relate the joint ventures to their own businesses.

3. CBA/Aussie Home Loans – tick

Sims decided to not oppose the Commonwealth Bank of Australia’s proposed acquisition of the remaining 67 per cent of the issued capital in Aussie Home Loans. In reaching his view, Sims says he took into account the competitive constraint arising from the presence of a number of alternative suppliers of home loan products and mortgage distribution services.

4. eRx Script Exchange/MediSecure agreement – tick

Authorisation granted to eRx Script Exchange to allow it to enter into a contract with MediSecure for interoperability between the parties’ electronic pharmaceutical prescription exchange systems. eRx and MediSecure are currently the only two parties operating prescription exchange services in Australia.

5. Skywest Airlines/Virgin Australia – tick

Sims chose to not oppose the proposed acquisition of Skywest Airlines by Virgin Australia. Virgin is the second-largest airline operator in Australia behind Qantas Group, while Skywest is a Perth-based regional airline with a fleet of 28 aircraft. Sims says this acquisition is unlikely to lead to a substantial lessening of competition in any relevant market.

6. Carsales.com/Trading Post – cross

Sims opposed the proposed acquisition by Carsales.com of assets associated with Trading Post from Telstra in December last year. He concluded that the proposed acquisition would be likely to substantially lessen competition by removing a close and effective competitor of Carsales.

7. Pfizer Nutrition/Nestlé S.A – tick

Sims granted approval for the acquisition of Pfizer Nutrition, a global infant nutrition business, from Pfizer by Nestlé S.A after accepting a court-enforceable undertaking. The undertaking requires Nestlé to license Pfizer Nutrition’s Australian infant-nutrition business’ brand portfolio to an independent purchaser, to be approved by the ACCC. Nestlé and Pfizer Nutrition are two of the three largest suppliers of infant formula and toddler milk in Australia.

8. Seven Group Holdings/Consolidated Media Holdings – cross

In October last year, Sims opposed the proposed acquisition by Seven Group Holdings of the balance of shares that it does not already own in Consolidated Media Holdings. Seven sought clearance from the ACCC on the basis that it was actively considering acquiring the remaining shares in CMH and asked the ACCC to review a proposal for an acquisition of all of the shares in CMH. The ACCC concluded that the proposed acquisition is likely to result in a substantial lessening of competition in the market for free-to-air television services.

9.Woolworths-Lowes/G Gay & Co – cross

Sims denied the proposed acquisition by the Woolworths/Lowe’s joint venture of an independent chain of three hardware stores owned by G Gay & Co in Ballarat, Victoria. He concluded that the proposed acquisition is likely to substantially lessen competition by removing what will be one of Woolworths’ two closest competitors in the Ballarat area. The other remaining key competitor is the Wesfarmers-owned Bunnings.

10. NBN/SingTel Optus – tick

Sims authorised an agreement between NBN Co and SingTel Optus for the migration of Optus’ HFC subscribers to the NBN and the decommissioning of parts of Optus’ HFC network. While Sims says this decision was “finely balanced”, in coming to the final view he says he took account a substantial amount of public and confidential information, plus submissions received from interested parties.

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