The Australian Competition and Consumer Commission (ACCC) has released a Statement of Issues (SOI) on the proposed acquisition of The Trust Company Limited (The Trust Company) by Perpetual Limited (Perpetual).
Both ASX listed, Perpetual and The Trust Company are two of the largest suppliers of corporate trust services in Australia. The ACCC’s preliminary view is that the competition effects of the proposed merger should be considered in the markets for the supply of trustee, responsible entity, custodial and private fiduciary services. Submissions lodged thus far have suggested that the merged entity would have an 80 per cent market share of trustee services with respect to property, debt, infrastructure and securitisation, a level which would ordinarily attract significant ACCC scrutiny.
Interestingly, despite the existence of another bidder, Equity Trustees Limited (in which The Trust Company has a 13.4 per cent stake), the ACCC has indicated that it will assess the proposed acquisition against a ‘counterfactual’ (i.e. a ‘world without the merger’) in which The Trust Company continues to operate independently. This approach seems to be at odds with the ACCC’s Merger Guidelines, which suggest that in the presence of a credible alternate bidder the relevant counterfactual may involve a competitive outcome which differs from the status quo.
The ACCC’s initial view is that the merger may raise competition concerns in that it may entrench Perpetual’s existing leading position in relation to trustee services for debt capital market products and custodial services and may raise barriers to entry. However, the ACCC also points to a number of factors that suggest ongoing competitive constraints, namely:
- actual or potential competition from existing competitors such as AET, BNY Mellon, Equity Trustees Limited together with the recent entry of a new participant, One Investment Group;
- the relatively common provision of custodial services in-house by some customers;
- the fact that reputation tends to attach to individual staff members rather than corporate suppliers.
The ACCC also noted that the potential for coordinated conduct is relatively low given the lack of transparency in the market and the vast array of product and cost offerings available across suppliers.
The ACCC invites submissions from the market in response to the SOI by 15 August 2013. The proposed final decision date is 19 September 2013.