Mega-merger hits snag

ACCC in legal challenge to Tabcorp-Tatts deal

TABCORP’S push to quickly bed down its mega-merger with Tatts has hit a major roadblock with the competition watchdog launching a legal challenge to the approval process.

The Australian Competition and Consumer Commission has lodged an unprecedented appeal in the Federal Court against a ruling by the Australian Competition Tribunal, which greenlit the $11 billion merger. ACCC chairman Rod Sims said the tribunal’s decision was based on three key errors that, if left unchallenged, would set a series of “unfortunate precedents” around competition law.

“We felt that we had no choice but to appeal given the nature of what we see as the three reviewable errors,” Mr Sims said.

“We believe that unless they are challenged, they will have very important implications for future decisions that we have to make.”

The competition tribunal approved a tie-up between Tabcorp and Tatts last month, stating it would result in substantial public benefit and adding that mooted competition concerns had been overstated.

Tabcorp had attempted to sidestep the ACCC by asking the tribunal to directly rule on the merger.

That unusual move came after the ACCC warned it had serious concerns about the power of the proposed combined group. The tribunal allows mergers where it believes the public benefits outweigh the public detriments.

The ACCC will argue that in the Tabcorp and Tatts case, the tribunal only considered issues to be detrimental if they might substantially lessen competition. It will submit this was not the correct application of the statutory test and was inconsistent with previous tribunal decisions.

“In previous decisions, the tribunal has taken into account the detriment constituted by any lessening of competition,” the commission said.

It will also argue the tribunal failed to model the likely future state of competition with or without the proposed deal – something it says is “fundamental to the assessment of likely detriment in all competition cases”.

Finally, the ACCC will argue the tribunal overstated the benefits of the proposed deal, such as cost savings and revenue synergies.

The commission will ask the Federal Court to refer the merger proposal back to the tribunal to reassess in light of the clarified legal arguments.

Despite the appeal, shares in Tabcorp rallied 1.4 per cent, or 6¢, to $4.29. Tatts shares climbed 0.8 per cent to $4.04.