The Australian Competition and Consumer Commission will not oppose the proposed merger between Incitec and Pivot, ACCC Chairman, Professor Allan Fels, said today.
Incitec and Pivot are the two largest manufacturers and suppliers of fertiliser products in Australia. The main area of competitive overlap between the companies is in the supply of fertiliser products to farmers on the Australian eastern seaboard.
The ACCC has conducted extensive market inquiries into this proposed merger consulting with farming organisations and competitors amongst others.
Market inquiries indicated that the relevant product markets should be categorised on the basis of fertiliser nutrients nitrogen, phosphorus and potassium. The ACCC concluded that fertiliser products containing the same basic nutrient were generally substitutable for each other and constrained each other in price.
Despite the merger leading to the merged party having very high market shares in some product categories, the ACCC concluded that the importation of fertiliser products is likely to operate as an effective competitive constraint on the merged entity, thereby thwarting any attempt to raise the price of fertiliser to farmers. Although it is expensive to enter any of the markets through the establishment of a new manufacturing facility, the importation of fertiliser products is fairly routine and does not present an insurmountable barrier. Independent imports of fertiliser products represent well in excess of 20 per cent of all fertiliser products used by Australian farmers.
On this basis, the ACCC believes that the proposed merger is unlikely to result in a substantial lessening of competition.