Wesfarmers Limited - Australian Pharmaceutical Industries Limited

Summary

Wesfarmers Limited (Wesfarmers) proposes to acquire Australian Pharmaceutical Industries Limited (API).

Wesfarmers is a retail and industrial conglomerate that operates businesses including Bunnings, Officeworks, Kmart, Target and Catch. Wesfarmers also has a 50% equity interest in the loyalty program Loyalty Pacific Pty Ltd (trading as Flybuys).

API is a pharmaceutical distributor and provider of health and beauty products and services that owns and operates the Priceline retail business and is the franchisor for, and distributes products to, independently owned Priceline Pharmacies. Priceline owns the health and beauty loyalty program Priceline Sister Club.

Market definition

The ACCC primarily considered the impact of the proposed acquisition in the Australian retail markets for over-the-counter pharmaceutical products and beauty and personal care products.

For the purposes of this assessment, the ACCC did not need to reach a concluded view on the precise definition of these markets, as it would not significantly alter the assessment.

Competition analysis

The ACCC concluded that the proposed acquisition is not likely to substantially lessen competition in any market in Australia.

Retail markets

The ACCC considered that several Wesfarmers businesses, namely Kmart, Target and Catch, retail products in the same categories as API’s Priceline business. These categories are over-the-counter pharmaceutical products and beauty and personal care products.

However, the ACCC found that Wesfarmers and API are not particularly close competitors in these retail markets and that there are many large and well-established retailers operating in the same markets that will compete strongly with Wesfarmers after the acquisition.

Loyalty schemes

The ACCC also considered the potential competitive effects of Wesfarmers having an ownership interest in both Flybuys and the Priceline Sister Club.

The ACCC concluded that the acquisition is unlikely to create any lock-in effects, and that the benefits obtained from customer transaction data do not appear to be so strong as to result in a substantial lessening of competition from Wesfarmers acquiring API.