The proposed $11 billion merger between wagering giant Tabcorp and lotteries and wagering firm Tatts Group is set for more scrutiny – this time by the Federal Court.
The the Australian Competition and Consumer Commission has applied to the Federal Court for a judicial review of the Australian Competition Tribunal’s consent for Tabcorp to merge with Tatts.
The ACCC argues that the tribunal made three errors of law in its decision which, the competition watchdog says, are fundamental to the case and to all future merger assessments.
Tabcorp initially sought informal merger clearance from the ACCC, and the ACCC started a review in November 2016.
But shortly after the watchdog published a statement of issues in March 2017, Tabcorp withdrew the application and instead lodged an application for authorisation with the Australian Competition Tribunal.
The ACCC and Australian Competition Tribunal apply different tests when assessing a merger.
The ACCC considers if there would be a substantial lessening of competition.
The tribunal can authorise a merger if the public benefits outweigh the public detriments.
The tribunal granted authorisation for the Tatts-Tabcorp merger last month, saying that the merger would create substantial public benefits and no material detriment.
“The ACCC is alleging the tribunal made three reviewable errors,” ACCC chairman Rod Sims said in a statement on Monday.
“It (the ACCC) is therefore seeking clarification of these three points of law which are central to the tribunal’s assessment of Tabcorp’s proposed acquisition of Tatts.”
The ACCC is challenging the tribunal’s reasoning that the proposed merger could only be detrimental if there was a substantial lessening of competition.
The watchdog says that the tribunal has in the past considered the detriment constituted by any lessening of competition.
Secondly, the ACCC says that in considering whether the merger was likely to cause detriment, the tribunal failed to compare the likely future state of competition both with and without the merger.
Thirdly, the ACCC claims the tribunal erred in the weight it gave to benefits such as cost savings and revenue synergies, which would benefit Tabcorp but not consumers generally.
Tabcorp said it is considering the ACCC’s application and will provide further information as appropriate.
Tabcorp shares were four cents higher at $4.27 at 1429 AEST.
Tatts shares were also four cents higher at $4.05.