THE Australian Competition & Consumer Commission has raised concerns about Landmark’s proposed acquisition of Ruralco, asking for stakeholder comment on the competition impact a merged national agency business might have on the agriculture sector.

The ACCC has released a statement of issues raising preliminary competition concerns about the Ruralco acquisition. Landmark and Ruralco supply rural merchandise including fertiliser, fencing and animal health products, livestock and wool agency, live export and other services through their branded retail store networks. Both companies also operate wholesale businesses supplying rural merchandise to independent stores.

“A merged Landmark-Ruralco would be by far the largest retail and wholesale supplier of rural merchandise in Australia, with Elders the only other large national chain,” ACCC deputy chair Mick Keogh said in a statement.

The combined entity would supply around 650 rural merchandise stores (including both corporate and member stores), about 45 percent of all rural merchandise stores nationally. The ACCC identified 80 Landmark corporate stores across Australia that are within 50km of a Ruralco outlet. Landmark and Ruralco, along with Elders, also jointly own the online livestock sales platform AuctionsPlus.

The legal test which the ACCC applies in considering the acquisition falls under section 50 of the Competition and Consumer Act 2010, which prohibits acquisitions that are likely to have the effect of substantially lessening competition in a market.

ACCC’s statement of issues says it is concerned that the proposed acquisition may substantially lessen competition in the supply of rural merchandise by:

• Combining two of the three largest retail chains with a national presence
• Removing one of few competitors to Landmark in certain local areas where the parties’ stores overlap
• Increasing concentration at the wholesale level and reducing the number of supply options for independent retailers, and
• Increasing the ability and incentive of Landmark to discriminate against independent stores it supplies in areas where they compete with Landmark’s corporate stores.

At this stage, ACCC said it did not consider it likely that the acquisition would raise significant competition issues in respect of vertical integration between product manufacturing and distribution in the supply of rural merchandise. Nor did it consider that the deal would substantially lessen competition in the supply of wool broking, livestock agency, live export services, real estate agency, agricultural insurance broking or water broking services.

The investigation’s focus on competition, is seeking stakeholder views on:

• How closely Landmark and Ruralco compete
• The availability of alternatives to Landmark and Ruralco
• Whether any reduction in competition would cause prices or commission rates to increase
• Whether any reduction in competition would cause service quality to decrease
• Whether particular services or geographic regions will be affected by the proposed acquisition.

“We are seeking submissions in response to our statement of issues, and will continue examining what impact the loss of a major national retail competitor might have on prices, product range (including private label brands) and other areas of competition,” Mr Keogh said.

The ACCC said it had identified a number of local areas, including Broome (WA), Alice Springs (NT), Cooma (NSW) and Hughenden (Qld), where Landmark’s rural merchandise stores compete with Ruralco stores and there would be few remaining competitors.

The commission is considering whether delivery from outside these regions would provide sufficient competition to the Ruralco-Landmark retail stores.

Ruralco is also a major wholesaler to independent rural merchandise stores through its CRT operation, and Landmark also has a smaller wholesale operation.

The ACCC is considering whether the proposed acquisition would reduce competition at the wholesale level, or whether the remaining wholesalers or buying groups, including AIRR, NRI and AgLink, would provide sufficient competition.

In addition, the ACCC is examining whether a merged Landmark-Ruralco would be more likely to discriminate against retailers which are wholesale customers that compete with its retail stores.

The ACCC anticipates reaching a final decision about the merger by 15 August.

Submissions process

Submissions from interested parties on the ACCC’s statement of issues can be provided by 27 June.

• Submissions (PDF format preferred) can be emailed to mergers@accc.gov.au with the title: ‘Submission re: Landmark – Ruralco attention Matthew Thomas’.
• Alternatively submissions may be mailed to the Merger Investigations Branch, ACCC, GPO Box 3131, Canberra ACT 2601.

The ACCC’s statement of issues is available here