The competition decision that snookered the treasurer

The largest bank merger deal since the global financial crisis – ANZ’s $4.9 billion purchase of Suncorp’s Queensland regional bank – has been approved by the courts. Its only real hurdle now is federal Treasurer Jim Chalmers.

It’s a sticky decision for Chalmers given his government has been waging a war on the dominant players in concentrated industries – the large duopolies and oligopolies that feature in our business landscape. The agenda is all about crimping their pricing power to benefit consumers and the nation’s productivity.

ANZ boss Shayne Elliott -  has judicial approval to acquire Suncorp’s banking arm
ANZ boss Shayne Elliott – has judicial approval to acquire Suncorp’s banking armCredit: Michaela Pollock

The big four in banking, the big three in energy retailing and the two supermarket titans are easy targets.

Being a competition champion amid a cost of living crisis is a no-brainer for the government – and it has already embarked on a major competition review that will look at tightening laws on takeovers by beefing up the arsenal of the Australian Competition and Consumer Commission (ACCC).

Against this backdrop, ANZ’s bid to acquire the second tier bank owned by Queensland-based Suncorp looks like the perfect opportunity for Chalmers to flex his pro-competition muscle, given he has the authority to block the deal on public interest grounds.

But to do so would effectively see him overrule the Australian Competition Tribunal whose three competition experts have now determined that this deal is in the public interest and didn’t really move the dial on competition. The tribunal went even further, saying the merger would create significant public benefits.

The best outcome for Chalmers, who wants to enhance his pro-competition bona fides, would be for the ACCC to appeal the tribunal’s decision to the Federal Court.

Technically, the Queensland government could also be a barrier to the completion of this deal, but ANZ has already agreed to a range of generous sweeteners such as setting up a technology hub and staffing it with 700 people in the state – to say nothing of agreements around a moratorium on reducing staff and branch numbers.

So there will be no impediments to the deal coming from the north of the border.


The best outcome for Chalmers, who wants to enhance his pro-competition bona fides, would be for the ACCC to appeal the tribunal’s decision to the Federal Court.

But even were this to happen, the Federal Court may uphold the tribunal’s decision, leaving Chalmers with an even slimmer excuse to block the deal.

Ultimately, it would be difficult for the treasurer to prosecute a case that allowing this deal would go against the public interest or meaningfully diminish competition.

Over the past year, the banks have been bemoaning the previously unseen intensity of competition for both loans and deposits. Rather than taking their word for it, their financial results, in which their interest rate margins have come under pressure, bear witness to their claims.

“The tribunal is satisfied that the home loans market is conducive to co-ordination, not least because of the combined 72 per cent share of banking system assets of the major banks,” the tribunal said in the judgment.

“The conditions for co-ordination, however, have recently reduced, and are likely to continue to reduce in the foreseeable future due to the material asymmetry in the market shares of the major banks, the emergence of Macquarie as a “maverick” in the market, and the increasing use of brokers that has reduced consumer choice frictions, facilitating greater customer switching.”

In other words, this merger won’t make any difference to the big four’s ability to co-ordinate on pricing. Technology has allowed customers to more seamlessly move between banks and the market share push from Macquarie has further enhanced competition.

In making its decision, the tribunal disagreed with an earlier adjudication by the ACCC which was concerned that the acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is dominated by the four major banks.

ANZ boss Shane Elliott sees the competitive dynamics in a somewhat different light. He argues that ANZ increasing its market share strengthens its position against the dominant players in the home loan market – CBA and Westpac.

The ACCC said it would reflect on the tribunal’s decision, effectively giving no steer on whether it would appeal.

For months competition experts and the banking industry alike have been confidently predicting the tribunal would reverse the ACCC’s decision.

It would be a brave call for the ACCC to continue to pursue any attempt to block the deal and an even braver one for the treasurer to intervene.

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