A.C.C.C. NOT TO OPPOSE MERGER BETWEEN SUNCORP METWAY AND PROMINA The Australian Competition and Consumer Commission will not intervene in the proposed acquisition of Promina Group Ltd by Suncorp Metway Limited, ACCC Chairman, Mr Graeme Samuel, said today. "Market inquiries indicated that if the merged firm attempted to raise prices above competitive levels, existing competitors including small to medium sized players would be well placed to win customers from it. These existing competitors, and the threat of new entry, are likely to act as a strong competitive constraint on the merged firm. As a result, the ACCC does not consider that the acquisition will allow Suncorp to profitably raise premiums or diminish its level of service". "The ACCC considers that the proposed acquisition is unlikely to substantially lessen competition in any of the markets for various lines of personal insurance, the market for commercial insurance lines, or the markets for the other financial products and services offered by Suncorp and Promina". The ACCC investigation focussed on personal insurance lines, particularly CTP and motor vehicle insurance in Queensland, and home insurance nationally, as well as on suppliers of services to insurance companies, after it quickly became apparent that in the case of commercial insurance lines and the other financial products offered by Suncorp, there are a large number of other competitors who would be able to constrain the merged firm. "The ACCC conducted a comprehensive investigation, including extensive discussions with many industry participants", Mr Samuel said. "In relation to the main personal lines, the ACCC formed the view that the merged firm will be constrained by existing and potential new entrants since barriers to entry and expansion, such as brand loyalty, are not insurmountable. In particular, a number of major banks have used their existing brands, branch networks and customer relationships to expand their insurance distribution operations and move into insurance manufacturing in recent years. They appear well placed to strengthen their position in home and motor vehicle insurance, particularly if the larger players attempt to increase prices". The ACCC will be publishing a Public Competition Assessment in due course, which will be available on the ACCC website, www.accc.gov.au, under Mergers. Media inquiries Mr Graeme Samuel, Chairman, (02) 6243 1131 or mobile/pager 0408 335 555 Ms Lin Enright, Director, Public Relations, (02) 6243 1108 or 0414 613 520 General inquiries Infocentre: 1300 302 502 MR 315/06 20 December 2006 2 BACKGROUND Suncorp and Promina both manufacture and distribute personal and commercial insurance lines, as well as a range of other financial products and services such as life insurance, superannuation, wealth management and trustee services. Suncorp also provides banking services. The ACCC published a Statement of Issues on 6 December 2006, identifying a number of lines of further inquiry that the ACCC wished to undertake, and inviting submissions from market participants on the issues that had been raised. Section 50 of the Trade Practices Act 1974 prohibits mergers and acquisitions that will have the effect, or are likely to have the effect, of substantially lessening competition in a market. Section 50(3) sets out a non-exclusive list of matters that must be taken into account in determining whether an acquisition is likely to substantially lessen competition. The ACCC conducted an informal merger assessment process in relation to the proposed acquisition in accordance with its published guidelines. The ACCC's Merger review process guidelines are available on the ACCC website, www.accc.gov.au.
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