Applications by Australia and New Zealand Banking Group Limited and Suncorp Group Limited

[2024] ACompT 1

AUSTRALIAN COMPETITION TRIBUNAL

Applications by Australia and New Zealand Banking Group Limited and Suncorp Group Limited [2024] ACompT 1

Review from:

Applications by Australia and New Zealand Banking Group Limited and Suncorp Group Limited for review of Australian Competition and Consumer Commission Merger Authorisation Determination MA1000023

File number(s):

ACT 1 of 2023

Determination of:

Justice Halley (Deputy President)
Dr J Walker (Member)
Ms D Eilert (Member)

Date of determination:

20 February 2024

Catchwords:

COMPETITION – applications under s 101 of the Competition and Consumer Act 2010 (Cth) (CCA) for review of merger authorisation determination made by the Australian Competition and Consumer Commission (ACCC) – share sale and purchase agreement (share purchase agreement) entered into between Australia and New Zealand Banking Group Limited (ANZ) and Suncorp Group Limited (SGL) (together, applicants) which provided for purchase of Suncorp Bank by ANZ (Proposed Acquisition) – where ACCC refused authorisation of the Proposed Acquisition – where authorisation application opposed by Bendigo and Adelaide Bank Limited (Bendigo) – whether Tribunal satisfied that Proposed Acquisition would not be likely to have the effect of substantially lessening competition in the national home loans market and local or regional markets in Queensland for agribusiness customers and small to medium enterprises under s 90(7)(a) of CCA – where necessary to identify commercially realistic counterfactuals – where Tribunal considered two counterfactuals referred to as No Sale counterfactual where SGL retains ownership of Suncorp Bank and Bendigo Merger counterfactual where Bendigo acquires Suncorp Bank – where Tribunal satisfied of test under s 90(7)(a) of CCA – where test under s 90(7)(b) only arises for determination if Tribunal not satisfied that Proposed Acquisition satisfies s 90(7)(a) – where Tribunal satisfied, in any case, that Proposed Acquisition would result, or be likely to result in a benefit to the public and benefit would outweigh detriment to public that would result, or be likely to result, from the Proposed Acquisition – determination of the ACCC set aside – ANZ granted authorisation pursuant to s 88(1) and s 102(1) of the CCA to acquire Suncorp Bank pursuant to share purchase agreement

STATUTORY INTERPRETATION – meaning and application of “future with and without test” under
s 90(7)(a) of CCA – proper approach to evaluation of counterfactuals under s 90(7)(a) of CCA

Legislation:

Competition and Consumer Act 2010 (Cth), ss 4, 4G, 42, 45, 46, Pt IV, ss 45D, 45DB, 45E, 45EA, 47, 48, 50, 50A, 88, 90, Pt IX, ss 101, 102, 109, Pt VII

Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth)

Financial Sector (Shareholdings) Act 1988 (Cth)

Parliament of Queensland Act 2001 (Qld), s 8

State Financial Institutions and Metway Merger Act 1996 (Qld), s 63

Cases cited:

Application by Flexigroup Ltd (No 2) [2020] ACompT 2

Application by Medicines Australia Inc [2007] ACompT 4; (2007) ATPR 42-164

Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1

Applications by Telstra Corporation Limited and TPG Telecom Limited [2023] ACompT 1

Applications by Telstra Corporation Limited and TPG Telecom Limited (No 2) [2023] ACompT 2

Australian Competition and Consumer Commission v Australian Competition Tribunal [2017] FCAFC 150

Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475

Australian Competition and Consumer Commission v Flight Centre Travel Group (2016) 261 CLR 203; [2016] HCA 49

Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297; [2011] FCAFC 151

Australian Competition and Consumer Commission v Pacific National Pty Ltd (2020) 277 FCR 49; [2020] FCAFC 77

Australian Competition and Consumer Commission v Pacific National Pty Ltd (No 2) [2019] FCA 669

Australian Gas Light Co v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317; [2003] FCA 1525

O’Connor v Construction, Forestry, Mining, Maritime and Energy Union [2023] FCAFC 151

Oshlack v Richmond River Council (1998) 193 CLR 72

Re 7-Eleven Stores Pty Ltd (1994) 16 ATPR 41-357

Re Herald & Weekly Times Ltd (on Behalf of the Media Council of Australia) (1978) 17 ALR 281

Re Qantas Airways Ltd [2004] ACompT 9

Re Queensland Co-Operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 8 ALR 481

Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492

Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22; [2015] HCA 51

Number of paragraphs:

911

Date of hearing:

4-5, 7-8, 11-15 December 2023

Counsel for Australia and New Zealand Banking Group Limited:

Dr R Higgins SC with Ms A Lord and Ms K Lindeman

Solicitor for Australia and New Zealand Banking Group Limited:

Ashurst

Counsel for Suncorp Group Limited:

Mr C Moore SC with Mr P Strickland and Mr T Rogan

Solicitor for Suncorp Group Limited:

Herbert Smith Freehills

Counsel for Bendigo and Adelaide Bank Limited:

Mr N De Young KC with Ms S Chordia

Solicitor for Bendigo and Adelaide Bank Limited:

Webb Henderson

Counsel for Australian Competition and Consumer Commission:

Mr G Rich SC with Mr R Yezerski SC, Mr C Tran, Ms M Caristo and Ms E O’Connor Jardine

Solicitor for the Australian Competition and Consumer Commission:

Australian Government Solicitor

IN THE AUSTRALIAN COMPETITION TRIBUNAL

File No:	ACT 1 of 2023
Re:	Applications by Australia and New Zealand Banking Group Limited and Suncorp Group Limited for review of Australian Competition and Consumer Commission Merger Authorisation Determination MA1000023
Applicants:	Australia and New Zealand Banking Group Limited and Suncorp Group Limited
Intervenor:	Bendigo and Adelaide Bank Limited

DETERMINATION

TRIBUNAL:	Justice Halley (Deputy President) Dr J Walker (Member) Ms D Eilert (Member)
DATE:	20 February 2024
WHERE MADE:	Sydney

THE TRIBUNAL DETERMINES AND DIRECTS THAT:

1.The determination of the Australian Competition and Consumer Commission (ACCC) dated 4 August 2023 be set aside pursuant to s 102(1) of the Competition and Consumer Act 2010 (Cth) (CCA).

2.Australia and New Zealand Banking Group Limited (ANZ) is granted authorisation pursuant to s 88(1) and s 102(1) of the CCA to acquire from Suncorp Group Limited (SGL) 100% of the issued share capital in SBGH Limited, either directly or via a related body corporate of ANZ, and certain real estate and intellectual and other property rights held by other SGL entities to facilitate the operation of Suncorp-Metway Limited, in accordance with a share sale and purchase agreement between ANZ and SGL executed on 18 July 2022.

3.Until further direction of the Tribunal, the reasons of the Tribunal in this proceeding dated today are not to be made available to or published to any person save for:

(a)the ACCC, its staff and any other person assisting the ACCC in relation to the proceeding including the ACCC’s legal advisers; and

(b)the parties’ legal advisers who, by reason of previous directions of the Tribunal, are permitted to have access to the confidential information of each of the parties to the proceeding.

4.Within 10 days of the date hereof, the parties are to file jointly:

(a)a copy of the Tribunal’s reasons that marks, by way of coloured shading, those parts of the reasons that a party or the ACCC seeks to have redacted on the grounds of commercial confidentiality or on the grounds that the information is protected information for the purposes of s 56 of the Australian Prudential Regulation Authority Act 1998 (APRA Act). Different coloured shading is to be used for each party, the ACCC and information that is protected information for the purposes of s 56 of the APRA Act; and

(b)short submissions addressing the basis for the claim of confidentiality on behalf of each party and the extent to which those confidentiality claims are agreed.

5.Nothing in these directions prevents the ACCC from consulting with the Australian Prudential Regulation Authority (APRA) in respect of the reasons of the Tribunal.

REASONS FOR DETERMINATION

A.       INTRODUCTION	[1]
A.1. Overview	[1]
A.2. The commercial and economic context of the proposed acquisition	[6]
A.3. The ACCC determination	[14]
A.4. The application for review	[20]
B.       STATUTORY FRAMEWORK FOR THE TRIBUNAL’S REVIEW	[42]
B.1. Overview	[42]
B.2. Grant of authorisation	[53]
B.3. The review of the ACCC’s determination	[53]
B.4. Statutory preconditions to authorisation	[57]
B.5. Section 90(7)(a) – the competition test	[75]
B.6. Section 90(7)(b) – the net public benefits test	[75]
B.7. Exercise of discretion	[82]
C.       BACKGROUND	[86]
C.1. Overview	[86]
C.2. Regulatory framework	[115]
C.2.1.     ADI licensing	[115]
C.2.2.     Calculating ongoing ADI capital requirements	[115]
C.2.3.     Significant financial institutions	[115]
C.2.4.     Other regulatory requirements	[115]
C.2.5.     Non-bank lenders	[115]
C.3. Profitability indicators	[115]
C.4. Price and non-price competition	[115]
C.5. Structural barriers to competition	[115]
C.5.1.     Scale	[115]
C.5.2.     Funding sources	[135]
C.5.3.     Funding costs	[135]
C.5.4.     Customer switching	[135]
C.5.5.     Lack of brand recognition	[135]
C.5.6.     Distribution channels	[135]
D.       COMPETITION IN THE FUTURE WITHOUT THE PROPOSED ACQUISITION	[135]
D.1. Overview	[135]
D.2. No Sale counterfactual	[139]
D.2.1.     Overview	[139]
D.2.2.     The applicants’ submissions	[141]
D.2.3.     The ACCC’s submissions	[143]
D.2.4.     Consideration	[149]
D.3. Bendigo Merger counterfactual	[152]
D.3.1.     Overview	[152]
D.3.2.     Historical consideration by Bendigo and SGL of potential merger/divestiture proposals	[162]
D.3.2.1.          SGL consideration of divestiture of Suncorp Bank	[162]
D.3.2.2.          Bendigo consideration of a potential merger with Suncorp Bank	[180]
D.3.3.     Principal contentions of the parties	[192]
D.3.3.1.          The applicants’ submissions	[192]
D.3.3.1.1.       Prospects of Bendigo making a credible offer for Suncorp Bank	[194]
D.3.3.1.2.       Prospects of SGL accepting an offer from Bendigo for Suncorp Bank	[202]
D.3.3.1.3.       Additional hurdles to acceptance of a Bendigo offer for Suncorp Bank	[206]
D.3.3.2.          Bendigo’s submissions	[213]
D.3.3.3.          The ACCC’s submissions	[221]
D.3.4.     Realisation of cost synergies	[228]
D.3.4.1.          Overview	[228]
D.3.4.2.          The applicants’ submissions	[231]
D.3.4.3.          Bendigo’s submissions	[241]
D.3.5.     Funding dis-synergies	[251]
D.3.5.1.          Overview	[251]
D.3.5.2.          The applicants’ submissions	[254]
D.3.5.3.          Bendigo’s submissions	[262]
D.3.6.     Capital dis-synergy and IRB status	[267]
D.3.6.1.          Overview	[267]
D.3.6.2.          The applicants’ submissions	[269]
D.3.6.3.          Bendigo’s submissions	[274]
D.3.7.     Capital raising and integration costs	[278]
D.3.7.1.          Overview	[278]
D.3.7.2.          The applicants’ submissions	[280]
D.3.7.3.          Bendigo’s submissions	[283]
D.3.8.     Consideration	[286]
E.       RELEVANT MARKETS	[323]
E.1. Introduction	[323]
E.2. National home loans market	[328]
E.3. Agribusiness and SME Banking markets	[331]
E.3.1.     Overview	[331]
E.3.2.     The applicants’ submissions	[333]
E.3.3.     The ACCC’s submissions	[341]
E.3.3.1.           Agribusiness markets	[341]
E.3.3.2.           SME markets	[347]
E.3.4.     Consideration	[351]
E.3.4.1.           Overview	[351]
E.3.4.2.           Agribusiness markets	[354]
E.3.4.3.           SME markets	[362]
F.        COMPETITIVE EFFECTS OF THE PROPOSED ACQUISITION IN THE NATIONAL HOME LOANS MARKET	[368]
F.1.  Overview	[368]
F.2.  Economic framework to analyse coordinated effects	[375]
F.2.1.     What are coordinated effects?	[375]
F.2.2.     The key to coordinated effects is what changes	[385]
F.3.  The principal contentions of the parties	[391]
F.3.1.     The applicants’ submissions	[391]
F.3.2.     Bendigo’s submissions	[395]
F.3.3.     The ACCC’s submissions	[398]
F.4.  Is the National Home Loans market conducive to coordination?	[402]
F.4.1.     Overview	[402]
F.4.2.     Market structure	[403]
F.4.2.1.           Overview	[403]
F.4.2.2.           The applicants’ submissions	[404]
F.4.2.3.           Bendigo’s submissions	[406]
F.4.2.4.           The ACCC’s submissions	[408]
F.4.2.5.           Consideration	[411]
F.4.3.     Symmetry and alignment	[425]
F.4.3.1.           Overview	[425]
F.4.3.2.           The applicants’ submissions	[426]
F.4.3.3.           The ACCC’s submissions	[429]
F.4.3.4.           Consideration	[431]
F.4.4.     Price transparency	[452]
F.4.4.1.           Overview	[452]
F.4.4.2.           The applicants’ submissions	[453]
F.4.4.3.           The ACCC’s submissions	[454]
F.4.4.4.           Consideration	[456]
F.4.5.     Consumer choice frictions	[461]
F.4.5.1.           Overview	[461]
F.4.5.2.           The applicants’ submissions	[462]
F.4.5.3.           The ACCC’s submissions	[466]
F.4.5.4.           Consideration	[468]
F.4.6.     Barriers to entry and expansion	[476]
F.4.6.1.           Overview	[476]
F.4.6.2.           The applicants’ submissions	[478]
F.4.6.3.           The ACCC’s submissions	[482]
F.4.6.4.           Consideration	[484]
F.4.7.     Recent increased price competition	[501]
F.4.7.1.           Overview	[501]
F.4.7.2.           The applicants’ submissions	[505]
F.4.7.3.           Bendigo’s submissions	[514]
F.4.7.4.           The ACCC’s submissions	[518]
F.4.7.5.           Consideration	[522]
F.4.8.     Overall assessment	[539]
F.5. Would the Proposed Acquisition increase the likelihood or sustainability of coordination in the home loans market?	[552]
F.5.1.     Overview	[552]
F.5.2.     Likelihood of increase in coordination if the Proposed Acquisition proceeds	[554]
F.5.2.1.           The applicants’ submissions	[554]
F.5.2.2.           The ACCC’s submissions	[560]
F.5.2.3.           Consideration	[564]
F.5.3.     Likelihood of comparative decrease in coordination in the No Sale counterfactual	[570]
F.5.3.1.           The applicants’ submissions	[570]
F.5.3.2.           The ACCC’s submissions	[573]
F.5.3.3.           The applicants’ submissions in reply	[575]
F.5.3.4. Consideration	[579]
F.5.4. Likelihood of comparative decrease in coordination in the Bendigo Merger counterfactual	[585]
F.5.4.1.           The applicants’ submissions	[585]
F.5.4.2.           Bendigo’s submissions	[594]
F.5.4.3.           Consideration	[601]
G.       COMPETITIVE EFFECTS OF THE PROPOSED ACQUISITION IN AGRIBUSINESS BANKING MARKETS	[617]
G.1. Overview	[617]
G.2. The principal contentions of the parties	[620]
G.2.1.     The applicants’ principal contentions	[620]
G.2.2.     Bendigo’s principal contentions	[621]
G.2.3.     The ACCC’s principal contentions	[622]
G.3. Market concentration	[624]
G.3.1.     The applicants’ submissions	[624]
G.3.2.     The ACCC’s submissions	[625]
G.3.3.     Consideration	[626]
G.4. Competitive overlap between ANZ and Suncorp Bank	[635]
G.4.1.     The applicants’ submissions	[635]
G.4.2.     Bendigo’s submissions	[639]
G.4.3.     The ACCC’s submissions	[642]
G.4.4.     Consideration	[643]
G.5. Is the Suncorp Bank offering differentiated and competitive?	[651]
G.5.1. The applicants’ submissions	[651]
G.5.2.     Bendigo’s submissions	[657]
G.5.3.     The ACCC’s submissions	[658]
G.5.4.     Consideration	[660]
G.6. Maintaining Suncorp Bank’s relationship managed model	[683]
G.6.1.     The applicants’ submissions	[683]
G.6.2.     Bendigo’s submissions	[687]
G.6.3.     Consideration	[688]
G.7. Barriers to entry or expansion	[696]
G.7.1.     The applicants’ submissions	[696]
G.7.2.     The ACCC’s submissions	[697]
G.7.3.     Consideration	[699]
G.8. Use of brokers	[702]
G.8.1.     The applicants’ submissions	[702]
G.8.2.     The ACCC’s submissions	[704]
G.8.3.     Consideration	[705]
G.9. Constraint imposed by Suncorp Bank in the No Sale counterfactual	[712]
G.9.1      The applicants’ submissions	[712]
G.9.2.     Bendigo’s submissions	[715]
G.9.3      The ACCC’s submissions	[716]
G.9.4.      Consideration	[717]
G.10           Constraint imposed by merged Bendigo/Suncorp Bank in the Bendigo Merger counterfactual	[725]
G.10.1.               The applicants’ submissions	[725]
G.10.2.               Bendigo’s submissions	[726]
G.10.3.               The ACCC’s submissions	[728]
G.10.4.               Consideration	[729]
G.11.          Overall assessment	[737]
H.       COMPETITIVE EFFECTS OF THE PROPOSED ACQUISITION IN SME BANKING MARKETS	[747]
H.1. Overview	[747]
H.2. The principal contentions of the parties	[750]
H.2.1.     The applicants’ principal contentions	[750]
H.2.2.     The ACCC’s principal contentions	[752]
H.3. Market concentration	[755]
H.3.1.     The applicants’ submissions	[755]
H.3.2.     The ACCC’s submissions	[756]
H.3.3.     Consideration	[758]
H.4. Competitive overlap between ANZ and Suncorp Bank	[766]
H.4.1.     The applicants’ submissions	[766]
H.4.2.     The ACCC’s submissions	[767]
H.4.3.     Consideration	[768]
H.5. Is the Suncorp Bank offering differentiated and competitive?	[772]
H.5.1.     The applicants’ submissions	[772]
H.5.2.     The ACCC’s submissions	[780]
H.5.3.     Consideration	[782]
H.6. Barriers to entry and expansion	[790]
H.6.1.     The applicants’ submissions	[790]
H.6.2.     The ACCC’s submissions	[791]
H.6.3.     Consideration	[794]
H.7. Use of brokers	[798]
H.7.1.     The applicants’ submissions	[798]
H.7.2.     The ACCC’s submissions	[799]
H.7.3.     Consideration	[801]
H.8. Constraint imposed by Suncorp Bank in the No Sale counterfactual	[805]
H.9. Constraint imposed by merged Bendigo/Suncorp Bank in the Bendigo Merger counterfactual	[807]
H.9.1.     The applicants’ submissions	[807]
H.9.2.     Consideration	[810]
H.10.          Overall assessment	[813]
I.         PUBLIC BENEFITS AND DETRIMENTS OF THE PROPOSED ACQUISITION	[827]
I.1.   Overview	[827]
I.1.1.       The principal contentions of the parties	[830]
I.1.1.1.            The applicants’ principal contentions	[830]
I.1.1.2.            Bendigo’s principal contentions	[832]
I.1.1.3.            The ACCC’s principal contentions	[834]
I.2.   Benefits to the public	[844]
I.2.1.       SGL becoming a “pureplay” insurer	[844]
I.2.2.       Productive efficiencies from integration synergies	[848]
I.2.3.       Prudential safety benefits	[855]
I.2.4.       Increase in Major Bank Levy	[862]
I.2.5.       Queensland commitments	[866]
I.2.5.1.            Overview	[866]
I.2.5.2.            The applicants’ submissions	[871]
I.2.5.3.            Bendigo’s submissions	[875]
I.2.5.4.            The ACCC’s submissions	[877]
I.2.5.5.            State of Queensland’s submissions	[881]
I.2.5.6. Consideration	[885]
I.3    Detriments to the Public	[894]
I.3.1.               The applicants’ submissions	[894]
I.3.2.               Bendigo’s submissions	[898]
I.3.3.               The ACCC’s submissions	[899]
I.4.   Overall assessment	[901]
J.        DETERMINATION	[908]

THE TRIBUNAL:

A.       INTRODUCTION

A.1.     Overview

1. The applicants, Australian and New Zealand Banking Group Limited (ANZ) and Suncorp Group Limited (SGL), seek a review by the Tribunal of a decision by the Australian Competition and Consumer Commission (ACCC), on 4 August 2023, not to authorise an acquisition by ANZ of Suncorp-Metway Limited (Suncorp Bank) from SGL.

2. The ACCC declined to authorise the proposed acquisition because it was not satisfied that (a) the acquisition would not be likely to have the effect of substantially lessening competition in a national home loans market and in local or regional banking markets in Queensland for agribusiness customers and small to medium enterprises (SME), and (b) that the benefits to the public of the proposed acquisition would outweigh detriments to the public, from the proposed acquisition.

3. The applications by ANZ and SGL are opposed by Bendigo and Adelaide Bank Limited (Bendigo). Bendigo contends that the proposed acquisition of Suncorp Bank by ANZ would be likely to have the effect of substantially lessening competition in a national home loans market and in local or regional banking markets in Queensland for agribusiness customers. It contends that the acquisition of Suncorp Bank by ANZ would further consolidate ANZ’s market position and structural advantages as a major bank, without engaging in competition, to the substantial detriment of competition in the home loans and agribusiness markets.

4. In addition, the State of Queensland sought and was given leave to provide a submission for the sole purpose of clarifying information provided to the ACCC in connection with the making of its determination.  

5. For the reasons that follow, the Tribunal is satisfied that the acquisition of Suncorp Bank by ANZ would not be likely to have the effect of substantially lessening competition in each of the national home loans market and local or regional Queensland markets for agribusiness customers and SME. Further, although strictly not necessary to determine given that finding, the Tribunal is also satisfied that the acquisition would be likely to result in a benefit to the public that would outweigh the detriment to the public that would be likely to result from the acquisition.  

   A.2.     The commercial and economic context of the proposed acquisition

6. The Australian banking sector presently includes the four major banks: ANZ, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Corporation (Westpac) (together, Major Banks), second-tier banks and other authorised deposit taking institutions (ADIs). The second-tier banks include banks at or around the size of Suncorp Bank, Macquarie Bank (Macquarie), ING Bank Australia (ING), Bendigo, Bank of Queensland and HSBC Bank Australia (HSBC). All of the Major Banks and second-tier banks are ADIs.

7. The Tribunal notes that beyond traditional non-bank lenders, since the Global Financial Crisis banking systems around the world have been facing threats of disruption from a range of digital players, particularly “BigTech” firms (large platform-based service providers such as Google, Apple and Amazon). As banking moves from a world of physical service delivery to one of digital service delivery, BigTech firms are expanding into financial services, particularly payment services.0F[1]

   [1]OECD, Digital Disruption in Banking and its Impact on Competition (2020) [HB 10/325/857].

8. The threat posed by BigTech firms to the banking sector was summarised in the following terms in a [REDACTED] Board Paper from 2021:

   [REDACTED]1F[2]

   [2]           [REDACTED]

9. The Major Banks collectively account for 72% of reported banking system assets in Australia.2F[3] The second-tier banks each have a share of banking system assets greater than 1% and collectively account for close to 14% of reported banking system assets, having increased their share of assets over the past decade. Other ADIs individually hold a share of banking system assets less than 0.7%, which includes 49 foreign bank branches, who primarily target niche areas and 57 credit unions and building societies, who operate under a mutual structure where customers are members and profits are reinvested back into the business.3F[4]

   [3]Joint Document identifying all findings on factual matters set out in the ACCC’s Reasons for Determination that are not contested by the parties on the Review dated 2 November 2023 (Agreed Factual Findings) [4.4].

   [4]Agreed Factual Findings [4.4]-[4.7].

10. The share of the Major Banks, second-tier banks and other ADIs, as a proportion of banking system assets as at May 2023, are set out in the following table:4F[5]

    [5]ACCC Reasons for Determination [HB 3/16/31] at [4.7], per ACCC calculations based on APRA Monthly Authorised Deposit Taking Institution Statistics May 2023 (issued 30 June 2023), calculated by dividing each entity’s ‘total resident assets’ by the total value of ‘total resident assets’ reported by all ADIs. These facts are agreed: Agreed Factual Findings [4.7].

11. Non-ADI lenders account for around 5% of total financial system assets in Australia.5F[6] Non-ADI lenders include smaller financial technology providers which can be broadly described as “fintechs”.6F[7]

    [6]           Agreed Factual Findings [4.9].

    [7]           Agreed Factual Findings [4.20]-[4.21].

12. The Major Banks and the second-tier banks all provide retail and business banking services and have larger retail loan books than business loan books. Banks, however, focus on different customer segments and the relative size of their retail portfolio compared with their business portfolio will vary significantly by bank.7F[8] For second-tier banks such as Bendigo, Bank of Queensland, ING, HSBC, Macquarie and Suncorp Bank, their retail lending (lending to households or individuals) represents between 78% and 89% of their total loan book. Suncorp Bank’s retail lending is 80% of its total loan book.8F[9] It is generally the case that second-tier banks provide a higher proportion of retail lending relative to their business lending, than the Major Banks.

    [8]           Agreed Factual Findings [4.12].

    [9]           Agreed Factual Findings [4.15].

13. Smaller banks also have portfolios focused on particular business customer segments. For example, for [REDACTED], lending to SME customers accounts for between [REDACTED] of total business lending.9F[10] The banks with the largest exposure to agribusiness lending as a proportion of their total business lending are [REDACTED].10F[11]

    A.3.     The ACCC determination

    [10]          Agreed Factual Findings [4.17].

    [11]          Agreed Factual Findings [4.18].

14. On 2 December 2022, ANZ lodged an application with the ACCC seeking authorisation under s 88(1) of the Competition and Consumer Act 2010 (Cth) (CCA) for ANZ to acquire 100% of the shares in SGBH Limited from SGL pursuant to the terms of a share sale and purchase agreement between ANZ and SGL executed on 18 July 2022 (Proposed Acquisition). SGBH Limited is a non-operating holding company that owns 100% of the shares of Suncorp Bank, which together with its subsidiaries, owns and operates SGL’s banking business in Australia.

15. On 4 August 2023, the ACCC made a determination dismissing the application by ANZ for authorisation of the Proposed Acquisition.

16. The ACCC concluded with respect to competitive effects that:

    Given the ACCC’s conclusions in relation to the markets for home loans, SME banking, and agribusiness banking, the ACCC is not satisfied in all the circumstances that the Proposed Acquisition is not likely to substantially lessen competition.11F[12]

    [12]          ACCC Reasons for Determination [HB 3/16/76].

17. The ACCC concluded with respect to public benefits and detriments that:

    The ACCC is not satisfied, in all the circumstances, that the Proposed Acquisition would result, or be likely to result, in a benefit to the public that would outweigh the detriment to the public that would result, or be likely to result, from the Proposed Acquisition.12F[13]

    [13]          ACCC Reasons for Determination [HB 3/16/81].

18. The ACCC records in its determination that it commissioned and had regard to an expert report from Professor Nicolas de Roos and two expert reports from Mary Starks in reaching its conclusions. It also records that it had regard to submissions received from ANZ, SGL and interested parties, including:13F[14]

    [14]          ACCC Reasons for Determination [HB 3/16/90-1] at [3.15].

    •ANZ’s application in support of the merger authorisation and related annexures including witness statements

    •Expert reports provided by the merger parties and interested parties

    •27 submissions from interested parties in response to the ACCC’s initial consultation process including six confidential submissions

    •over 20 submissions from interested parties following the ACCC’s statement of preliminary views

    •ANZ’s response to submissions from interested parties,89 the ACCC’s statement of preliminary views, and Ms Starks’ reports, including witness statements and expert reports

    •Suncorp Group’s response to submissions from interested parties, the ACCC’s statement of preliminary views, and Ms Starks’ reports, including witness statements and expert reports

    •submissions from the merger parties

    (Footnotes omitted.)

19. The ACCC provided the following summary of the submissions made by interested parties:

    Overview of interested party submissions

    3.26. Submissions to the ACCC from interested parties raise a variety of views on issues related to the Proposed Acquisition.

    3.27.Several interested parties raised competition concerns regarding the Proposed Acquisition, noting:

    •it would result in the removal of a significant second-tier competitor

    •Suncorp Bank’s position in the supply to agribusiness markets

    •there is inertia for customers switching between providers

    •the low prospect of successful new entry and expansion in the industry

    •increased consolidation of market share among major banks would make the relevant markets more susceptible to coordinated interactions.

    3.28.In particular, CowBank and BMAgBiz submit that agribusiness customers have specialist needs and expressed concern that the Proposed Acquisition would reduce competition and availability of finance, particularly for bespoke agribusinesses with more complex needs. Judo Bank and Bank of Queensland submit that markets for supply to agribusiness and small to medium enterprise (SME) customers demonstrate state, regional and local characteristics.

    3.29.BEN and Judo Bank submit that there is a realistic likelihood that Suncorp Bank, at least in part, could be acquired by another purchaser. BEN further submits that the counterfactual where Suncorp Bank is acquired by BEN is commercially realistic.

    3.30.In addition to competition concerns, interested parties opposing authorisation generally raised concerns that the Proposed Acquisition would lead to public detriments and some questioned the extent to which synergies and benefits claimed by the merger parties will materialise if the Proposed Acquisition proceeds.

    3.31.Particularly, several submissions expressed concerns that the Proposed Acquisition would reduce access to and quality of services due to branch closures and a focus away from Queensland and regional areas.

    3.32.Similarly, the Consumers’ Federation of Australia, Clyde and Gail Andrews, and Property Rights Australia raise concerns that the Proposed Acquisition would impact on access to services for vulnerable customers including those in regional areas which may have poor internet access, elderly customers and those experiencing vulnerability.

    3.33.Other interested parties, including an insurer, supported or expressed neutral views regarding authorisation. Rabobank expressed neutral views.

    3.34.Interested parties supporting the Proposed Acquisition generally note that the major banks are subject to existing competitive pressure driving investment in technology, and that the Proposed Acquisition would enable Suncorp Group to be more focused and fill unmet client needs in the insurance industry.

    3.35.The ACCC also received a large number of submissions from consumers. These submissions raise a number of concerns regarding the conduct of ANZ and Suncorp Bank and the Proposed Acquisition, including general concerns about competition and regulation in the Australian banking industry, such as applicable dispute resolution obligations, potential branch closures, attrition of Suncorp Bank employees and potential price increases. Several of these submissions also raise concerns about how ANZ and Suncorp Bank have handled individual disputes with their customers.

    (Footnotes omitted.)

    A.4.     The application for review

20. On 25 August 2023, each of ANZ and SGL (collectively, the applicants) filed applications in the Tribunal pursuant to s 101 of the CCA for a review of the ACCC’s determination made on 4 August 2023. On 29 August 2023, the Tribunal made directions for the two applications to be determined together. There is no reason to distinguish between the applications and, in these reasons, the two applications will be referred to as the “application”. The Tribunal also notes that whilst each of the applicants filed separate concise statements of facts, issues and contentions (SOFIC) and submissions, in substance, the applicants advanced their case collectively. Each addressed different aspects of the application and adopted the submissions made by the other. The Tribunal, therefore, has considered it appropriate to address the submissions made by each of ANZ and SGL below, collectively, as the applicants’ submissions.

21. On 29 August 2023, the Tribunal also made a direction pursuant to s 109(2) of the CCA permitting Bendigo to intervene in this proceeding.

22. On 27 November 2023, the Tribunal made a direction that the State of Queensland file and serve the submissions annexed to an affidavit of Michael John Kimmins dated 6 October 2023, and on 15 December 2023, the Tribunal made a direction pursuant to s 102(10)(d) of the CCA formally requesting that the State of Queensland provide those submissions, for the sole purpose of clarifying information provided to the ACCC in connection with the making of its determination.

23. The application for authorisation filed by ANZ is a merger authorisation within the meaning of the CCA.

24. The Proposed Acquisition is subject to three conditions precedent (a) approval by the Federal Treasurer under the Financial Sector (Shareholdings) Act 1988 (Cth), (b) a final determination by the Tribunal to authorise the Proposed Acquisition or a declaration made by the Federal Court of Australia that the Proposed Acquisition would not contravene s 50 of the CCA, subject to there being no lodgements of a relevant application for review of the declaration or a notice of appeal, and (c) the State Financial Institutions and Metway Merger Act 1996 (Qld) (Metway Merger Act) being either repealed or amended such that it does not apply to any holding company of Suncorp Bank or ANZ or its related bodies corporate, with reference to certain agreed amendments and agreed commitments to the Queensland government set out in Schedule 17 of the Share Sale and Purchase Agreement or as otherwise agreed between the parties and the Queensland government.

25. A review by the Tribunal of authorisation determinations made by the ACCC is governed by the provisions of Pt IX of the CCA. As explained in the Tribunal’s decision in Applications by Telstra Corporation Limited and TPG Telecom Limited [2023] ACompT 1 (Telstra/TPG (No 1)) at [9] (O’Bryan J, Dr J Walker and Ms D Eilert), a review of a merger authorisation under Pt IX differs from a review of other authorisations in two material ways:

    (a)first, a review of a merger authorisation is required to be completed by the Tribunal within a statutory time period (whereas a review of other authorisations is not subject to any time limit); and

    (b)second, a review of a merger authorisation is not a re-hearing of the matter (whereas a review of other authorisations is a re-hearing of the matter) and, correspondingly, restrictions are imposed on the information, documents and evidence to which the Tribunal may have regard in a review of a merger authorisation (whereas no such restrictions are imposed in a review of other authorisations).

26. In the usual course, the statutory time period for the completion of a review of a merger authorisation is within 90 days. However, under s 102(1AD) of the CCA, the Tribunal may determine in writing that the matter cannot be dealt with properly within the initial period, either because of its complexity or because of other special circumstances, and that an extended period applies for the review, which consists of the initial period and a further specified period of not more than 90 days.

27. On 29 August 2023, the Tribunal made a determination in writing to that effect such that the period of the present review is 180 days, which ends on 20 February 2024.

28. With respect to the information, documents and evidence to which the Tribunal may have regard in this review, and in accordance with s 102(9) and s 102(10) of the CCA, the Tribunal has only had regard to (a) information that was referred to in the ACCC’s Reasons for Determination, (b) information furnished, documents produced or evidence given to the ACCC in connection with the making of its determination, (c) supplementary information provided to the Tribunal by the parties that did not exist at the time that the ACCC published its Reasons for Determination, and (d) information provided by the State of Queensland pursuant to the request from the Tribunal, for the sole purpose of clarifying information provided to the ACCC in connection with it making its determination.

29. The information, documents and evidence given to the ACCC in connection with the making of its determination was extensive. The ACCC received more than 50 submissions, 27 witness statements, 12 expert reports, and commissioned a further three expert reports. The ACCC also used its compulsory evidence gathering powers to require the applicants and other third parties to provide information and documents, which culminated in the ACCC receiving more than 200,000 documents. The ACCC conducted compulsory examinations on a number of individuals.14F[15]

    [15]          ACCC Reasons for Determination [HB 3/16/66].

30. The evidence given to the ACCC included a number of witness statements of executives of ANZ, SGL, Suncorp Bank, and Bendigo and expert reports prepared on behalf of those parties. The Tribunal has found the witness statements to be of assistance in understanding the commercial context in which the Proposed Acquisition arose and the options available to ANZ, SGL, Suncorp Bank, and Bendigo, if the Proposed Acquisition does not proceed. The witnesses who gave statements are summarised below.

31. SGL relied on statements from the following lay witnesses:

    (a)Steve Johnston, the CEO of SGL, dated 25 November 2022, 17 May 2023 (two statements), and 13 July 2023;

    (b)Clive van Horen, CEO of Suncorp Bank, dated 25 November 2022, 17 May 2023, and 14 July 2023; and

    (c)Adam Bennett, CIO of SGL, dated 16 May 2023.

32. ANZ relied on statements from the following lay witnesses:

    (a)Adrian Went, the Group Treasurer of ANZ, dated 28 November 2022 and 17 May 2023;

    (b)Shayne Elliott, the CEO of ANZ, dated 30 November 2022, 17 May 2023, and 30 June 2023;

    (c)Douglas John Campbell, the General Manager, Home Loans Australia, in the Australia Retail Division at ANZ, dated 30 November 2022 and 17 May 2023;

    (d)Isaac James Christian Rankin, the Managing Director of Commercial and Private Banking at ANZ, dated 30 November 2022;

    (e)Yiken Yang, General Manager, Deposits, ANZ, dated 30 November 2022 and 17 May 2023;

    (f)Mark Bennett, Head of Agribusiness, Australia Commercial Division ANZ, dated 1 December 2022, 17 May 2023, and 7 July 2023;

    (g)Guy Samuel Mendelson, Managing Director, Business Owners Portfolio, Australia Commercial Division ANZ, dated 1 December 2022;

    (h)Peter Dalton, Managing Director Designer and Delivery ANZx, dated 13 December 2022;

    (i)Louise Claire Higgins, Managing Director, Suncorp Integration ANZ, dated 17 May 2023 and 17 July 2023; and

    (j)James Anthony Lane, State Manager of Business Banking, Queensland, Australia Commercial Division ANZ, dated 17 July 2023.  

1. Bendigo relied on a witness statement made by Cameron Telford Stewart, Head of Mergers and Acquisitions at Bendigo, dated 3 March 2023.

2. In the course of its assessment of the application for authorisation, the ACCC also examined a number of those witnesses and other executives of the parties pursuant to its powers under s 155 of the CCA. The persons from ANZ examined by the ACCC were Mr Elliott, Mr Campbell, and Mr Yang. The persons from Suncorp Bank examined were Dr van Horen, Mr Johnston (examined twice), and Dean Cleland, Executive General Manager, Business Banking. The persons from Bendigo examined were Marnie Baker, CEO and Managing Director of Bendigo, (examined twice) and Ryan Brosnahan, Bendigo’s Chief Transformation Officer.

3. SGL relied on the following expert reports:

   (a)a report prepared by Dr David Howell, dated 15 May 2023, addressing the likely issuer credit rating for a merged Bendigo/Suncorp Bank; and

   (b)reports prepared by Mozammel Ali, dated 17 May 2023 and 23 July 2023, addressing the funding costs and challenges of the Proposed Acquisition, the second report responded to reports prepared by Ms Starks that address advanced internal ratings-based accreditation issues arising out of the Proposed Acquisition.

4. ANZ relied on the following expert reports:

   (a)reports prepared by Dr Jeffery Carmichael AO, dated 25 November 2022 and 13 May 2023, addressing the prudential public benefits and detriments arising out of the Proposed Acquisition;

   (b)reports prepared by Dr Phillip Williams AM, dated 1 December 2022 and 19 May 2023, addressing the likely competitive effects of the Proposed Acquisition in relation to the supply of banking products in Australia, identification of the relevant product and geographic dimensions of the market or markets for commercial banking products, and whether the Proposed Acquisition is likely to substantially lessen competition in relation to the relevant market or markets; and

   (c)reports prepared by Patrick Smith, dated 1 December 2022, 17 May 2023, and 17 July 2023, addressing whether the net cost savings described in the workbook titled ‘Synergies and one-off costs’ would be a public benefit of the Proposed Acquisition and whether the impacts of the funding costs identified in the witness statement of Mr Went would be considered a public benefit.

5. Bendigo relied on expert reports prepared by Professor Stephen King, dated 3 March 2023 and 28 June 2023, addressing whether the Proposed Acquisition would have the effect of substantially lessening competition in any market in Australia and whether public benefits would outweigh detriments as a result of the Proposed Acquisition.

6. The ACCC relied on the following expert reports:

   (a)a report prepared by Professor Nicolas de Roos, dated 5 April 2023, addressing the concept of “coordinated effects” as it applies to the competition assessment of mergers and acquisitions in general. The report further sets out a high-level framework for assessing any change in the likelihood, extent, or severity and sustainability of coordinated effects arising out of the Proposed Acquisition compared with a counterfactual in which the Proposed Acquisition did not proceed;

   (b)a report prepared by Mary Starks, dated 16 June 2023, in response to the expert reports of Dr Williams, and Dr Carmichael. The report also addresses the appropriate markets or areas of competitive overlap for analysing the competitive effects of the Proposed Acquisition and whether the Proposed Acquisition would have the effect of substantially lessening competition in the relevant areas of competitive overlap; and

   (c)a supplementary expert report prepared by Ms Starks, dated 7 July 2023, addressing whether any of her conclusions in her first report are altered considering the additional information provided to her listed at Annexure A of the supplementary report.

7. In accordance with Direction 13 of the directions made on 29 August 2023, as varied by Direction 11 of the directions made on 20 October 2023, the parties have prepared and filed a joint document identifying all findings on factual matters set out in the ACCC’s Reasons for Determination that are not contested by the parties on this review (Agreed Factual Findings).

8. The Tribunal has adopted the Agreed Factual Findings for the purposes of making this determination.

9. The Tribunal has also received and had regard to (a) the SOFICs filed on behalf of each of the parties to this proceeding, (b) written submissions filed on behalf of each of the parties in advance of the hearing, and (c) oral submissions advanced on behalf of each of the parties during the hearing, together with a number of aide memoires and further written submissions provided to the Tribunal during the hearing.

   B.       STATUTORY FRAMEWORK FOR THE TRIBUNAL’S REVIEW

   B.1.     Overview

10. The grant of authorisations by the ACCC under Pt VII of the CCA and the Tribunal’s review of determinations by the ACCC in respect of authorisation applications, was amended significantly by the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth) (2017 Amendment Act): see Telstra/TPG (No 1); Applications by Telstra Corporation Limited and TPG Telecom Limited (No 2) [2023] ACompT 2 (Telstra/TPG (No 2)); see also the Explanatory Memorandum to the enacting bill, the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 (2017 Explanatory Memorandum).

11. The amendments largely implemented the recommendations from the Competition Policy Review chaired by Professor Ian Harper (Harper Review). Consistently with the Harper Review’s two principal recommendations in respect of authorisations, notifications and class exemptions, the 2017 Amendment Act purported to simplify the authorisation regime such that (a) only a single authorisation application was required for a single business arrangement or transaction, and (b) the ACCC was newly empowered to grant authorisation on the basis that the conduct would not be likely to substantially lessen competition.

12. The effect and purpose of the statutory provisions and principles relevant to an authorisation application were largely not in dispute between the parties.

13. The following consideration of the statutory framework and principles governing the Tribunal’s review in this matter was determined in accordance with the opinion of the presidential member presiding: s 42(1) of the CCA.

    B.2.     Grant of authorisation

14. Section 88 of the CCA empowers the ACCC to grant authorisations in respect of conduct that would or might otherwise contravene the provisions prohibiting restrictive trade practices under Pt IV of the CCA and is relevantly expressed in the following terms:

    88       Commission may grant authorisations

    Granting an authorisation

    (1)Subject to this Part, the Commission may, on an application by a person, grant an authorisation to a person to engage in conduct, specified in the authorisation, to which one or more provisions of Part IV specified in the authorisation would or might apply.

    Note:For an extended meaning of engaging in conduct, see subsection 4(2).

15. While the authorisation remains in force, the provisions in Pt IV of the CCA will not apply in respect of the conduct that is the subject of the authorisation to the extent it is engaged in by the applicant, any other person named or referred to in the application as a person who is engaged in, or who is proposed to be engaged in, the conduct and any other particular persons or classes of persons, as specified in the authorisation, who become engaged in the conduct: s 88(2) of the CCA.

16. In respect of an authorisation application, the ACCC shall make a determination in writing either granting such authorisation as it considers appropriate or dismissing the application: s 90(1) of the CCA.

17. By s 90(7) of the CCA, the statutory preconditions to the determination of an authorisation application are expressed as follows:

    90       Determination of applications of authorisations

    …

    (7)The Commission must not make a determination granting an authorisation under section 88 in relation to conduct unless:

    (a)the Commission is satisfied in all the circumstances that the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition; or

    (b)the Commission is satisfied in all the circumstances that:

    (i)the conduct would result, or be likely to result, in a benefit to the public; and

    (ii)the benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct; or

18. An “authorisation” is defined in s 4 of the CCA to mean an authorisation under Div 1 of Pt VII granted by the ACCC or by the Tribunal on a review of the ACCC’s determination.

19. A “merger authorisation” is defined in s 4 of the CCA in the following terms:

    merger authorisation means an authorisation that:

    (a)is an authorisation for a person to engage in conduct to which section 50 or 50A would or might apply; but

    (b)is not an authorisation for a person to engage in conduct to which any provision of Part IV other than section 50 or 50A would or might apply.

20. The effect of assigning a specific definition to “merger authorisation” is to limit such authorisations to conduct to which only s 50 or s 50A of the CCA would or might apply.

    B.3.     The review of the ACCC’s determination

21. A person dissatisfied with a determination by the ACCC under Div 1 of Pt VII of the CCA, in relation to an application for an authorisation may apply to the Tribunal for a review of the determination: s 101(1)(a) of the CCA. On a review of the ACCC’s determination in relation to an application for authorisation, the Tribunal may make a determination affirming, setting aside or varying the ACCC’s determination and, for the purposes of the review, may perform all the functions and exercise all the powers of the ACCC: s 102(1)(a) of the CCA. A determination by the Tribunal pursuant to s 102(1) is taken to be a determination of the ACCC: s 102(2) of the CCA.

22. The Tribunal’s task on review is to “make its own findings of fact and reach its own decision as to whether authorisation should be granted or not, and if so, any conditions to which it is to be subject”: Application by Medicines Australia Inc [2007] ACompT 4; (2007) ATPR 42-164 (Medicines Australia) at [135] (French J, Mr GF Latta and Prof C Walsh).

23. The Tribunal’s task in respect of a merger authorisation application does not, however, entail “full merits review” or a “rehearing” because of the time and commercial sensitivities specific to such transactions: 2017 Explanatory Memorandum at [15.49]; see also Telstra/TPG (No 1) at [50]; Telstra/TPG (No 2) at [107]. This rationale is reflected in certain of the requirements for merger authorisations, brought into effect by the 2017 Amendment Act, including that (a) the Tribunal’s review of the ACCC determination must be completed within 90 days and may only be extended in certain circumstances: s 102(1AC) of the CCA, and (b) the Tribunal, in conducting its review, may only have regard to the material that is enumerated in s 102(10) of the CCA. The limitations on the information that the Tribunal may have regard to, in conducting its review, is intended to ensure that applicants to a merger authorisation “do not delay production” of relevant material to the Tribunal. This facilitates, in turn, the Tribunal in conducting its review “expeditiously”: 2017 Explanatory Memorandum at [9.80].

24. The Tribunal’s function is not to consider the correctness of the ACCC’s determination or whether it could have been better formulated: Medicines Australia at [138]; Application by Flexigroup Ltd (No 2) [2020] ACompT 2 at [135] (O’Bryan J, Dr J Walker and Ms D Eilert). The published reasons for the ACCC’s determination can, however, provide a “convenient reference point” for defining the matters in dispute: Telstra/TPG (No 2) at [108]; Re Herald & Weekly Times Ltd (on Behalf of the Media Council of Australia) (1978) 17 ALR 281 at 296 (Deane J, Mr J Shipton and Mr J Walker). Further, to the extent that the parties agree with factual findings made by the ACCC in the course of its determination, the Tribunal, ordinarily, need not examine those facts in detail: Telstra/TPG (No 2) at [108].

    B.4.     Statutory preconditions to authorisation

25. Section 90(7) of the CCA enumerates two tests for authorisation under s 90(7)(a) and s 90(7)(b). The tests for authorisation are expressed in the alternative, and, accordingly, the Tribunal need only be satisfied that the applicant has discharged its onus in respect one of the authorisation tests.

26. No standard of proof applicable in a civil litigation context, such as the balance of probabilities, applies to decisions bearing an administrative character, as in this case: Telstra/TPG (No 2) at [99] and the authorities cited therein. Hence, the only relevant precondition to granting authorisation is the existence of the Tribunal’s satisfaction of one of the conditions under s 90(7)(a) or s 90(7)(b). Put another way, the ACCC or the Tribunal on review must reach an “affirmative belief” as to one of the matters under s 90(7)(a) or s 90(7)(b): Telstra/TPG (No 2) at [99]. This requisite state of satisfaction is to be formed in good faith, reasonably and upon a correct understanding of the law: Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22; [2015] HCA 51 at [33] (Gageler J, as his Honour then was and Keane J); O’Connor v Construction, Forestry, Mining, Maritime and Energy Union [2023] FCAFC 151 at [34] (Rangiah, Wheelahan and Raper JJ).

27. Both tests for authorisation require the ACCC or the Tribunal on review to compare a future with and without the conduct that is the subject of the authorisation application. In this regard, the tests for authorisation direct primary focus to the effects of the conduct for which authorisation is sought rather than the effects of conduct that is coincident with but not causally related to the conduct the subject of the authorisation application: Telstra/TPG (No 2) at [145]-[147]. For example, in respect of the test under s 90(7)(b), public benefits that are the result of other coincident conduct that is not the subject of the authorisation application may not be taken into account.

    B.5.     Section 90(7)(a) – the competition test

28. The first test for authorisation requires the ACCC or the Tribunal on review to be satisfied that the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition: s 90(7)(a).

29. The application of the test under s 90(7)(a) ultimately requires the relevant decision maker to engage in the following stages of analysis:

    (a)identification of the relevant markets, being the “field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive”: Re Queensland Co-Operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 8 ALR 481 (QCMA) at 513 (Woodward J, JAF Shipton Esq and Prof MD Brunt); and

    (b)a comparison between the nature and extent of competition in any market potentially affected by the proposed conduct in a future where the proposed conduct occurs and in a future without the proposed conduct: Telstra/TPG (No 2) at [117]; Australian Competition and Consumer Commission v Pacific National Pty Ltd (2020) 277 FCR 49; [2020] FCAFC 77 (Pacific National) at [103] (Middleton and O’Bryan JJ) and the authorities cited therein.

30. Substitutability is the essential concept for market definition. It is perhaps best explained by asking would there be a significant switch in demand or supply in response to a relatively small price increase (all other competitive variables being unchanged).15F[16] In practice, this is reflected in the test known as the hypothetical monopolist, small but significant and non-transitory increase in price (SSNIP) test. It asks whether a small but significant non-transitory increase in price by a hypothetical monopolist would be defeated by demand side substitution (consumers switching to other products) and/or supply side substitution (other firms commencing to supply the product quickly and without significant investment).

    [16]Maureen Brunt “Market Definition” Issues in Australian and New Zealand Trade Practices Litigation Australian Business Law Review (April 1990) at pp 93-94.

31. Further, in addressing market definition it is necessary to distinguish between substitution in supply and new entry. Substitution in supply occurs when a firm is able to make a switch in production that is relatively rapid, using existing assets and without incurring significant expenditure. New entry is likely to take much longer and require significant expenditure on the acquisition of new assets. The likelihood of entry or expansion is taken into account in the second stage of the analysis.

32. The test under s 90(7)(a) is not applicable to authorisations in respect of cartel conduct (Div 1 of Pt IV), secondary boycotts (s 45D to s 45DB), contracts etc. affecting the supply or acquisition of goods or services (s 45E to s 45EA) and resale price maintenance (s 48): s 90(8) of the CCA. The purpose of this limitation was explained in the 2017 Explanatory Memorandum at [9.44]:

    This avoids a mismatch between the basis on which the conduct is prohibited, which does not look to whether the purpose, effect or likely effect of the conduct is a substantial lessening of competition, and the basis on which authorisation for that conduct may be granted.

33. Section 90(7)(a) is framed in similar language to s 45, s 46, s 47 and s 50 under Pt IV of the CCA, except for the following key differences.

34. First, s 90(7)(a) is expressed as a negative proposition. Therefore, contrary to the application of the similarly framed provisions in Pt IV of the CCA, s 90(7)(a) requires the Tribunal to be satisfied that the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition. It does not necessarily follow that if the Tribunal is not satisfied that the conduct would have the effect, or would be likely to have the effect, of substantially lessening competition that the Tribunal must be satisfied that the conduct would not have the effect, or likely effect, of substantially lessening competition. In some cases, the Tribunal may be satisfied that it can make a negative finding that it was not satisfied the conduct would be likely to substantially lessen competition but might have insufficient evidence to make a positive finding that it was satisfied the conduct would not be likely to substantially lessen competition.

35. Second, proof of contravention of similarly framed provisions in Pt IV of the CCA requires proof on the balance of probabilities. The evidentiary burden of proof applicable in civil litigation, is not applicable to an administrative decision of the ACCC or the Tribunal. The Tribunal’s task in respect of s 90(7)(a) is to reach a state of satisfaction or an “affirmative belief” that the conduct the subject of the authorisation application would not have the effect, or would not be likely to have the effect, of substantially lessening competition.

36. Notwithstanding these differences, the principles developed in respect of the meaning of the “likely effect of substantially lessening competition” as it appears in the language of s 45, s 46, s 47 and s 50 of the CCA, are directly instructive to the application of s 90(7)(a) of the CCA. The meaning of the “likely effect of substantially lessening competition” has been canvassed in a large body of case law and was most recently considered by the Full Court of the Federal Court in Pacific National and the Tribunal in Telstra/TPG (No 2). 

37. In Telstra/TPG (No 2), the Tribunal summarised the meaning of “competition” at [112] to [114]. The Tribunal relevantly stated at [114], by reference to O’Bryan J’s decision in Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475 at [124]-[127], that:

    [C]ompetition is best described by reference to its aim, mechanism and effect:

    (a)The basic aim of business competition is to win sales – competitors strive to replace each other in the supply of products (whether goods or services) sought by customers.

    (b)The key mechanism of competition is through substitution – to supply products to customers in place of another competitor’s supply. Substitution occurs on the demand side, whereby customers substitute one product or source of supply for another, and on the supply side, whereby suppliers adjust their production mix to substitute one product for another or one area of supply for another. Competitors strive to bring about substitution in a number of ways: through lowering their costs of production to enable them to profitably lower their prices; through improving the quality of their product and thereby increasing the value of the product to customers; and through inventing new products to meet the needs and wants of customers in new or better ways.

    (c)As to effect, competition enhances the welfare of Australians by creating incentives and pressure for suppliers to reduce their costs of production and their prices (which, in the language of economics, is referred to as an improvement in productive efficiency), to commit resources to the production of goods and services most wanted by customers and to improve the quality of those products (which, in the language of economics, is referred to as an improvement in allocative efficiency) and to invest in innovation with the object of inventing new products to meet the needs and wants of customers (which, in the language of economics, is referred to as an improvement in dynamic efficiency).

1. Section 4G of the CCA provides further colour to the concept of lessening competition, provides that:

   For the purposes of this Act, references to the lessening of competition shall be read as including references to preventing or hindering competition.

2. As to the meaning of “substantially”, Middleton and O’Bryan JJ stated in Pacific National at [104] that:

   [T]he word does not connote a large or weighty lessening of competition, but one that is “real or of substance” and thereby meaningful and relevant to the competitive process.

   (Emphasis added. Citations omitted.)

3. Critically, the meaning of “likely”, in the context of its application to an assessment of a substantial lessening of competition, has been the subject of significant scrutiny, judicially and before the Tribunal.

4. In Pacific National at [246] (Middleton and O’Bryan JJ), their Honours adopted the approach of French J in Australian Gas Light Co v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317; [2003] FCA 1525 at [348] and stated that “likely” means a “real commercial likelihood”. The Full Court stated at [246] that the determination of whether an acquisition or merger is likely to have the effect of substantially lessening competition requires the application of the following approach:

   (a)the application of s 50 requires a single evaluative judgment;

   (b)it is a distraction (and, we would add, wrong) to ask what standards of proof apply to the primary facts which will involve predictions about the future;

   (c)however, the degree of likelihood of any particular future fact existing or arising will be relevant to the assessment of the likely effect on competition of the acquisition.

   (References to primary judgment omitted.)

5. This approach was recently affirmed by the Tribunal in Telstra/TPG (No 2) at [117].

   B.6.     Section 90(7)(b) – the net public benefits test

6. The second test for authorisation requires the ACCC or the Tribunal on review to be satisfied that the conduct would result, or be likely to result, in a benefit to the public and the benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct: s 90(7)(b). The form of this second test is consistent with tests previously contained in s 90: 2017 Explanatory Memorandum at [9.41]; Telstra/TPG (No 2) at [120]. The principles developed in respect of previous iterations of s 90(7)(b), therefore, are directly applicable to the present iteration of the test. The relevant principles are summarised as follows.

7. The relevant “public” to which the test is directed, is the Australian public: QCMA at 507-8; Medicines Australia at [107].

8. A “benefit to the public” has a wide import and will include “anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress”: QCMA at 507-508; Telstra/TPG (No 2) at [121]. A “benefit to the public” can take into account both group interests and individual interests, to the extent that such individual interests are, in accordance with general societal views, worthy of inclusion and measurement: Re Qantas Airways Ltd [2004] ACompT 9 (Qantas Airways) at [187] (Goldberg J, Mr GF Latta and Prof DK Round). In this regard, cost savings or productive efficiency gains achieved by a private firm can constitute a “benefit to the public” in circumstances where it ultimately leads to “public” outcomes including a reduction in prices to final consumers or dividends to a range of shareholders. The weight to be given to such costs savings, however, depends on the extent to which they are passed through to consumers: Qantas Airways at [189]-[190].

9. A “detriment to the public” can include “any impairment to the community generally, any harm or damage to the aims pursued by the society including as one of its principal elements the achievement of the goal of economic efficiency”: Re 7-Eleven Stores Pty Ltd (1994) 16 ATPR 41-357 at 42,683; Medicines Australia at [108]. In many cases, the most important potential detriments will flow from the anti-competitive effect, which will result, or is likely to result, from the conduct the subject of the authorisation application: Medicines Australia at [108]. It may be the case that a purported benefit when “viewed in terms of its contribution to a socially useful competitive process” is in fact, to be judged as a detriment to the public: QCMA at 510.

10. The test under s 90(7)(b) requires the ACCC or the Tribunal on review to undertake a balancing exercise in order to determine whether benefits to the public ultimately outweigh detriments to the public: see Australian Competition and Consumer Commission v Australian Competition Tribunal [2017] FCAFC 150 (ACCC v ACT) at [7] (Besanko, Perram and Robertson JJ); QCMA at 506. Such a balancing exercise will involve what has been described as an “instinctive synthesis”, not least because many of the purported benefits and detriment will be “incommensurable and possibly unmeasurable”: ACCC v ACT at [7].

11. The weight to be given to a particular “benefit” requires an assessment of its nature, characterisation and the identity of the beneficiaries to it: Qantas Airways at [188]. This includes discerning “who takes advantage [of the benefit to the public] and the time period over which the benefits are received”: Qantas Airways at [189]; Telstra/TPG (No 2) at [122].

12. An applicant for authorisation is required to show that there is a factual basis for concluding that the purported benefits are likely to result, rather than to quantify in precise terms, the benefits: Qantas Airways at [201]; Telstra/TPG (No 2) at [125]. Relevantly, in Telstra/TPG (No 2), the Tribunal adopted and provided the following summary of further principles governing benefit analysis, which were set out in Qantas Airways at [203]-[209]:

    (a)an accurate, objective quantification of public benefits is difficult, in part because benefits have to be estimated for some period in the future and so their magnitude becomes a matter not only of empirical estimation based on assumptions but also one of statistical likelihood;

    (b)the nature of public benefits should be defined with some precision, a degree of precision which lies somewhere between quantification in numerical terms at one end of the spectrum and general statements about possible or likely benefits at the other end of the spectrum;

    (c)any estimates involved in benefit analysis should be robust and commercially realistic, in the sense of being both significant and tangible;

    (d)appropriate weighting will be given to future benefits not achievable in any other less anti‑competitive way, and so the options for achieving the claimed benefits should be explored and presented;

    (e)the Tribunal is not assisted by fanciful and speculative modelling of benefits where the underlying assumptions are not clearly spelled out, where the estimates have not been subject to rigorous sensitivity analysis, and where the estimating process is not wholly transparent;

    (f)while detailed quantification of benefits is the best option, quantification is not required by the CCA and benefits should be quantified only to the extent that the exercise enlightens the Tribunal more than the alternative of qualitative explanation; and

    (g)where benefits cannot be quantified in monetary terms, they can still be claimed in qualitative terms.

    B.7.     Exercise of discretion

13. The power conferred on the ACCC or the Tribunal on review to authorise conduct is discretionary. The statutory criteria under s 90(7) are only necessary conditions and, therefore, satisfaction of the criteria does not oblige the ACCC or the Tribunal on review to grant authorisation: Telstra/TPG (No 2) at [127]; Medicines Australia at [106]. Given the large variety of circumstances to which the discretion may be applied, it is not necessary nor desirable to define its outer limits, other than to say that it is not narrowly confined and will be informed by the objectives of the CCA: Medicines Australia at [126]; Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505; Oshlack v Richmond River Council (1998) 193 CLR 72 at 84.

14. Typically, however, authorisation will be granted if the ACCC or the Tribunal on review are satisfied that the conduct the subject of the application, is likely to result in a net benefit to the public.

15. In circumstances where the ACCC or the Tribunal on review are not satisfied that the conduct would lead to a net public benefit, the Tribunal relevantly stated in Medicines Australia at [128] (prior to the 2017 Amendment Act):

    Similarly, where the anti-competitive detriment is low to non-existent the ACCC may be entitled to say, as a matter of discretion, that it would only authorise the conduct if the public benefit to be derived from it, beyond that necessary to outweigh the anti-competitive detriment, or satisfy the per se conduct test is substantial. That is to say that the ACCC can require, in the proper exercise of its discretion, that the conduct yields some substantial measure of public benefit if it is to attract the ACCC’s official sanction. The Tribunal is in a similar position.

    C.       BACKGROUND

    C.1.     Overview

16. As set out above at [40], the Tribunal adopts the factual matters set out in the Agreed Factual Findings. At the time of the filing of the Agreed Factual Findings, Bendigo was not in a position to express a view on the correctness of certain of the factual matters, which were not contested by the applicants and are identified in Table 2 of the Agreed Factual Findings.

17. The Tribunal has examined the findings of fact made by the ACCC, having regard to evidence on which they were based, the submissions made by the parties about them, and the Agreed Factual Findings.

18. The following section sets out the relevant background and industry information in respect of the Australian banking industry, having particular regard to the positions of ANZ, Suncorp Bank and Bendigo.

    C.2.     Regulatory framework

19. Suppliers of services in the Australian banking industry are subject to significant regulatory and prudential oversight, reflecting the important role that the banking sector plays in the Australian economy. This section sets out the relevant background information in respect of that regulatory and prudential framework.

    C.2.1.  ADI licensing

20. The Australian Prudential Regulation Authority (APRA), the prudential regulator of the Australian financial services industry, prescribes strict regulatory requirements in relation to obtaining and maintaining an ADI licence. Without an ADI licence, banks are unable to offer deposit products to customers.16F[17] This is significant because deposits can be a comparatively cheap source of funding for lending activities compared to other funding sources.17F[18]

    [17]          Agreed Factual Findings [4.27], [4.28].

    [18]          Agreed Factual Findings [4.27].

21. APRA provides two routes through which an entity can obtain an ADI licence: the “direct route” and the “restricted route”. Both routes are depicted at [4.28] of the ACCC’s Reasons for Determination, in the following figure referred to as “Figure 2”:18F[19]

    [19]ACCC Reasons for Determination [HB 3/16/100] at [4.28], Figure 2, sourced from APRA, ADI Licensing – Restricted ADI Framework Information Paper (4 May 2018) at p. 9; Agreed Factual Findings [4.28].

22. An entity that holds an ADI licence, obtained through the direct route, can conduct the full range of banking activities, including deposit-taking, from the time it obtains the licence. To obtain a licence through the direct route, an entity is typically required to hold substantial capital resources at the point of application, or at least, a very clear avenue for access to such resources. APRA’s prudential requirements will also commence from the time the point of the licence.19F[20]

    [20]          Agreed Factual Findings [4.29].

23. Alternatively, an entity that holds a restricted ADI licence, will be subject to “phased-in” regulatory obligations and in turn, only be permitted to conduct a restricted range of activities. An entity can apply for a restricted ADI licence before they are ready to be a fully licenced ADI and can do so through APRA’s Restricted ADI Licensing Framework.20F[21]

    C.2.2.  Calculating ongoing ADI capital requirements

    [21]          Agreed Factual Findings [4.30].

24. An entity that is a fully licenced ADI must comply with all applicable prudential standards including requirements for financial resilience (such as minimum bank capital and liquidity requirements), governance, risk management, recovery and resolution, and reporting. The prudential standards establish minimum expectations for regulated entities, having regard to APRA’s purpose of ensuring that the financial interests of Australians are protected and the financial system is stable, competitive and efficient.21F[22]

    [22]          Agreed Factual Findings [4.32].

25. APRA requires ADIs to hold a prudent minimum level of capital relative to a risk-adjusted measure of their assets, to ensure that banks are more likely to remain solvent during periods of financial adversity. Holding such a financial buffer increases the probability that ADIs have the capability to absorb unexpected losses, such as higher than usual defaults by borrowers on their loans.22F[23]

    [23]          Agreed Factual Findings [4.33].

26. APRA permits two approaches for determining banks’ credit risk capital requirements: the internal ratings-based (IRB) approach and the standardised approach.23F[24] Currently, each of the Major Banks, Macquarie and ING use the IRB approach. All other banks, including Suncorp Bank and Bendigo, use the standardised approach.24F[25]

    [24]          Agreed Factual Findings [4.34].

    [25]          Agreed Factual Findings [4.38].

27. Banks that are approved for the IRB approach can determine their capital requirements for credit risk using internal models that have been approved by APRA. To use the IRB approach, banks are required to hold extensive historical data, a sophisticated risk measurement framework, develop advanced internal modelling capabilities and undergo a rigorous accreditation process. Banks that use the IRB approach are also subject to more stringent regulatory requirements and more intensive ongoing supervision than banks using the standardised approach.25F[26]

    [26]          Agreed Factual Findings [4.35].

28. In contrast, banks that employ the standardised approach apply risk weights, prescribed by APRA, for different types of lending. Standardised risk weights are intentionally simple and conservative. Consequently, banks that use the standardised approach may need to hold more capital against a similar exposure compared to banks that use the IRB approach.26F[27]

    [27]          Agreed Factual Findings [4.36].

29. The capital framework is calibrated such that IRB capital requirements are, on average, lower than standardised capital requirements.27F[28]

    [28]          Agreed Factual Findings [4.36].

30. The Tribunal notes that as capital is generally more expensive than other forms of funding, banks that use the IRB approach can typically provide lower cost offerings than banks that use the standardised approach. This gap has narrowed somewhat since (a) APRA implemented higher minimum capital requirements for IRB banks in 2017 (150 basis point increase, compared to a 50 basis point increase for standardised banks) in response to recommendations in the Financial System Inquiry Final Report in 2014 and (b) the implementation of APRA’s new capital framework on 1 January 2023.

31. The quality of banks’ capital has also improved. Common Equity Tier 1 (CET1) capital, the highest quality form of capital that is more expensive than other sources of funding and has a directly negative effect on banks’ return on equity (ROE), accounts for most of the rise in total capital, since it was introduced as a minimum requirement in 2013.28F[29]

    C.2.3.  Significant financial institutions

    [29]          Agreed Factual Findings [4.40], [4.67].

32. The Major Banks are labelled by APRA as domestic systemically important banks (D-SIBs). This is due to factors such as their size, interconnectedness, substitutability and complexity and that their distress or failure would cause more significant dislocation in the domestic financial system and economy than less systemically important institutions. Banks designated as D-SIBs must hold more CET1 capital to meet higher loss absorbency (HLA) requirements, which increases their ability to absorb losses and, therefore, reduces the probability of failure.29F[30]

    [30]          Agreed Factual Findings [4.40].

33. The designation of entities as significant financial institutions (SFIs) was recently also introduced by APRA, which includes ADIs with assets above $20 billion and those determined by APRA due to factors such as complexity of operations and group membership. This definition allows APRA to differentiate consistently between prudential requirements for larger and smaller entities.30F[31]

    [31]          Agreed Factual Findings [4.44].

34. Further, in 2017, the “Major Bank Levy” of 0.015%, paid each quarter on the balance of a bank’s liabilities (funding sources), was introduced for banks with over $100 billion in total liabilities (Major Bank Levy). Currently, the Major Banks and Macquarie are subject to the Major Bank Levy, which recognises that large leveraged banks are a source of systemic risk in the financial system and the wider economy. The Major Bank Levy is also intended to level the playing field for smaller ADIs and non-ADI competitors, relative to the Major Banks, “whose size and market dominance affords them significant funding cost advantages and pricing power at the expense of their customers”.31F[32]

    C.2.4.  Other regulatory requirements

    [32]          Agreed Factual Findings [4.45].

35. ADIs are also subject to other regulatory requirements including anti-money laundering and counter-terrorism financing, and conduct regulations. The government agencies responsible for setting and enforcing regulations include the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Securities and Investments Commission (ASIC).32F[33] Obligations to which ADIs and financial service providers will be subject include, the requirement that to conduct a financial services business, an entity must hold an Australian Financial Services Licence and meet the conditions which attach to the holding of the licence.33F[34] These additional regulatory obligations will impact each ADI’s compliance costs differently and relevantly, larger banks will have greater capability than smaller players to absorb fixed compliance costs.34F[35]

    C.2.5.  Non-bank lenders

    [33]          Agreed Factual Findings [4.46].

    [34]          Agreed Factual Findings [4.46].

    [35]          Agreed Factual Findings [4.47].

36. Non-bank lenders are required, in most cases, to hold an Australian Credit Licence (or operate as an authorised representative of an Australian Credit Licensee) and are regulated by ASIC. Non-bank lenders are also required to meet Anti-Money Laundering and Counter-Terrorism Financing requirements prescribed by AUSTRAC and entities that are registered financial corporations must report periodic data to APRA.35F[36]

    C.3.     Profitability indicators

    [36]          Agreed Factual Findings [4.48].

37. There are several measures of a bank’s profitability. The most common measure is a bank’s ROE, which shows how efficiently the bank is using its equity capital to generate income.36F[37] The Tribunal notes that net interest margin (NIM) is also a measure of a bank’s profitability, calculated by reference to its lending activities.

    [37]          Agreed Factual Findings [4.58].

38. Banks generally accrue profits by lending at interest rates that are higher than the interest rates of their funding.37F[38]

    [38]          Agreed Factual Findings [4.59].

1. Bendigo submits any public benefits that might arise from the Proposed Acquisition would be outweighed by (a) competitive detriments in the home loans market and the agribusiness banking markets, and (b) harm to the Australian retail banking industry by entrenching the oligopoly market structure of the Major Banks, and removing the only real chance for a second-tier bank such as Bendigo to challenge effectively the Major Banks, by a step up in scale.[932]

   I.1.1.3.            The ACCC’s principal contentions

   [932] Bendigo Outline of Submissions at [96].

2. The ACCC advances the following principal contentions in response to the benefits of the Proposed Acquisition, claimed by the applicants.

3. First, any improvements to SGL’s insurance business would be small and could equally be expected to arise in the Bendigo Merger counterfactual.[933]

   [933]ACCC Outline of Submissions at [149]; ACCC Reasons for Determination [HB 3/16/318, 319] at [7.26], [7.31].

4. Second, there is likely to be a public benefit realised from integration synergies, but in a lower amount than claimed by the applicants,[934] and “some measure” of integration synergies are also likely to be realised in the Bendigo Merger counterfactual.[935] In addition, it submits that the extent of the synergies remains uncertain, the synergies may be further delayed and the extent of any pass through of benefits to consumers will depend on the degree to which any savings relate to fixed or variable costs savings, and the intensity of competition following the Proposed Acquisition.[936]

   [934]        ACCC Outline of Submissions at [153]-[159].

   [935] ACCC Outline of Submissions at [158].

   [936]        ACCC Outline of Submissions at [159]

5. Third, any benefits from improving the prudential safety of Suncorp Bank are unlikely to be material because there is no meaningful risk of Suncorp Bank failing. Further, any benefits would be offset by requirements to tie up additional capital, and the Proposed Acquisition would lead to a larger ANZ that would thereby increase systemic risk as the consequences of failure would be more widespread and significant.[937]

   [937]        ACCC Outline of Submissions at [160]-[162].

6. Fourth, any increase in the Major Bank Levy would not be a meaningful public benefit because any increase to government revenue is offset against the risk of harm that larger banks pose.[938] Further, any perceived benefit could be expected to arise also in the Bendigo Merger counterfactual as a merged Bendigo/Suncorp Bank would equally be likely to be subject to the Major Bank Levy, and the quantum of the increase would be larger because both Bendigo and Suncorp Bank would be captured.[939]

   [938] ACCC Outline of Submissions at [163].

   [939] ACCC Outline of Submissions at [163].

7. Fifth, there is potentially some benefit in the form of lower funding costs, but any benefits are likely to be small, and at least partially, offset by higher contributions for the Major Bank Levy and higher capital requirements. Further, Ms Starks’ view is that these savings are unlikely to constitute efficiency benefits and the extent of any pass through to consumers is uncertain.[940]

   [940]        ACCC Outline of Submissions at [164]-[166].

8. Sixth, the commitments made by the applicants to the State of Queensland cannot be taken into account as public benefits under s 90(7)(b) because they are only coincident with the Proposed Acquisition, and do not result from the conduct for which authorisation is sought. The ACCC further submits that any benefits to Queensland may well give rise to correlative detriments in other States, and to the extent that any benefits may be profitable to other banks, including Bendigo, those banks could be expected to pursue them if the Proposed Acquisition does not proceed.[941]

   [941]        ACCC Outline of Submissions at [167]-[170].

9. The ACCC submits that the most significant detriments of the Proposed Acquisition are its likely impacts on competition in the markets for home loans, retail deposits, agribusiness banking and SME banking.[942]

   [942] ACCC Outline of Submissions at [171].

10. The ACCC submits that the Proposed Acquisition involves a substantial public detriment, being the loss of an attractive acquisition target for an existing smaller bank and, in turn, the loss of the most meaningful opportunity for a second-tier bank to better compete through an increase in scale.[943] The ACCC contends that this detriment extends beyond market specific detriments, and should be brought to account as public detriments under s 90(7)(b) of the CCA.[944]

    [943]        ACCC Outline of Submissions at [172]-[173].

    [944] ACCC Outline of Submissions at [175].

11. The ACCC submits that given the substantial public detriments that are likely to result from the Proposed Acquisition, and the limited public benefits that might be considered likely to be realised, the Tribunal might properly conclude that it is not satisfied that the public benefits from the Proposed Acquisition would outweigh the resulting public detriments. [945]

    I.2.      Benefits to the public

    I.2.1.    SGL becoming a “pureplay” insurer

    [945] ACCC Outline of Submissions at [176].

12. The Tribunal accepts that the SGL conglomerate structure is not providing its insurance business, and more importantly, its consumers, with any advantages. Rather, it would appear that there are only, or, at least, largely diseconomies of scope reflected in the conglomerate discount [REDACTED].[946]

    [946]        SGL Board Insights Pack dated 7 April 2022 [HB 26/1060/1585].

13. The Tribunal also accepts that (a) SGL may well be better placed to confront the challenges posed by increasing natural disasters, attributable to climate change, without the distraction of operating a second-tier bank and (b) SGL’s divestiture of Suncorp Bank may result in increased capitalisation from the removal of the conglomerate discount. Any increase in market capitalisation might well only reflect market confidence in future earnings, which may or may not increase value to consumers.

14. Further, the Tribunal accepts that to the extent that there is a real resource saving from increased efficiency, or SGL being able to compete better in insurance markets for the benefit of consumers, this would constitute a public benefit.

15. The Tribunal, however, is of the view that each of these benefits could accrue independently of the Proposed Acquisition by SGL divesting Suncorp Bank by a spin off or a sale to a bank, other than a Major Bank.

    I.2.2.    Productive efficiencies from integration synergies

16. The applicants claim that the annual cost synergies from productive efficiencies that could be realised from the Proposed Acquisition would be approximately $260 million, pre-tax, and would commence to flow some four to six years after the Proposed Acquisition.[947] This figure represents approximately [REDACTED]% of the cost base of Suncorp Bank.[948]

    [947]ANZ Outline of Submissions at [80]; First Statement of Louise Higgins dated 17 May 2023 [HB 12/452/737] at [15]; First Expert Report of Patrick Smith [HB 16/568/687-90] at [64]-[74].

    [948]        Synergies and one-off costs at Sheet 1 ‘NPV’ [HB 12/456].

17. Both the quantum of those synergies, and the time by which they could be achieved, have been subject to extensive due diligence by ANZ. Ms Higgins gave evidence of the extent of the due diligence undertaken by ANZ with the assistance of external and subject matter experts, since December 2021, to determine the likely value of the integration synergies that could be realised from the Proposed Acquisition. Ms Higgins provided a comprehensive explanation of the steps taken to estimate Suncorp Bank’s cost base, identify and estimate cost synergies and one off integration costs, and finalise other due diligence estimates.[949]

    [949]First Statement of Louise Higgins dated 17 May 2023 [HB 12/452/740-748].

18. Further, the ANZ estimate of the percentage of the synergies claimed to the cost base of Suncorp Bank is consistent with Barrenjoey’s calculation in a November 2021 presentation to the SGL board that the average synergy realisation from mergers and acquisitions of large Australian banks in the period 1995 to 2020, as a percentage of the target’s cost base, was 34%.[950] Further, Ms Starks referred, in her first report, to an analysis that [REDACTED].[951]

    [950]        SGL Board Insights paper dated 26 November 2021 [HB 7/39/239].

    [951]First Expert Report of Mary Starks [HB 16/578/1490] at [10.19], Figure 37.

19. Equally, Mr Smith’s estimate of $[REDACTED] million in integration costs, which is close to [REDACTED] the estimated run rate synergies, appears to be reasonable when compared with the [REDACTED] average of integration costs to run rate synergies incurred in mergers and acquisitions of large Australian banks in the period between 1995 and 2020.[952]

    [952]        SGL Board Insights paper dated 26 November 2021 [HB 7/39/239].

20. The Tribunal accepts that real resource cost savings from spreading fixed costs, labour cost reductions and branch rationalisations represent gains in productivity efficiency and, therefore, constitute public benefits, to the extent that they are merger specific and more likely to be realised in the future with, rather than without, the Proposed Acquisition.

21. The Tribunal is satisfied that the cost savings identified by the applicants are more likely in the future with the Proposed Acquisition. Although [REDACTED], for the reasons provided at [292]-[322] above, while it might be a realistic commercial possibility, there remains considerable uncertainty as to whether the merger would occur in that counterfactual. Further, and more relevantly, the time period in which those synergies could be realised is uncertain because Bendigo was not able to undertake any due diligence[953] of the quantum and timing of the likely costs savings.

    [953]First Statement of Louise Higgins dated 17 May 2023 [HB 12/452/742-748]; cf Transcript of Second Examination of Marnie Baker [HB 15/550/627-628] at T9.20–T10.12].

22. The Tribunal accepts, however, that costs savings from branch closures that have already occurred, estimated by Mr Smith to be in vicinity of $[REDACTED] million,[954] need to be excluded (representing only some [REDACTED]% of the claimed run rate synergies). The Tribunal also accepts that it would be necessary to net off integration costs. Mr Smith estimates that the net present value of total costs savings expected from the Proposed Acquisition would be between $[REDACTED] and $[REDACTED] (after excluding pecuniary savings and netting off integration costs and dis-synergies).[955]

    I.2.3.    Prudential safety benefits

    [954] First Expert Report of Patrick Smith [HB 16/568/686] at [61].

    [955]        Second Expert Report of Patrick Smith [HB 16/570/801] at [16] and Table 1.

23. Following the Proposed Acquisition, Suncorp Bank, would become part of ANZ and would thus become a D-SIB and be subject to higher prudential standards and regulatory oversight by APRA. At the same time, it would have reduced costs of funds, and access to a lower cost of capital than it currently enjoys.

24. In evaluating the extent of any prudential benefits that might result from the Proposed Acquisition, it is important not to double count the benefit of reductions in risk from increased prudential requirements, as explained by Dr Carmichael,[956] and the benefit of reductions in the cost of funds, by reference to Mr Smith’s analysis of costs savings, to the extent that this reflects the same underlying reduction in risk.

    [956]        First Expert Report of Dr Jeffrey Carmichael [HB 16/562/375] at 2.2, 2.4, 2.5 and 3.

25. The Tribunal accepts that there would be some prudential benefits from the Proposed Acquisition, but, ultimately, is not persuaded that they would be likely to be significant.

26. First, while it follows that an increase in prudential requirements and becoming a part of a larger and more diversified bank would make it less likely for Suncorp Bank to fail, it is doubtful that any benefit to Suncorp Bank would be substantial. Given Suncorp Bank’s existing support from SGL and financial position, any current risk of failure is negligible. The difference may be no more, as suggested by Dr Carmichael, than a difference between Suncorp Bank being a bank that was an “unquestionably strong bank”, and Suncorp Bank becoming a bank that was “an unquestionably stronger bank”.[957] It follows that any reduction in systemic risk to the Australian financial system would similarly not be significant.

    [957]        Second Expert Report of Dr Jeffrey Carmichael [HB 16/563/399].

27. Second, the greater capital requirements and level of prudential scrutiny associated with becoming a D-SIB bank, that would lead to more capital being tied up, together with increased regulatory costs that would be incurred by both APRA and ANZ, would reduce the value of any prudential benefits that might otherwise have arisen from the Proposed Acquisition.

28. Third, Suncorp Bank’s access to a higher credit rating,[958] and a lower cost of capital as a result of the Proposed Acquisition would either (a) reflect a real resource cost saving associated with a reduction in underlying risk that would have been already taken into account, if there was a substantive reduction in risk, or (b) would not otherwise be a public benefit to the extent it constituted a transfer of risk. The transfer of risk is transferring risk to the government and taxpayers because Suncorp Bank becomes part of a bank that is considered “too big to fail”.

    [958]First Expert Report of Mozammel Ali [HB 16/558/139]; Statement of Adrian Went dated 28 November 2022 [HB 11/371/6, 11] at [18], [29].

29. Fourth, it is not apparent, contrary to Mr Smith’s evidence,[959] how a lower cost of funds would represent a productive efficiency gain attributable to a reduction in risk associated with an expectation of support from ANZ. No reason was advanced as to why ANZ could be expected to provide greater support to Suncorp Bank than SGL. To the extent that any increase in Suncorp Bank’s credit rating following the Proposed Acquisition reflected a real reduction in risk, it would seem more likely that this was due to increased prudential requirements associated with being a D-SIB bank, and becoming part of ANZ’s more diverse portfolio.

    I.2.4.    Increase in Major Bank Levy

    [959] First Expert Report of Patrick Smith [HB 16/568/694] at [88].

30. Following its acquisition by ANZ, Suncorp Bank would become subject to the Major Bank Levy. The benefit alleged by the applicants is that this would result in an increase of taxation revenue of approximately $24 million per annum, and public benefits from the use to which that revenue could be put.[960]

    [960]ANZ Outline of Submissions at [91]; Merger Authorisation Application dated 2 December 2022 [HB 17/592/380] at [8.71].

31. This alleged benefit is different from the net benefit found by the Tribunal in Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1 (MacGen). The issue in MacGen was whether the use of government revenue generated from the privatisation of MacGen was a public benefit. It concerned revenue derived from a change in ownership of assets from the government to the private sector not, as in this case, a transfer of surplus from a merged entity to the government.

32. In any event, to the extent that the “tax benefit” in this case might by characterised as a benefit, it would best be understood as a “forced pass through” to the public of some of the cost efficiencies likely to arise from the Proposed Acquisition.

33. If the issue is examined through that lens, however, the “pass through” benefit would be greater under the Bendigo Merger counterfactual as both Bendigo and Suncorp Bank would become liable to the Major Bank Levy as a merged entity.

    I.2.5.    Queensland commitments

    I.2.5.1.            Overview

34. The share sale and purchase agreement entered into between SGL and ANZ on 18 July 2022 (SSPA), was conditional on obtaining amendments to the Metway Merger Act. In order to procure the Queensland government’s agreement to make the necessary amendments to the Metway Merger Act to permit the Proposed Acquisition to proceed, SGL and ANZ entered into agreements with the State of Queensland (respectively, SGL Implementation Agreement[961] and ANZ Implementation Agreement),[962] in which they made a series of commitments to the government (Queensland commitments).

    [961]        Signed Implementation Agreement – Suncorp and State of Queensland [HB 9/198].

    [962]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410].

35. The principal commitments made by SGL in the SGL Implementation Agreement were that (a) the headquarters of SGL would remain in Queensland, (b) for the ten years after the amendments to the Metway Merger Act, SGL would locate more employees servicing the “Suncorp Insurance Group” and “Group Corporate Service Activities” in Queensland than in all other states and territories, (c) it would increase the number of employees in Townsville by establishing a “Suncorp Regional Hub”, and (d) it would establish a “Disaster Response Centre of Excellence” in Brisbane.[963]

    [963]Signed Implementation Agreement – Suncorp and State of Queensland [HB 9/198/495, 500-501, 503, 504].

36. The commitments made by ANZ to the Queensland government in the ANZ Implementation Agreement included the following new lending commitments (a) $15 billion over a ten year period for renewable energy and other environmental projects in Queensland, (b) $10 billion over a ten year period to support energy projects in Queensland,[964] (c) $10 billion in the three years following the Proposed Acquisition to support SME businesses in Queensland, [965] and (d) for a period of [REDACTED] years after the completion of the Proposed Acquisition, seek to assist in [REDACTED] and provide, in aggregate, $[REDACTED] million in loans to support the [REDACTED],[966] (together, the lending commitments).

    [964]Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2093].

    [965]Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2093].

    [966]Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2093-2094].

37. The ANZ Implementation Agreement provided that the time periods in which each of the lending commitments were to be provided were dependent, among other things, on demand, ANZ’s credit and risk assessment of applicants, prudential and regulatory requirements, competition from other lenders, and general economic, commercial and political factors.[967]

    [967]Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2094].

38. The other commitments made by ANZ to the Queensland government comprised (a) a commitment that in the [REDACTED] years following the Proposed Acquisition, there would be [REDACTED],[968] (b) a commitment to having a “[REDACTED]”, who will [REDACTED],[969] (c) the establishment of a “tech hub” in Queensland (Tech Hub commitment),[970] (d) committing to the use of its best endeavours to enter into partnership agreements with Google for the implementation of certification and education initiatives (Google commitment),[971] and (e) establishing two Queensland-based universities to develop technology skills in Queensland’s banking and finance sector (University commitments).[972]

    I.2.5.2.            The applicants’ submissions

    [968]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2095].

    [969]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2095-2096].

    [970]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2095-2096].

    [971]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2096-2097].

    [972]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2097].

1. The applicants advance the following submissions in support of their contentions that the Queensland commitments are public benefits for the purposes of s 90(7)(b) of the CCA.

2. First, the Queensland commitments made by ANZ are merger-specific and certain because ANZ would not have made them absent the Proposed Acquisition and ANZ is bound to give effect to them irrespective of whether any economic benefit may be obtained.[973]

   [973] ANZ Outline of Submissions at [94].

3. Second, the Queensland commitments made by SGL are merger-specific and certain because (a) SGL would not have made the commitments without divesting Suncorp Bank, (b) the commitments would not be able to be made in the Bendigo Merger counterfactual because they were only made possible because of the value provided by the 100% cash offer from ANZ, and (c) the spending commitments are “clear and time-bound”.[974]

   [974] SGL Outline of Submissions at [88].

4. Third, the benefits are a likely result of the conduct for which authorisation is sought because they are causally connected to, not merely coincident with, the Proposed Acquisition. They submit that the ANZ Implementation Agreement was executed in order to procure the Queensland government’s agreement to amend the Metway Merger Act in order to satisfy the condition precedent that the Act be amended in the SSPA to permit the Proposed Acquisition to proceed.[975]

   I.2.5.3.            Bendigo’s submissions

   [975] ANZ Outline of Submissions at [96].

5. Bendigo submits that the statutory preconditions for authorisation under s 90(7)(b) of the CCA are directed to conduct that is the subject of the application and do not extend to the Queensland commitments that do not give rise to benefits that “result from” the Proposed Acquisition.[976]

   [976] Bendigo Outline of Submissions at [95].

6. Bendigo further submits, that in any event, to the extent that the Queensland commitments represented profitable lending, or other investment opportunities in Queensland, it is likely that other banks, including a merged Bendigo/Suncorp Bank would pursue them.[977]

   I.2.5.4.            The ACCC’s submissions

   [977]        Bendigo Outline of Submissions at [95]; ACCC Reasons for Determination [HB 3/16/339] at [7.102].

7. The ACCC submits that the Tribunal should find that the Queensland commitments are not likely to give rise to any substantial relevant public benefits, for the following reasons.[978]

   [978] ACCC Outline of Submissions at [167].

8. First, it would be an error for the Tribunal in addressing s 90(7)(b) of the CCA to have regard to commitments made by the applicants to a third party, namely the State of Queensland, under agreements that are coincident with the Proposed Acquisition, and for which no authorisation is sought.[979]

   [979] ACCC Outline of Submissions at [168].

9. Second, there is little evidence before the Tribunal, which would permit it to be satisfied that the Queensland commitments would not give rise to correlative detriments in other parts of Australia.[980]

   [980] ACCC Outline of Submissions at [169].

10. Third, if the Queensland commitments provided profitable opportunities, other entities, including Bendigo, could be expected to pursue them independently of the Proposed Acquisition.[981]

    I.2.5.5.            State of Queensland’s submissions

    [981] ACCC Outline of Submissions at [170].

11. The State of Queensland accepts that some of the Queensland commitments from SGL were announced prior to being approached by SGL about the Proposed Acquisition, and that there were no legally binding agreements for them to be delivered. It states, however, that it advances the following submissions to assist the Tribunal in its consideration of the public benefits claimed by the applicants.[982]

    [982] State of Queensland Primary Outline of Submissions at [2]; [19].

12. First, the Queensland commitments give it the benefit of (a) new specific monetary and time commitments from SGL and ANZ, (b) measurable and clear employment commitments from SGL and ANZ, and (c) Chief Executive Officer reporting commitments from both SGL and ANZ allowing the State to monitor compliance with the Queensland commitments.[983]

    [983]        State of Queensland Primary Outline of Submissions at [19(b), (c) and (d)].

13. Second, the benefits of the Queensland commitments include proposed variations and improvements to the existing “Head Office” commitments imposed on SGL under the Metway Merger Act.[984]

    [984]        State of Queensland Primary Outline of Submissions at [21]-[22].

14. Third, in the absence of the Proposed Acquisition, there would be no necessity to amend the Metway Merger Act and, therefore, unless SGL (or ANZ) “volunteered” commitments, the State would have no basis on which they could negotiate any of the Queensland commitments from SGL or ANZ.[985]

    I.2.5.6. Consideration

    [985] State of Queensland Primary Outline of Submissions at [24].

15. On balance, the Tribunal accepts the applicants’ contention that the commitments made by ANZ and SGL to the Queensland government are more accurately characterised as benefits causally related to the Proposed Acquisition, rather than benefits coincident with the Proposed Acquisition. The SGL and ANZ Implementation Agreements are conditional on the Proposed Acquisition proceeding and were entered into for the purpose of obtaining the Queensland government’s commitment to amend the Metway Merger Act. The agreements were a condition precedent to that commitment being provided.

16. The Proposed Acquisition could not proceed without the amendments to the Metway Merger Act and the Queensland government’s agreement to amend the Metway Merger Act was conditional on the commitments from ANZ and SGL in the Implementation Agreements.

17. The Tribunal, however, is not satisfied that the commitments made by ANZ and SGL to the Queensland government represent a material public benefit, for the following reasons.

18. First, as acknowledged by the State of Queensland in its submissions to the Tribunal, some of the commitments in the SGL Implementation Agreement, in particular, the establishment of the “Disaster Response Centre of Excellence”, had been publicly announced by SGL prior to it approaching the Queensland government about the Proposed Acquisition.[986]

    [986] State of Queensland Primary Outline of Submissions at [19].

19. Second, some of the commitments are significantly qualified, perhaps most clearly demonstrated by the “[REDACTED]” qualifications to the lending commitments.[987] The Tribunal does not accept that the lending commitments can be characterised as “certain”, or that the spending commitments are “clear and time bound”.[988]

    [987]        Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2094].

    [988] SGL Outline of Submissions at [88].

20. Third, there is a fundamental tension in the proposition that the Queensland commitments are “public benefits”. If the Queensland commitments are profit maximising, there is no sound reason why SGL, ANZ or any other profit maximising entity would not pursue them absent the Proposed Acquisition.

21. More specifically, if the lending commitments would not otherwise have been made, then they would either represent an inefficient allocation of resources, or a correction for insufficient competition in the market, that is, lending volume below competitive quantity. Given the Tribunal’s conclusion that the Proposed Acquisition would not be likely to have the effect of substantially lessening competition in SME markets in Queensland, or the national market for home loans, the lending commitments would, if not profit maximising, be either neutral or an inefficient use of resources.

22. Equally, if the [REDACTED] commitments ([REDACTED],[989] and [REDACTED][990] exceeded the otherwise profit maximising level, this would reflect an inefficient allocation of resources, or additional [REDACTED] to support a quantitative competition correction. Given the Tribunal’s conclusions that the Proposed Acquisition would not be likely to have the effect of substantially lessening competition in any relevant market, the [REDACTED] commitments, if not profit maximising, would be either neutral (that is, the same [REDACTED] would occur absent the commitments), or an inefficient use of resources.

    [989]        Signed Implementation Agreement – Suncorp and State of Queensland [HB 9/198/496, 516]

    [990]Queensland Executed Implementation Agreement – ANZ and State of Queensland [HB 11/410/2095].

23. Fourth, establishing the “Tech Hub”[991] in Queensland is not likely to represent a public benefit for the purposes of s 90(7)(b). If locating the “Tech Hub” in Queensland was not the first best solution, it would represent an inefficient global allocation of resources contrary to free trade policy. To count this as a benefit in Australia would require the Tribunal to also take account of all the flow on costs to the economy of committing resources contrary to Australia’s comparative advantage.

    I.3       Detriments to the Public

    I.3.1.               The applicants’ submissions

    [991]        Signed Implementation Agreement – Suncorp and State of Queensland [HB 9/198/2096].

24. The applicants submit that there are no relevant countervailing detriments capable of outweighing the clear and tangible benefits that will be realised from the Proposed Acquisition. They submit that the Proposed Acquisition will not meaningfully lessen competition in any market and, therefore, there are no significant public detriments to take into account.[992]

    [992] SGL Outline of Submissions at [90].

25. The applicants submit that the ACCC’s contention that the Proposed Acquisition gives rise to a meaningful competitive detriment by removing an attractive acquisition target for existing smaller banks to build scale and better compete with the Major Banks and thereby entrench an existing oligopoly, should be rejected. They submit that meaningful scale may be helpful, but is not necessary for effective competition, as demonstrated by Macquarie for home loans, Rabobank for agribusiness lending and Judo Bank in both agribusiness and SME and  lending. They submit that smaller banks can be effective non-price competitors without scale and the ACCC does not suggest that a merged Bendigo/Suncorp Bank would have sufficient scale to compete, other than on non-price aspects of competition.[993]

    [993] ANZ Outline of Submissions at [98].

26. In any event, the applicants submit that there are other second-tier banks of similar scale to Suncorp Bank, and there is no reason why additional scale could not be achieved through other combinations of Bendigo, Bank of Queensland and ING or other smaller banks, such as Bank of Queensland’s recent acquisition of ME Bank.[994] They submit that the ACCC adopts a static approach to competition and fails to take into account the prospect of other banks entering the relevant markets and becoming attractive acquisition targets in their own right, in a future with the Proposed Acquisition.[995]

    [994] ANZ Outline of Submissions at [99].

    [995] ANZ Submissions in Reply at [36].

27. Relatedly, the applicants submit that to the extent a merger between Bendigo and Suncorp Bank in the Bendigo Merger counterfactual is commercially credible, then it follows that a merger between Bendigo and another bank, other than Suncorp Bank, is equally credible in the factual with the Proposed Acquisition. They submit that other acquisition opportunities for Bendigo include banks that have recently entered the market and grown market share.[996]

    I.3.2.               Bendigo’s submissions

    [996] SGL Outline of Submissions at [91].

28. Bendigo submits that there are two categories of competitive detriments that would arise from the Proposed Acquisition. First, competitive detriments in the markets in which ANZ and Suncorp Bank operate, including the markets for home loans and agribusiness banking. Second, harm to the Australian retail banking industry by further entrenching the oligopoly market structure of the Major Banks by removing the real chance of a second-tier bank, such as Bendigo, effectively challenging the Major Banks through a step-up in scale.[997]

    I.3.3.               The ACCC’s submissions

    [997] Bendigo Outline of Submissions at [96].

29. The ACCC submits that the most significant public detriments of the Proposed Acquisition are its likely effect on competition in the markets for home loans, retail deposits, agribusiness banking and SME banking. It submits that these anti-competitive effects should be given considerable weight for the purposes of s 90(7)(b), particularly given the markets are of “immense importance” to Australian consumers and businesses.[998]

    [998] ACCC Outline of Submissions at [171].

30. The ACCC also submits that the acquisition of Suncorp Bank by a Major Bank is a substantial public detriment because it removes the best and most meaningful opportunity to build scale and better compete with the Major Banks through a step up in scale.[999] It submits that the loss of Suncorp Bank as a stand-alone competitor will further entrench the existing market structure, whereby the Australian banking sector will continue to be dominated by the Major Banks for the foreseeable future.[1000]

    I.4.      Overall assessment

    [999]        ACCC Outline of Submissions at [172]-[173].

    [1000] ACCC Outline of Submissions at [174].

31. On balance, the Tribunal is satisfied that the benefits from the Proposed Acquisition would outweigh the detriments to the public, that would be likely to result from the Proposed Acquisition.

32. First, the integration and productive efficiencies from the Proposed Acquisition represent real and tangible benefits, although it is difficult to predict the extent to which they will be passed through to consumers. Nevertheless, the Tribunal is satisfied that the costs savings represent a saving of real resources, and they are likely to be sustained.

33. Second, the other alleged public benefits, as explained above, are either not public benefits, or are not specific to the Proposed Acquisition, except to the extent that there is some small reduction in risk from Suncorp Bank being combined with a more diversified ANZ.

34. Third, the detriments from any reduction in competition in the home loans, SME and agribusiness markets, for the reasons advanced above, are not likely to be meaningful.

35. Fourth, even if the Tribunal had not been able to conclude that it was satisfied that the Proposed Acquisition was not likely to have the effect of substantially lessening competition, any detriments arising from any reduction in competition are unlikely to be sufficiently certain, for the reasons advanced above, in addressing the competition inquiry in s 90(7)(a), to outweigh the integration and production efficiencies forecast to arise from the Proposed Acquisition. Most significantly, these reasons included the uncertainty in the timing of the receipt of the postulated synergies that might be expected from a merger between Bendigo and Suncorp Bank.

36. Fifth, neither the ACCC nor Bendigo advanced any evidence that any lessening of competition in a national retail deposits market was significant or meaningful. In the absence of any such evidence, it is not possible for the Tribunal to attribute any weight to any loss of competition in that market for the purpose of identifying possible detriments likely to arise from the Proposed Acquisition.

37. Sixth, the loss of Suncorp Bank as a potential source of additional scale for a second-tier or smaller bank can fairly be characterised as a public detriment, not least given Mr Elliott’s statement that was quoted in the Australian Financial Review that the acquisition of Suncorp Bank was a “once-in-a-lifetime opportunity”,[1001] and his evidence that an acquisition of Suncorp Bank provided ANZ with “[REDACTED]”.[1002] Combinations of other second-tier and smaller banks might provide other possibilities for banks to acquire greater scale, but these possibilities are more speculative and uncertain than a merger between Bendigo and Suncorp Bank. Nevertheless, and more significantly, given the dominant position of the Major Banks, the additional scale provided by Suncorp Bank would still be unlikely to be sufficient to enable the merged entity to engage in more meaningful price competition with the Major Banks.

    [1001]Australian Financial Review, ANZ’s ‘once-in-a-lifetime’ deal comes with complexity, 18 July 2022 [HB 31/1308/77].

    [1002]       Transcript of Examination of Shayne Elliott [HB 14/489/15] at T15.17.

    J.        DETERMINATION

38. The applicants have applied for authorisation of an acquisition of Suncorp Bank by ANZ. That conduct has been referred to as the Proposed Acquisition in these reasons.

39. The Tribunal has applied the authorisation preconditions stated in s 90(7) of the CCA and has assessed the likely competitive effects of, and public benefits and detriments likely to result from, the Proposed Acquisition.

40. For the reasons stated above, the Tribunal is satisfied, in all the circumstances, that the Proposed Acquisition, being the conduct for which authorisation is sought:

    (a)would not be likely to have the effect of substantially lessening competition; and

    (b)would be likely to result in, a benefit to the public that would outweigh the detriment to the public that would be likely to result from the Proposed Acquisition.

41. The Tribunal, therefore, sets aside the determination of the ACCC declining to grant authorisation of the Proposed Acquisition under s 88(1) of the CCA, and in its place, makes a determination pursuant to s 88(1) and s 102(1) of the CCA granting to ANZ unconditional merger authorisation for the Proposed Acquisition.

I certify that the preceding nine hundred and eleven (911) numbered paragraphs are a true copy of the Reasons for Determination of the Honourable Justice Halley, Dr Jill Walker and Ms Diana Eilert.

Associate:

Dated: 20 February 2024