ACCC reviews its decisions on OfficeMax and Lyreco deals
Regulator finds “no significant negative competitive effects” of mergers.
Two relatively recent mergers in the Australian office products market have been subject to a detailed review by the Australian Competition and Consumer Commission (ACCC).
The ACCC has released a report detailing the findings arising from reviews of six mergers – including Platinum Equity-owned Winc’s acquisition of OfficeMax and Complete Office Supplies’ acquisition of Lyreco - which occurred between 2017 and 2019, that were not opposed by the ACCC.
Reviews of past merger decisions (often referred to as ‘ex-post’ merger reviews) are generally undertaken by competition authorities to inform and improve processes and decision-making.
The ACCC said the OfficeMax and Lyreco acquisitions resulted in a shift in market structure from four to two main national suppliers of office stationery to large customers.
The ex-post review relied primarily on a large number of interviews with customers and other interested parties.
During the ex-post review, no market participant identified significant negative competitive effects as a result of the acquisitions.
The ACCC said it would normally expect to identify some degree of competitive harm resulting from a change in market structure from four main suppliers to two main suppliers.
However, its inquiries suggest that the combination of factors considered the initial assessments, taken together, are providing sufficient constraint on Winc and COS following the acquisitions.
These include:
- In relation to the constraint on Winc, COS’ acquisition of Lyreco enabled it to expand more quickly than it may have been able to organically, and provide greater competitive tension than it otherwise would have.
- There is at least a small amount of competitive tension provided by small Indigenous-owned businesses in the industry. These businesses are generally partnered with existing suppliers which they rely on for their back-end, warehousing and logistics. They are not genuine independent competition, but may represent an opportunity for smaller suppliers to capture market share from Winc and COS.
- Government customers have a tendency to contract in ways that allow them to multisource their requirements, by establishing a panel of suppliers. This means that despite Winc and COS’ large size relative to other suppliers, there are opportunities for much smaller suppliers to be successfully listed on government panels. It also makes it easy for large government customers to switch between alternative contracted suppliers and punish Winc or COS for price increases or deterioration in service quality.
- There appears to be competition at the margins by retail office products suppliers. In particular, rather than ordering from their contracted office products supplier, office or procurement managers are increasingly making ad hoc purchases from Officeworks, and more recently, Amazon.
- There appears to be a small amount of competitive constraint provided by suppliers other than the traditional ‘one-stop shop’ suppliers of traditional office products. For example, customers identified the ability to move ink and toner requirements away from office product suppliers to vendors of managed printing services.
- The office products market is in a period of long-term decline. This trend has been accelerated by COVID-19 seeing employees work from home and offices closed resulting in no office product spend.
Date Published:
28 March 2022