The Australian Competition and Consumer Commission (ACCC) has raised a number of objections to the potential acquisition of Pillar Administration by Link Group.
The NSW government announced it would privatise Pillar in December 2015, and Link soon stepped forward as an interested party.
In a Statement of Issues on the proposed merger released yesterday, the ACCC said the acquisition would be likely to "substantially lessen competition in the supply of superannuation administration services by entrenching Link’s dominant position".
The merger would be likely to result in lower service levels or higher prices, which would ultimately be passed on to superannuation fund members, said ACCC chair Rod Sims.
The ACCC pointed out that Link and Pillar are the only providers of superannuation administration services to large funds in the country.
"The ACCC is concerned that the possible acquisition will remove the only alternative superannuation administration services provider with the demonstrated capacity to supply administration services to larger funds in competition with Link," Mr Sims said.
"Consequently, there would be one dominant administration provider facing limited competitive constraint in the outsourced market.
"It would also remove the potential for an alternative owner to further invest in Pillar’s offering and make it an even stronger competitor to Link in the future."
The ACCC said another issue in its final determination on the matter, due on 15 December 2016, will be the barriers to entry or expansion in the sector – including the likelihood of larger funds insourcing administration in the future.
"The ACCC’s preliminary view is that a fund that currently outsources superannuation administration services is unlikely to switch to insourcing as a way of bypassing Link; it would be too costly and difficult," Mr Sims said
"The ACCC also considers that funds are unlikely to provide superannuation administration services to each other in a way that competitively constrains Link.
"It is beyond the remit of most funds to sell administration services and, furthermore, many funds are likely to be reluctant to purchase administration services from their competitors."
The competition regulator will be accepting submissions from interested parties by 28 October 2016 ahead of its expected final decision date of 15 December 2016.
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