The takeover by Experian Australia Credit Services of rival illion has received a green light from the ACCC, which said the merger was “not opposed.”
Experian announced plans for this takeover in April, and it reduces the number of credit bureaus operating in Australia to three.
Experian Bureau is a joint venture, with Experian Australia Pty Ltd holding a majority share, with minority interests held by the four major banks, Latitude Financial Services and American Express Australia.
illion (formerly D&B) is majority owned by funds that are managed and advised by Archer Capital.
The ACCC said it considered the likely impact of the proposed acquisition on competition in markets for consumer credit reporting services, credit decisioning, identity verification services and related services.
The ACCC said it concluded that the proposed acquisition “was not likely to substantially lessen competition in any market.
“The ACCC found that the market for the supply of consumer credit reporting services in Australia is concentrated with services supplied by three market participants. The proposed acquisition is a merger between 2 of the 3 consumer credit reporting bureaus in Australia, with the remaining competitor – Equifax – being the largest consumer credit bureau in Australia.”
CreditorWatch also is in this field, but only operates in the commercial credit reporting market.
“Our investigations indicate that Experian and illion provide only a weak competitive constraint against the market leader Equifax and this is unlikely to change if the merger does not go ahead” the ACCC said.
“This lack of competitive constraint is a result of factors particular to consumer credit reporting and to the entrenched position of Equifax.
“The majority of credit providers appear to use a single credit bureau and most often that bureau is Equifax. The ACCC also found that even where the large credit providers contract with multiple bureaux, some see Equifax as the primary bureau and utilise Experian and illion as a secondary data source.
“Primary bureau status is considered important to a credit reporting body. Where customers tend to direct more enquiries to their primary bureau, this allows the bureau to obtain more enquiry data than if they were a secondary bureau.
“Barriers to entry and expansion in consumer credit reporting are very high and the most fundamental barrier to expansion is access to large and high quality dataset assets.”
The ACCC’s review found that the datasets of Experian and illion are less comprehensive than that of Equifax, which reduces the competitive constraint they are able to provide. It is this lack of superior data quality that affects Experian’s ability to attract more customers and gain market share.