The Australian Competition and Consumer Commission has concerns about AFG’s plan to acquire Connective Group.
AFG announced last August that it had launched a takeover bid for a rival mortgage aggregator, Connective Group. The A$120 million deal would create a mortgage distribution network with more than 6500 brokers.
The ACCC said in a statement yesterday: “Combing AFG and Connective would create the largest aggregator in Australia by a significant margin, accounting for almost 40 per cent of all mortgage brokers operating in Australia.”
The regulator’s view is that the aggregator market is already concentrated. It said: “The ACCC is concerned there will be limited similar alternatives for brokers to switch to. This may negatively impact the services offered to brokers.”
The ACCC’s preliminary view is that the combined AFG-Connective would have the ability to reduce commissions payable to brokers, increase fees or reduce service levels.
It also says the merged entity may have an increased ability and incentive to “foreclose” small lenders by denying access to its panel, raise costs and induce affiliate brokers to recommend AFG-Connective branded products.
The ACCC has released a statement of issues and is seeking industry views on certain competition issues.
Section 50 of the Competition and Consumer Act 2010 prohibits acquisitions that would have the effect or be likely to have the effect of substantially lessening competition in any market.