ACCC ruling on AXA Asia Pacific signals new attitude

Mike Taylor explains the consequences of the ACCC's surprising decision to halt NAB's acquisition of AXA Asia Pacific.

That National Australia Bank (NAB) has been irked by the Australian Competition and Consumer Commission’s (ACCC’s) decision to veto its acquisition of AXA Asia Pacific is obvious and, quite possibly, the bank is justified.

To justify its decision, the ACCC surprised many by referencing a likely diminution in competition in the platform market, particularly with respect to wraps.

In simple terms, NAB’s control of Aviva’s highly successful Navigator platform did not sit well with its future control of the AXA platforms.

And it is this rationale that has provided NAB with every justification to be irked, because if the ACCC had applied the same thinking to Westpac’s merger with St George then it, too, would likely to have been vetoed.

When the ACCC green-lighted the Westpac/St George merger it gave the combined BT/Asgard group a dominant position in the platform space, including control of one-quarter of the primary market — the platforms nominated by planners as their primary/preferred platform vehicle.

Did the ACCC fully understand the implications of its decision when it approved the Westpac/St George merger? Probably not. Did the competition regulator understand a whole lot more when it vetoed NAB’s bid for AXA Asia Pacific? Almost definitely.

It can hardly have missed the fact that control of the Australian platform market had almost halved inside four years to be dominated by just three of the nation’s four big banks.

While some have argued that the ACCC’s position would have been more easily understood if it had been based on bank dominance of a sector, this reasoning fails to recognise the essential narrowness of the regulator’s charter and the unwillingness of any government body to adopt what could be interpreted as a ‘political’ position.

In any case, the ACCC’s stated preference for an AMP-owned AXA Asia Pacific amounted to the same thing. It represented the expression of a view that the industry would be better served by having strong and viable non-bank players.

The Australian financial services industry and a good many commentators should take two messages from the ACCC’s position — the first being that it is not simply a rubber stamp and the second being that it these days has a greater understanding of the intricacies of the financial services industry.

If there is a third message to be taken from the ACCC’s decision, it is that the regulator tends to be unimpressed by high-priced spin.