Application for authorisation of Tabcorp Holdings and Tatts Group proposed merger

The ACCC merger register page provides the following summary of the proposed merger: 'Tabcorp Holdings Limited (Tabcorp) and Tatts Group Limited (Tatts) propose to merge. Tabcorp and Tatts both operate off-course totalisators and retail wagering networks (in different states and territories) and online wagering businesses. Tabcorp and Tatts both supply gaming and promotional management systems and services to gaming venues and gaming monitoring services to state governments.'

Tabcorp originally sought informal clearance from the ACCC. The ACCC released of a Statement of Issues on 9 March 2017. Following the release of the statement of issues Tabcorp withdrew its application for informal clearance.

On 13 March 2017 Tabcorp announced it would seek authorisation for the merger from the Australian Competition Tribunal (see Tabcorp media release). Tabcorp's application for Authorisation and related documents can be found on the Tribunal's case page.

The matter was heard before the Tribunal (comprising Justice Middleton (President), Mr Grant Latta AM (Member) and Dr Darryn Abraham (Member)) from 16 May - 2 June 2017.

On 20 June the Tribunal granted authorisation, subject to a condition that Tabcorp sell the Odyssey gaming monitoring operations. Reasons for this decision were published on 22 June 2017: Application by Tabcorp Holdings Limited [2017] ACompT 1. The reasons run to 255 pages.

The ACCC provided an initial response indicating that it 'will now consider the reasons for decision published by the Tribunal.'

Both the ACCC and Crownbet subsequently applied for judicial review of the decision (only judicial review is possible from merger decisions of the Tribunal; full merits review is not available).

The ACCC succeded in one of the grounds of Judicial Review and the Tribunal decision was set aside.

Tabcorp re-applied for authorisation on 29 September 2017.

On 17 November 2017 the Tribunal granted authorisation for the proposed merger.

On 1 December the ACCC announced it would not appeal the Tribunal's decision to authorise the Tabcorp/Tatts merger, observing that although it takes a different view from the Tribunal about public benefits/detriments in this case, it does 'not consider there is any error of law that needs to be corrected' (ACCC, 'ACCC won't seek review of Tabcorp-Tatts determination' (1 December 2017))

The public reasons for decision are also available from the Federal Court site (at just over 350 pages they're about 100 pages longer than the original authorisation): Applications by Tabcorp Holdings Limited [2017] ACompT 5

The ACCC commenced its review of the proposed merger on 25 November 2016.

It released a Statement of Issues on 9 March 2017. See also media release.

Following release of SoI on 9 March 2017, Tabcorp withdrew its request for informal review and made application to the Tribunal for authorisation.

The Tribunal observed (para 35) that, although the ACCC reached 'no definitive conclusion' in its SoI about whether the acquisition would result in a substantial lessening of competition, in its final submissions before the Tribunal it 'proffered the view that the proposed merger should not be allowed.' (para 35)

Tabcorp announced its decision to seek authorisation on 13 March 2017 (see Tabcorp media release).

View Tabcorp's application for Authorisation.

The ACCC has an important role in assisting the Tribunal in merger authorisation applications and, the Tribunal noted, the views expressed by it 'must be given due weight having regard to' its important regulatory role under the Act. (para 37). The Tribunal made the following comments about the ACCC's role (para 38):

... The ACCC’s statutory responsibility to assist the Tribunal in its determination involves making enquiries and providing a report to the Tribunal regarding the application for authorisation: s 95AZEA and s 95AZFA. It may also call witnesses, examine or cross-examine witnesses, report on statements of fact, and make submissions to the Tribunal: s 95AZF. In this respect, when the ACCC appears before the Tribunal, it occupies a different role to that of a traditional regulator. As regulator, it reaches its own conclusion regarding informal or formal merger clearance. When appearing before the Tribunal, the ACCC uses its resources and expertise to assist the Tribunal in an impartial manner, regardless of any conclusions it may have drawn from its earlier analysis in the clearance process. The circumstances of this application have required the ACCC to act first as regulator with the decision-making power that entails, and then transform into an adviser without the ability to make a determination. The transition from decision-maker to adviser cannot always be easy, but the Tribunal was grateful to receive the constructive contributions of the ACCC in this proceeding. ...

Authorisation was granted for a second time on 17 November 2017.

The Full Federal Court set aside the original decision of the Tribunal as a result of a successful application for judicial review by the ACCC.

Some doubt then arose about whether a rehearing was required because more than six months had passed since the original application. The Act provides that authorisation applications must be decided within six months (or the Tribunal will be taken to have refused authorisation pursuant to s 95AZI).

On 26 September Justice Middleton, President of the Australian Competition Tribunal, held that, while he considered the Tribunal did have that power, to avoid the risk of subsequent challenge he suggested Tabcorp make a fresh application, noting:

"We’ve got to proceed as quickly as we can but with all due process ..."

The matter will be reheard on 24-25 October and will include updated evidence from the previous hearing.

On 29 September 2017 Tabcorp submitted a fresh authorisation application.Subsequent directions hearings established the following timelines:

• Friday 6 October: parties and interveners to serve any new evidence arising since 2 June
• Monday 9 October: submissions and supporting materials by third parties due
• Friday 13 October: the ACCC to file a report pursuant to s 95AZEA and any further evidence
• Tuesday 17 October: replies to be submitted
• Friday 20 October: other written submissions due
• Monday 23 October: other written replies due
• Tuesday 24 - Wednesday 25 October: hearing (if needed)

Justice Middleton granted Tatts, CrownBet, the Racing Victoria Interveners and Racing.com leave to intervene and also ordered that the evidence filed in the first Tabcorp application would stand as evidence in the new application and third party submissions filed in that proceeding would stand as submissions in the new proceedings (subject to the parties withdrawing the submissions).

See Application by Tabcorp Holdings Limited (No 2) (ACT 3 of 2017)

See also Application by Tabcorp Holdings Limited (ACT 1 of 2017)

On 31 March the following organisations were granted leave to intervene in the proceedings:

• CrownBet Pty Ltd
• Racing Victoria Limited
• Harness Racing Board (t/a Harness Racing Victoria)
• Greyhound Racing Control Board (t/a Greyhound Racing Victoria)
• Racing.Com Pty Ltd

On 17 March Tatts Group Limited was granted leave to intervene

The Tribunal granted authorisation on 20 June 2017 subject to a condition that Tabcorp sell the Odyssey gaming monitoring operations. Reasons can be found here:

• Application by Tabcorp Holdings Limited [2017] ACompT 1

Below I've extracted the passages I consider most important or interesting; it is not a substitute for reviewing the full decision available at the link above.

The Tribunal spent considerable time detailing the businesses of the merging parties and the interveners. It noted that Tabcorp submitted that the proposed transaction would 'combine the largely complementary businesses of Tabcorp and Tatts':

[para 31] Tabcorp submitted that the proposed transaction would combine the largely complementary businesses of Tabcorp and Tatts, producing a diversified Merged Entity operating in wagering and media, lotteries, Keno and gaming services. It was said that Tabcorp’s strengths lie in wagering, while Tatts’ strengths lie in lotteries, based partly on historical patterns of trade. However, all participants agreed that the Tribunal’s role is to look forward, not to the past. Historical matters are useful only insofar as they indicate future competitive practices.

[para 32] The proposition that Tabcorp and Tatts are complementary rather than competitive businesses found some support in the contributions made by each business unit to the current financial performance of the Merger Parties. ... While large sums were earned by both Merger Parties from wagering and gaming services, a significant proportion of these were earned under exclusive licences held by one or the other party in various State and Territory jurisdictions. With respect to the supply of those services to consumers, the exclusive nature of these licences means that there is no competitive tension in the retail channel within their exclusive jurisdictions. This is not to dismiss the observation that the Merger Parties do compete head-on in the provision of some services in other channels, and in the bidding process for those exclusive licences.

The Tribunal set out the legal test and its role as follows (emphasis added):

[para 39] The legal test by which the Tribunal makes its determination is not the test in s 50. Under s 95AZH, the Tribunal must not grant authorisation unless it is satisfied in all the circumstances that the proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to occur.

[para 58] Section 50 prohibits a corporation from acquiring shares or assets if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market. However, the Tribunal may grant authorisation to a person to acquire shares in the capital of a body corporate or acquire the assets of another person: s 95AT(1). The Tribunal may grant authorisation subject to specified conditions, including a condition that a person must make and comply with an undertaking to the ACCC under s 87B: s 95AZJ(1) and (2). If Tribunal authorisation is granted the prohibition in s 50 does not apply, provided the authorised acquisition is carried out in accordance with the conditions of its grant: s 95AT(2) and (3).

[para 59] The Tribunal must not grant an authorisation unless satisfied that, in all of the circumstances, the proposed acquisition would result, or be likely to result, in “such a benefit to the public that the acquisition should be allowed to occur”: s 95AZH(1).

[para 60] Section 95AZH(2) specifies certain matters to which the Tribunal must have regard in determining what amounts to a public benefit. If as a consequence of the proposed merger there is likely to be a significant increase in the real value of exports, or a significant substitution of domestic products for imported goods, the Tribunal must regard these as a public benefit: s 95AZH(2)(a). The Tribunal must also take into account, in determining what amounts to a benefit to the public, all other relevant matters that relate to the international competitiveness of any Australian industry: s 95AZH(2)(b).

[para 61] However, the Tribunal is not confined to these matters when considering whether such a public benefit has arisen that the transaction should be allowed. The expression “benefit to the public” has been interpreted broadly by the Tribunal since Re Queensland Co-operative Milling Association Ltd; re Defiance Holdings Ltd (1976) 8 ALR 481 (‘Re QCMA’) where the Tribunal said (at 510) that public benefit included:

anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress.

A public benefit arises “if the benefit would not exist without the acquisition or if the acquisition removes or mitigates a public detriment which would otherwise exist”: Application by Sea Swift Pty Ltd [2016] ACompT 9 at [42] (‘Sea Swift’).

[para 62] The Tribunal has previously adopted a modified total welfare standard when identifying and assessing public benefit: see Qantas Airways Limited [2004] ACompT 9 at [185] (‘Qantas’). This means that the Tribunal has considered that gains flowing to only a limited number of members of the community may constitute a benefit to the public, but those gains will carry less weight than gains which flow to the community generally.

[para 63] In Qantas, the Tribunal considered whether ‘public benefits’ include the gains made by a domestic company’s foreign shareholders. Endorsing Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385, the Tribunal emphasised that:

it is benefits to the Australian public, not to the overseas public, to which the Tribunal should have regard. However, the Tribunal noted the practical difficulties involved in limiting one’s consideration to benefits to the Australian public.

[para 64] The Tribunal in that instance concluded that supra-competitive returns and deadweight loss that accrues to foreign shareholders should be disregarded. However, returns to foreign shareholders of Australian companies would constitute a public benefit where they are reinvested in the Australian economy or result in further foreign investment in Australia: Qantas at [199].

[para 65] The method by which the Tribunal assesses the existence and weight of a public benefit was described in Sea Swift at [42]:

A public benefit arises from a proposed acquisition if the benefit would not exist without the acquisition or if the acquisition removes or mitigates a public detriment which would otherwise exist. If a claimed public benefit exists, in part, in a future without the proposal, the weight accorded to the benefit may be reduced appropriately. Public benefit is a wide concept and may include anything of value to the community generally so long as there is a causal link between the proposed acquisition and the benefit: see Application by Medicines Australia Inc (2007) ATPR 42-164; [2007] ACompT 4 (“Medicines Australia”) at [107], [118]-[119]. Benefits not widely shared may nevertheless be benefits to the public: Hospital Benefit Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369 at 375-377. However, the extent to which the benefits extend to ultimate consumers is a matter to be put in the scales: [Re AGL] at [168].

[para 66] Although s 95AZH does not explicitly refer to public detriment, assessment of public benefit does not occur in a vacuum. The Tribunal must have regard to “all the circumstances” in applying the authorisation test prescribed by the CCA. In Re Queensland Independent Wholesalers Ltd (1995) 132 ALR 225 (‘Re QIW’), the Tribunal said at 234:

The examination of “all the circumstances” must in our view involve the tribunal in an examination of matters of detriment, including anti-competitive detriment, in order to conclude whether in all the circumstances there is such a degree of benefit to the public that the acquisition should be allowed to proceed …

[para 67] Public detriments can include, but are not limited to, the reduction of competition resulting from an acquisition: Re QCMA at 512. They may include detriments other than those that relate to anti-competitive effects: Sea Swift at [43]. Much like public benefits, public detriments are broadly framed to include “any impairment to the community generally”, including “any harm or damage to the aims pursued by society including as one of its principal elements the achievement of the goal of economic efficiency”: Qantas at [150], quoting Re 7-Eleven Stores Pty Ltd, Australian Association of Convenience Stores Incorporated and Queensland Newsagents Federation (1994) ATPR 41-357 at 42,683.

The Tribunal noted that consideration of benefits and detriments to the public necessarily include looking at the competitive effects of the transaction, including the effect of the merger on international competitiveness (s 95AZH(2) and may include any other pro- or anti-competitive market effects (para 68). In this context, the Tribunal noted:

[para 68] ... The Act includes two definitions of a market: s 4E states that ‘market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services’. Section 50(6) is directly applicable to the prohibition in s 50(1) of acquisitions that would substantially lessen competition; it adds that ‘market means a market for goods or services in Australia, or a State, or a Territory, or a region of Australia’. Certainly, s 50(6) does not exclude the concept of substitutability, a concept to which the Tribunal will return.

[para 69] To assess competitive effects in a market, the market would normally need to be defined, or at least considered.

[para 70] In considering the competitive effects of any transaction, there is an emphasis on substitutability (amongst other factors) and the commercial context and the commercial realities relevant to the market and competition. Market identification is an economic tool or instrumental concept to analyse competitive behaviour. Any analysis will necessarily involve value judgements, as such analysis concerns human behaviour and commercial norms of behaviour.

[para 71] The Tribunal observes that the High Court of Australia has recently confirmed the principles relevant to market definition and any analysis of competitive behaviour in Air New Zealand Ltd v Australian Competition and Consumer Commission [2017] HCA 21 (‘Air New Zealand’). At [12]-[14], Kiefel CJ and Bell and Keane JJ stated [note: emphasis in these extracts is from the Tribunal decision]:

[12] The authorities confirm that a market, within the meaning of the TPA, is a notional facility which accommodates rivalrous behaviour involving sellers and buyers. In Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd, Deane J, after noting that “[s]ection 4E confines ‘market’ for the purposes of the Act to ‘a market in Australia’”, went on to say that “‘market’ should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes”. Dawson J agreed generally with Deane J, adding:

“A market is an area in which the exchange of goods or services between buyer and seller is negotiated. It is sometimes referred to as the sphere within which price is determined and that serves to focus attention upon the way in which the market facilitates exchange by employing price as the mechanism to reconcile competing demands for resources”.

[13] Similarly, in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission, McHugh J observed:

“[T]he market is the area of actual and potential, and not purely theoretical, interaction between producers and consumers where given the right incentive … substitution will occur. That is to say, either producers will produce another similar product or consumers will purchase an alternative but similar product.”

[14] Section 4E of the TPA proceeds upon the express footing that, notwithstanding the abstract nature of the concept of a market, it is possible to locate the market where the competition protected by the TPA occurs in Australia. Reconciling the abstract notion of a market with the concrete notion of location, so that they work coherently, presents something of a challenge. Particularly is this so because “competition” describes a process rather than a situation. But given that the TPA regulates the conduct of commerce, it is tolerably clear that the task of attributing to the abstract concept of a market a geographical location in Australia is to be approached as a practical matter of business. It is important that any analysis of the competitive processes involved in the supply of a service is not divorced from the commercial context of the conduct in question.

(Emphasis added).

[para 72] At [39], Nettle J (whilst agreeing with Gordon J) stated as an additional comment:

[39] As the majority in the Full Court of the Federal Court (Dowsett and Edelman JJ) recognised, market definition is a question of fact. More precisely, it involves “a fact-intensive exercise centered on the commercial realities of the market and competition”. And, as a consequence, the definition of a market is liable to vary according to the purposes of the exercise undertaken.

(Emphasis added).

[para 73] At [57]-[65], Gordon J stated:

[57] Market identification is not a task undertaken at large, or in a vacuum. The task, and the extent of the task, are tailored to the conduct at issue and the statutory terms governing the contravention. The need to identify the market arises only in the context of determining whether the conduct constitutes a particular contravention of the TPA. That is, the question of whether there is a market “in Australia” is to be asked and answered in the statutory context in which that question arises. It is not to be asked or answered in isolation from that context or by looking only at what appears in s 4E of the TPA.

[58] The first step is to identify “precisely what it is that is said to have been done in contravention of the section”. As has been rightly said in the Federal Court of Australia, the court begins with the problem at hand and asks “what market identification best assists the assessment of the conduct and its asserted anti-competitive attributes”. Identifying a market is a “focusing process” which is “to be undertaken with a view to assessing whether the substantive criteria for the particular contravention in issue are satisfied, in the commercial context the subject of analysis” … .

[59] That approach recognises that the concept of a “market” is “not susceptible of precise comprehensive definition”. It recognises that market identification is an economic tool, or instrumental concept, that uses and integrates those legal and economic concepts best adapted to analyse the asserted anticompetitive conduct. It recognises that market identification is “not an exact physical exercise to identify a physical feature of the world” and that there is often little or no utility in debating or identifying “the precise physical metes and bounds of a market”. It recognises that market identification is “not a physical thing, or essence, which can be identified in a manner divorced from the relevant context”. And it recognises that market identification depends upon the issues for determination – the impugned conduct and the statutory provision proscribing anti-competitive behaviour that the conduct is said to contravene.

[60] That is not to say that a market can be identified arbitrarily. It must be based on findings of fact. "The premise of that proposition”, as the Full Court of the Federal Court said in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd, is that the identified market “has economic and commercial reality":

"It must accordingly not be artificial or contrived. Economists frequently construct economic models to analyse complex commercial or economic events or scenarios. But a model is unlikely to be a useful analytical tool if based on unrealistic assumptions that materially depart from the real world facts and circumstances involving commercial behaviour in which the events to be analysed occur."

[61] The identification of the market must therefore "accurately [and] realistically describe and reflect the interactions between, and perceptions and actions of, the relevant actors or participants in the alleged market, that is, the commercial community involved”.

[62] Embedded in the “focusing process” is the recognition that the substantive criteria for a particular contravention in issue will depend on the particular statutory provisions. That process “may lead to the drawing of different lines in different circumstances depending upon the purpose of the provision in question”. In turn, that process may “lead to different market definitions in relation to the same industry” or even different markets within the same case. That potential was recognised more than 25 years ago by Professor Brunt, who wrote that “[t]here can be more than one ‘relevant market’ for a particular case, in the sense of markets that will attract liability”. There is nothing odd about that conclusion. As Professor Brunt pointed out, it reflects the fact that market identification “is but a tool to facilitate a proper orientation for the analysis of market power and competitive processes – and should be taken only a sufficient distance to achieve the legal decision”.

[63] Recognising that market identification is an economic tool has other important consequences. Economics is a social science and “does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor draw correct conclusions”.

[64] The nature of economics as a social science is often highlighted by the existence of conflicting expert opinions about the identification of a relevant market. Deane J acknowledged as much in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd, when his Honour said:

“The economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted. One overall market may overlap other markets and contain more narrowly defined markets which may, in their turn, overlap, the one with one or more others.”

[65] When a court is required to draw its own conclusions about market identification, it is therefore inherent in that task – being one founded on economics as a social science – that the court will be required to make “value judgments about which there is some room for legitimate differences of opinion”. As a result, “[m]arket identification and definition is not an exact science. It is rooted in the analysis of commerce as an aspect of human behaviour”.

(emphasis added)

[para 74] However, in this proceeding, there has been no real contest as to market definition although the Tribunal will make some observations specifically relating to various areas of debate in this regard. As indicated, market definition is only a tool for analysing the extent of competitive constraints that apply to the participants engaging in the market.

[para 75] The Tribunal appreciates that care must be taken in the consideration of substitutability in any discussion of the concept of a market. Substitutability has never, as a matter of legal principle, been the sole criterion to consider in any debate in defining a market. As the plurality said in Air New Zealand at [24]-[26]:

[24] In QCMA the Trade Practices Tribunal explained that a market is “the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution … if given a sufficient price incentive”. Later, in discussing the distinction between markets and submarkets, it was said that: “Where the defining feature of a market is the existence of close substitutes (whether in demand or supply), the defining feature of a sub-market is the existence of still closer and more immediate substitutes.”

[25] The Tribunal did not say that substitutability will be the defining feature of a market in every case. The passage takes as its premise that it is the defining feature for the question at hand.

[26] This is not to suggest that substitutability may not be an important, or even a decisive, factor in market definition in some cases, just as barriers to entry may be. It is rather that concepts such as market and cross-elasticity of supply and demand provide no complete solution to the definition of a market, as Dawson J observed in Queensland Wire Industries. Much will depend upon the context in which the question arises. The exercise of market definition needs to take into account the conduct in question and its effects, and the statutory terms governing the question.

(Emphasis added).

[para 76] Gordon J (with Nettle J agreeing) made the following comments as to substitutability at [85]-
[89]:

[85] As s 4E of the TPA relevantly provided, a market in relation to services includes a market for those services as well as other services that are substitutable for, or “otherwise competitive with”, those first mentioned services.

[86] In QCMA, the Tribunal said that “[w]here the defining feature of a market is the existence of close substitutes (whether in demand or supply), the defining feature of a sub-market is the existence of still closer and more immediate substitutes” (emphasis added). In Queensland Wire, Mason CJ and Wilson J referred to that oft cited passage in QCMA as explaining that “the defining feature of a market is substitution”.

[87] There are a number of points to be made about that statement in Queensland Wire. First, as the Tribunal itself recognised in QCMA, the existence of close substitutes is not the defining feature of every market. Second, as Dawson J pointed out in Queensland Wire, “[i]mportant as they are, elasticities and the notion of substitution provide no complete solution to the definition of a market”. Focusing too closely on the concept of substitutability can obscure the proper identification of the market and undermine the purpose of the relevant statutory provisions.

[88] As noted earlier, s 45 is concerned to promote competition. Relevantly, it is concerned to proscribe contracts, arrangements or understandings that contain a provision which has the purpose, effect or likely effect of “substantially lessening competition” by, for example, controlling the price for services supplied by a party to that contract, arrangement or understanding. And the competition that is to be promoted is competition in any market in which a corporation that is a party to the contract, arrangement or understanding supplies those services. In that context, questions of substitutability may be relevant but are unlikely to be determinative in the process of market identification.

[89] The proposition that questions of substitutability are not determinative is not limited to s 45. In the context of s 50 of the TPA, a substantial lessening of competition is assessed by reference to a range of matters. The extent to which substitutes are available is just one of those matters. Other matters relevant to an assessment for the purposes of s 50 include the height of barriers to entry to the market, the degree of countervailing power in the market and dynamic characteristics of the market such as growth, innovation and product differentiation.

(Emphasis added).

[para 77] The Tribunal, to the extent that it has needed to consider the concept of a market, has been mindful not to limit itself to questions of substitutability, although this is an important consideration which in economic terms encapsulates, for instance, barriers to entry to the market and product differentiation. It will be apparent from these Reasons that the Tribunal has emphasised substitutability, but necessarily takes other factors into account as specifically identified.

[para 78] The Tribunal observes that Market definition in Australian law can involve the application of the hypothetical monopolist test to measure substitutability. Put simply, if a small but significant non-transitory increase in price (‘SSNIP’) in one set of products leads consumers to substitute another set of products, then the market could be defined to include both sets of products. Dimensions of substitutability may include product characteristics, geographical limits, the functional level of the transaction, and the temporal aspect.

[para 79] The hypothetical monopolist test can, in some instances, be an over-simplification of complex market practices. First, it asks for consideration of consumer responses in aggregate, whereas different consumer sub-markets (or niches) can show very different responses to a SSNIP. Secondly, price takes on differing levels of significance in different markets. For instance, to raise the price even slightly would be to destroy the business model of products which have traditionally been offered for free, such as social media platforms or online search engines. The experts that the Tribunal heard from agreed that competition in wagering services takes place in both price and non-price terms. However, price usually remains the most objective lever to manipulate when considering substitutability.

Later in its reasons (para 193) the Tribunal again referred back to Metcash where Justice Yates (Finn J agreeing) referenced (para's 245-246) the Tribunal's 1976 QCMA decision:

The seminal expression of “the market” for the purposes of Australian competition law is to be found in [Re QCMA] (1976) 25 FLR 169 at 190; 8 ALR 481 at 516-517, where the Trade Practices Tribunal said:

We take the concept of a market to be basically a very simple idea. A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them. (If there is no close competition there is of course a monopolistic market.) Within the bounds of a market there is substitution — substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm’s product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives…

The need to consider the possibilities of substitution in defining a market for competition law purposes is enshrined in the definition of “market” for the purposes of the Act …

The Tribunal set out to the principles to be applied when applying the future 'with and without' test to assess net public benefit in merger cases [emphasis added]:

[para 85] In applying the net public benefits test, the Tribunal has previously considered it useful to compare the likely future ‘with’ the proposed acquisition to the likely future ‘without’ the proposed acquisition. ...

[para 86] Conclusions as to the ‘future without’ (or ‘counterfactual’) necessarily require the assessment of several hypotheticals. The correct approach to the counterfactual is to determine, on the balance of probabilities, the most likely of those hypotheticals: Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297 (‘Metcash’) at [225] (Yates J, Finn J agreeing).

Degree of satisfaction required

[para 87] ... the Act requires that the Tribunal not grant authorisation unless satisfied that the proposed acquisition would be likely to result in such a benefit to the public that it should be allowed to occur. Because it is expressed in the negative, in order to grant authorisation the Tribunal must be satisfied of an outcome that is, in all the circumstances, preferable to the outcome under the counterfactual.

[para 88] The Tribunal’s assessment must be based in the real world and not rest on speculation or theory alone: see Sea Swift at [47], citing Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317 (‘Australian Gas Light Company’). It is the balance of public benefit and detriment with the merger, compared to the balance of public benefit and detriment under the counterfactual, which leads to the Tribunal’s conclusions.

[para 89] The Tribunal must be satisfied that “there is a real chance, and not a mere possibility” of the benefit or detriment eventuating: Qantas at [154]-[156], citing Australian Gas Light Company; see also Re VFF Chicken Meat Growers’ Boycott Authorisation [2006] ACompT 2 at [83]. There must be a commercial likelihood that the applicant will act in such a way as to bring about the claimed benefits or detriments. Various options for achieving claimed benefits or avoiding claimed detriments, including any less anti-competitive options, may be explored and weighted appropriately: Qantas at [206]; AGL at [163].

[para 90] Claimed benefits and detriments must be of substance and have durability: see Qantas at [205]; see also Sea Swift at [46]. They should be sufficiently capable of exposition, whether quantitatively or otherwise, rather than “ephemeral or illusory”: see Qantas at [156]; see also Sea Swift at [45]. Any estimate as to their quantification should be robust and commercially realistic: see Qantas at [206]; see also Sea Swift at [46]; see also AGL at [163]. The assumptions underlying claimed benefits or detriments must be spelled out in such a way that they can be tested and verified: see AGL at [163]; see also Sea Swift at [46]-[48].

[para 91[ As stated in Qantas at [207]:

Whilst we recognise that public benefits are easy to assert, but are much harder to prove in advance of their creation, that does not deter us from demanding a high standard of commercial and social accountability in the estimates presented to us. Accordingly, we do not believe that there is anything to be gained by fanciful and speculative modelling of benefits where the underlying assumptions are not clearly spelled out, where the estimates have not been subject to rigorous sensitivity analysis, and where the estimating process is not wholly transparent.

[para 92] Nevertheless, in AGL at [172], the Tribunal stated:

The language of s 95AZH does not dictate mathematical precision. In practice it will often be the case that the factors going to the balancing exercise to determine whether the Tribunal has the necessary satisfaction as specified do not lend themselves to precise quantification. Even if precise quantification of the value of all competing benefits and detriments to the public cannot be made, the Tribunal is required to decide whether it has the specified level of satisfaction. If it does not, it may not approve the proposed merger or acquisition. If it does, it may do so. As the ACCC said in its final submissions, the Tribunal is called upon to make a robust and commercially realistic judgment, exposed by its reasoning process: cf Re Qantas at [206]-[210].

[para 93] Finally, it is to be observed that even if the Tribunal is satisfied that the acquisition is likely to result in such a benefit to the public that it should be allowed to occur, the Tribunal has a residual discretion to refuse authorisation: Application by Medicines Australia Inc [2007] ACompT 4 at [122]-[128] (‘Medicines Australia’).

Need for care - general observations on Tribunal role

The Tribunal observed that merger control 'must be carried out with great care' because of its forward looking nature and that 'realities must be considered: it is unacceptable to proceed purely on the basis of theory', particularly in this case 'where the watering industry is in a state of change and various views have been expressed as to the future' (para 95).

The Tribunal detailed the evidence of material that may assist and that were involved in this case (from para 96) and further noted that it had 'allowed the interveners to take a very active part in the proceedings' (para 97). It observed that whilst 'the Tribunal has an inquisitional role, with the assistance of the ACCC, and having regard to the role taken by the participants before the Tribunal, the Tribunal primarily relies upon the material specifically referred to by the participants and relied upon by them.' (para 98). The issues arising in this proceeding, the Tribunal observed, require an 'evaluative approach' and there were 'many competing considerations' which 'need to be considered in context and evaluated side by side' (par 101). The Tribunal again observed that there was 'no doubt' the wagering industry will continue, for the relevant timeframe, to be operating 'in a rapidly changing environment' (para 101).

The Tribunal observed that the retail wagering model was under threat as customer preferences move online (para 102) and took considerable time to outline the competitive environment (see from para 119 - overview of the regulatory environment)). In relation to evidence as to the future of the wagering industry, the Tribunal observed (emphasis added):

[para 103] ... This evidence must be weighed with the documentary material put before the Tribunal but, more importantly, must be considered by the Tribunal as an expert Tribunal entitled to evaluate the evidence based upon this expertise and experience. This is the reason the Parliament establishes tribunals such as the Australian Competition Tribunal. This is not to say the Tribunal ignores the material before it, or the invaluable assistance given by those participants in the industry, and the expert evidence relied upon in this proceeding. Whilst the Tribunal is not bound by the rules of evidence, it must formulate its views based upon relevant material put before the Tribunal. However, it is for the Tribunal to finally evaluate the different views given by various witnesses, viewed with the aid of the Tribunal’s own expertise and experience.

The Tribunal further noted that, given the purpose of the Act, a 'very important' consideration will be potential anti-competitive effects and confirmed that it Tabcorp (the applicant) which has a 'responsibility to place relevant information before the Tribunal to satisfy the Tribunal that the authorisation should be made'.

Industry support

The Tribunal noted that the 'racing industry' and 'retail sector' was 'overwhelmingly supportive of the proposed merger or does not actively oppose the proposed merger' (para 109) and that no state government had opposed the merger (para 109). The Tribunal set out some evidence from Tabcorp documenting this support (para 110); for example, Matthew Corby, CEO of Greyhound Racing SA, who stated (emphasis added):

'The merging of Tabcorp and Tatts will foreseeably result in a more competitive wagering market, evidenced by greater innovation, better product offering and enhanced service levels. That heightened competition will produce improved outcomes for wagering customers and act as a catalyst for greater customer choice … The synergies that the merged entity will be capable of realising will only serve to bring it into closer alignment with the circumstances of the online corporate bookmakers within the context of the greater cost and regulatory impositions under which Tabcorp and Tatts are required to operate. I believe that this will produce a healthier competitive environment generally that will drive stronger returns back to the racing industry and government”.'

The Tribunal did observe, however, that while this evidence demonstrated a general level of support for the merger from a range of stakeholders, it was not in itself conclusive of public benefit. In particular, they observed, '... statements of support for the proposed acquisition need to be carefully considered. Some PRAs have relied on presentations given by Tabcorp propounding the benefits of the proposed acquisition and this may well be the basis of their support. In some cases, such as Racing Queensland and RWWA, the PRAs have entered into arrangements with Tabcorp designed to protect the interests of those PRAs in the future with the proposed acquisition.' (para 113)

Expert Evidence

Oral evidence was heard from experts via four 'hot tubs' with the following themes, each comprising two Tabcorp experts and two non-Tabcorp experts (para 117):

1. Consumer wagering (Pleatsikas, Smith, Mellsop and Houston)
2. Bidding for licences (Hird, Mellsop, Menezes, Pleatsikas)
3. Racing media (Pleatsikas, Smith, Hird, Houston)
4. Public benefits (Simes, Pleatsikas, Mellsop, Houston)

The Tribunal then assessed separately the likely competitive effect of the merger in relation to consumer wagering, wagering licences, racing media, the gaming services industry and the lottery and keno industries before turning to public benefit considerations.

Skip to:

• Competitive assessment: wagering services
• Competitive assessment: wagering licences
• Competitive assessment: racing media
• Competitive assessment: gaming services industry
• Competitive assessment: lottery and keno
• Public benefit considerations

Briefly, the Tribunal concluded:

• There would be no SLC in the consumer wagering market resulting from the merger with the result that there was no public detriment in that respect;
• No public detriment was likely to arise arise from any SLC in the market for wagering licences or 'provision of pooling services to pari-mutuel wagering operators' [para 314]
• No 'competitive detriment arises in respect of media rights from the merger' [para 374]; in particular, that there would be no 'substantial lessening of competition in the delivery of racing media services or the bidding for racing media rights' [para 380]
• Although there was some concern (raised as part of original informal clearance process) that the merger may result in an SLC in relation to EGM services in Qld, these were addressed in an undertaking by Tabcorp to divest the Odyssey business which they proposed as part of the authorisation application and which was accepted by the Tribunal and made a condition of the authorisation
• [para 417] No competition concerns arise from the merger in the provision of lotteries and Keno, because there is no material overlap in the products supplied by the Merger Parties.

The concept of price in relation to wagering services

The Tribunal spent some time discussing the concept of price in the context of wagering services (from para 148), noting the difficulties of determining price where consumers can 'vary the stake as much or as little as their purposes require' (para 148). Other measures of price, including 'odds', yield, etc and their relative merits and deficiencies were discussed.

The Tribunal considered wagering was essentially a 'financial product and an entertainment service' (para 153) and that:

[para 154] As an entertainment product, a consumer who places a losing bet (and therefore receives no financial benefit) still receives some utility from the thrill of the event, in the same way that a consumer who buys a cinema ticket leaves the cinema with nothing but the memory of the film’s events and an entertaining night out. But entertainment usually has a set price per event; the consumer wagers as much or as little as is required to provide the enjoyment sought. ...

The Tribunal set out in some detail the different types of wagering product available (from para 158).

Demand trends

The Tribunal noted that total 'national wagering expenditure had grown steadily for the past decade', with compound annual growth estimated at 6.3% per annum and FY2015 turnover of $30.05 billion (para 177). The Tribunal noted that the trends were different in relation to different types of wagering product; in particular, fixed-odds 'wagering and tote derivative wagering' were 'increasing their shares of total wagering turnover, at the expense of pari-mutuel wagering' (para 179). Notably, while in FY2001 pari-mutuel wagering accounted for 81% of all wagering turnover in Australia, in FY2015 it had declined to only 35% (para 179). On the other hand, fixed-odds wagering turnover had significantly increased from 19% to 63% in the same period.

One of the challenges associated with this was the 'risk of a vicious circle of reducing liquidity' because, 'the less popular pari-mutuel wagering becomes, the smaller the pool' and the 'smaller the pool, the less stable the odds'; in this way there was a 'risk of network effects exacerbating the decline of pari-mutuel' (para 181).

Demand trends also showed that both racing and sports wagering turnover had grown each year from 2006-2015 (para 182) and that the former was more popular amongst older consumers and the latter more popular with younger consumers (para 183).

It was further noted that the 'licenced off-course, retail wagering model' was being challenged by low-cost online models, aided by a consumer preference for online wagering (para 184). Statistically, from FY2001 to FY2015 'Tabcorp estimated that the retail share of wagering turnover in Australia declined from 66% to 33%, while the share of online wagering turnover increased from 3% to 51%'(para 185). This, the Tribunal noted, was important because 'it has a direct impact on competition in the provision of consumer wagering services' and because 'the value of the exclusive retail wagering licence in future will be dependent on the degree of consumer demand for wagering services in retail channels' (para 184).

The Tribunal went on to discuss some of the 'wagering complexity', including 'exotic', 'multi' and 'in-play wagering', noting, for example, that online provision of in-play wagering is unlawful, but 'in-play wagering via retail or telephone channels is not unlawful' (para 190).

Market definition

After referring back to the Tribunal's comments in QCMA on market definition, the Tribunal noted that in this case markets were 'defined by reference to substitutability' and in the 'experts’ joint report on wagering competition, there was general agreement that the ‘hypothetical monopolist test’ remained a conceptual basis for market definition for the purposes of the determination by the Tribunal.' (para 194).

The ACCC submitted that:

... the wagering market is highly complex and involves the provision of differentiated products. These differentiated products have varying degrees of substitutability along dimensions of wagering product type, channel, and geography. (para 195)

The Tribunal went on to consider whether or not there was substitutability across these dimensions.

While acknowledging that there may be a core group of premium customers unlikely to switch from their preferred product (para 196), the Tribunal noted that markets 'are not generally defined by the intrinsic characteristics of consumers, nor by the volume or value of their consumption' and that, despite the existence of these 'core' customers, it was 'of the view that a SSNIP in pari-mutuel wagering will lead to lower demand and profitability as consumers switch to fixed-odds, tote derivative, or betting exchange wagering.' (para 196). In addition, the market for consumer wagering products was not 'defined according to a preference for a particular distribution channel' (para 197); there were several reasons for this:

1. while there may be preferences, 'if one channel was to experience a SSNIP there would be very little to prevent consumers acquiring wagering services via a different channel' (para 197)
2. the different channels offer 'very similar products' (para 198) with most differences 'caused by the terms of statutory licences, not the nature of consumer demand' (para 198)
3. many reports of consumers entering retail venues to watch events and then making online wagers demonstrated 'a high degree of substitutability between retail and online wagering' (para 198)
4. 'Tabcorp, Tatts, Sportsbet and CrownBet consider the retail monopolies of the Merger Parties to be an advantage in recruiting multi-channel wagering consumers. The exclusive retail licensee has the commercial opportunity to convert retail consumers into online consumers of their own wagering products' (para 198)

The Tribunal observed that the existence of 'lock-in effects is less likely where consumers can easily switch suppliers, and this is facilitated in consumer wagering by the adoption of ‘multi-homing' ... the 'presence of multi-homing behaviour signifies a lack of structural lock-in effects or consumer loyalty to a particular supplier, and is an indication of strong competition within a market.' (para 199)

The Tribunal further observed that while there were demographic differences in preferences for sports and racing wagering, this did not mean there was no substitutability between the two, with evidence provided that a portion of consumers wagered on both forms (the portions were redacted) (para 200). In addition, while wagering complexity appeared to a subset of consumers, they were 'rightly seen as a particular configuration of standard wagering products, rather than separate product classes in their own right' (para 201).

The Tribunal therefore concluded that 'the wide array of wagering products are included within the single consumer wagering market.' (para 201; emphasis added)

The Tribunal went on to consider supply-side substitution (from para 202). It considered that 'barriers to entry into pooling are low, and in a perfect market a SSNIP in pari-mutuel wagering by existing players would entice new entrants into the field' and that although such entry was restricted due to Government regulation it was a relevant consideration in relation to bidding for licences. The Tribunal then noted non-regulatory obstacles to entry and concluded that although large capital investment would be required, this did not represent a barrier to entry.

In relation to geographic market it was observed that despite state/territory monopolies on retail wagering services, wagering channels (online/retail) were substitutable with the result that the market was not limited to state/territory jurisdictions.

[para 208] The strength of online and telephone wagering operations, coupled with the ubiquity of online access via smartphones, tablets and personal computers, leads to the conclusion that the single retail licence cannot restrict the geographical definition of the market.

The Tribunal concluded that consumer wagering occurs 'in a single national market' (para 2010).

Substantial lessening of competition

The Tribunal noted the increased share of turnover and revenue arising from the merger (redacted), but adopted (at para 212) the following statement from Qantas at [430]:

It is a simple exercise to take a snapshot of a market at a moment in time and see a combined market share … However, such a snapshot tells us nothing about the conduct in the market leading to that market share, or about the potential dynamic interaction in that market with other competitors within the market who have either recently entered it or who have recently commenced an expansion of their activities in it.

The Tribunal observed that it:

[para 214] ... agrees with the proposition, put by Tabcorp, that a firm in a growing market cannot simply accept a continuing decline of market share on the basis that it is holding its historic revenues stable in absolute terms. The fact that this decline is driven in the two fields of endeavour in which the Merger Parties hold their exclusive licences – retail and pari-mutuel wagering – indicates that the business models of the Merger Parties will continue to come under substantial pressure.

Much of the financial information contributing to the Tribunal's assessment (from para 216) was redacted. It makes the following observations regarding price discrimination, although the context is missing given the preceding redaction (emphasis added):

[para 218] ... Indeed, the economic theories of optimal taxation and pricing suggest that, for a fixed level of revenue in excess of marginal costs, overall consumer welfare can be increased if a supplier engages in price discrimination between distinct market segments, albeit at the likely risk of leaving some consumers worse off in the process. Even if revenue is allowed to increase, introducing a degree of price discrimination can allow an increase in total surplus (consumers and producers combined) because it reduces the deadweight costs associated with uniform pricing across distinct market segments. An increase in total quantity demanded after the price changes would generally indicate increased welfare.

The Tribunal then (from para 219) discusses competition between Tabcorp and Tatts, noting the ACCC's observations that 'fixed-odds and pari-mutuel wagering appear to be differentiated' and Tabcorp and Tatts were 'the only two providers of pari-mutuel wagering in Australia' (para 219). The Tribunal, however, observed that:

[para 219] ... Once the market has been defined to include all types of wagering product, and not simply pari-mutuel wagering, it becomes difficult to describe any lessening of competition arising from restrictions on a segment of that market as ‘substantial’. With the introduction of tote derivative products, it may be doubted that Tabcorp and Tatts could ever really engage in any anti-competitive profiteering in pari-mutuel wagering. Even if it was possible, such conduct by the Merged Entity in pari-mutuel wagering will inevitably lead to substitution into fixedodds products. The same comments apply to any submissions regarding the effect of the merger on the Merger Parties’ fixed-odds performance.

On the issue of whether Tatts would be a vigorous competitor under the counterfactual the Tribunal stated:

[para 220] Market definition guides the analysis, and having concluded that there is a market in which there are more participants than just the Merger Parties, it is appropriate that the analysis factors in all actual and potential suppliers to that market. As the ACCC suggested, there is good reason to consider whether the target of the acquisition is likely to be a vigorous competitor under the counterfactual, and more is said of this with respect to public benefits and merger specificity below. But analysis of the counterfactual is only necessary if analysis shows that the merger is likely to result in a detriment; and we can only reach that point if the Tribunal concludes that there will be a substantial lessening of competition in the market for consumer wagering services. Therefore, the starting point for competition analysis is the market, not a limited view of competition between the two Merger Parties.

[Comment: it is not clear why the merger would only result in detriment if there is a conclusion that the merger will SLC given that public benefit/detriment is not limited to competitive effects]

The Tribunal generally agreed with evidence from Mr Cooke (CEO and Managing Director of Tatts) that over the next five years there will be continued 'growth in the digital arena', continued 'decline in totalisator betting' and a growth in sports betting' which would pose challenges for racing (para 221, 222).

The Tribunal observed that:

[para 222] Competition in Australia is a means to the end of protecting the interests of consumers rather than competitors in the market: Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 191 (Mason CJ and Wilson J). However, the performance of rivals is relevant to the analysis, and particularly so when rivals have very different business models. ...

On this point they noted:

• corporate bookmakers have (collectively) experienced rapid growth recently (para 223);
• there has been a 'consolidation of wagering operations in Australia' in recent years (para 224);
• each rival competes with the parties to the proposed merger and with other corporate bookmakers (para 225) and that there is a clear difference in strategy even amongst 'rivals of similar turnover' (para 225);
• 'different structural advantages and strategies' of competitors have lead to 'differences in performance measures' (para 226)
• larger firms showed 'remarkably consistent EBIT [earnings before interest and taxes] over recent years (para 227) (CrownBet suggested EBIT was 'not a good measure of market power or the relative profitability of different firms with different product ranges and cost structures, especially if they have high capital costs' (para 226); the Tribunal maintained that EBIT this was a crude summary of profitability upon 'upon which the Tribunal may form a view as to the ongoing competitive performance of existing firms who may or may not represent a competitive constraint on the Merged Entity in the event of authorisation' (para 226))
• for many competitors, global scale, lower cost base and heavy marketing investment 'has delivered very significant growth' for 'corporate bookmakers over the last decade' (para 229)
• Tabcorp's application is 'consistent with the larger trend to industry consolidation' and the Tribunal anticipates ongoing consolidation in the industry (para 229; emphasis added)

It concluded (para 230):

'More importantly for the sake of this analysis, the Tribunal takes the view that there will not be a substantial lessening of competition in the consumer wagering market as a result of the proposed merger. In this respect, no detriment to the public is likely to arise.'

Future bidding environment - public benefit

The Tribunal noted an expert report from Prof Menezes (on behalf of Tabcorp) that there would be 'public benefit consequences of the merger for the likely outcomes of future bidding for Sate licence' (para 232) and, in particular, the propositions (from the report and exchange of expert views) that (para 233):

1. 'Economic efficiency only requires that the strongest bidder wins the licences'; and
2. as a result, 'if the merger does not change the identity of the winning bidder, its effects on public benefits can only be through the distribution of the surplus created by the licence auctions between the winner and the public (through the State governments and, consequently, PRAs)'

The Tribunal noted that those propositions were, 'with some caveats' agreed to by the expert economists and had 'important implications for the Tribunal's decision' (para 234).

In relation to the first, the Tribunal noted that it was generally accepted that, as incumbent licensee, 'Tabcorp would be the strongest bidder for the upcoming Victorian retail and pari-mutuel licences' and the merger was likely to strengthen this position with the result that it would cause 'no reduction in economic efficiency nor any public detriment' (para 236). The Tribunal further stated that:

[para 236] ... if the merger did strengthen the winning bidder (the Merged Entity), the State government might then be able to negotiate a higher price (inclusive of returns to industry) than Tabcorp could have afforded absent the merger, something that would add to the claimed public benefits.

In this respect, Professor Menezes stated:

[para 237] It follows that if the total welfare is defined as total surplus from the auction, then irrespective of what happens to the auction price, total welfare will increase for a merger that creates synergies. It also follows that total welfare is unchanged by a merger that does not alter, through synergies or dissynergies, the value of the object for sale.

Mr Mellsop (for the ACCC)

[para 238] This is a very important finding, because it implies that any merger affecting bidding markets should be authorised (assuming there are no dis-synergies), even if the merger would lead to reduced auction prices (in the situation when the auctioneer is the seller, as the state governments would be).

Mr Mellsop further observed, however, that the finding assumes a dollar in the hands of the merged entity is the same as a dollar in the hands of the taxpayer or others; a distributional rather than economic issue (para 239). The Tribunal acknowledged distributional issues would potentially arise (para 240) and that in order to identify potential detriment from the merger the Tribunal needed to consider whether, 'in the counterfactual, Tatts was likely to be the "second-highest" bidder in future licence auctions', whether 'State governments could structure the auction processes to compensate for the effect of this if the merger proceeded' and whether, 'if the absence of Tatts was not likely to influence the price paid, whether the merger would otherwise reduce the payments to government or industry and whether this could be considered a detriment.' (para 241). The Tribunal went on to consider these issues, concluding:

• It is 'difficult to predict the nature of any future bidding process for the Victorian licence' (para 245), noting the 'wagering industry is in a state of immense change' (para 246) and that 'the actual competition for the next licence [in 2024 or 2026] will not commence for several years' (para 247). Notably, the Tribunal did not accept that the Victorian Government would (as ACCC and interveners suggested) offer 'effectively the same bundle of wagering rights' as it did in 2012 (para 248).
• Absent the acquisition 'Tatts could possibly remain a credible bidder', but the Tribunal placed 'this no higher than a possibility' (para 265) and noted there were 'doubts as to the future viability of Tatts if the merger does not proceed' (para 266)
• There are 'several potential bidders beyond Tabcorp and Tatts' including overseas operations that would have 'strong interests' in the bidding process (para 269)
• It did 'not accept [as the ACCC and some corporate bookmakers suggested] that the potential disadvantages suggested by the large corporate bookmakers would prevent the large corporate bookmakers from entering the bidding contest' (para 272)
• It was 'not satisfied that corporate bookmakers lack the essential expertise to conduct a retail business in Australia' (para 272)
• There was evidence that 'running a totalisator business is less complicated than running a fixed-odds business' and the 'talent needed to run such a business was easily acquired' (para 273)
• capital expenditure was not a 'serious obstacle to operating a retail enterprise' (para 274)

Pooling

The Tribunal did not consider 'lack of guaranteed access to pooling' to be 'an impediment to any future bid for the Victorian licence' (para 277). It further noted that unless 'the WA TAB is both privatised and acquired by Tabcorp, the WA TAB will continue to be an independently-owned pool with which a Victorian licence holder can pool postmerger, and is likely to do so.' (para 279)

[para 284] The Tribunal’s role is to consider the likely future with and without the merger, but as noted in Australian Gas Light Company, “[t]he meaning of ‘likely’ reflecting a ‘real chance or possibility’ does not encompass a mere possibility”. The Tribunal takes the view that a future in which the Western Australian licence is privatised, Tabcorp wins that Western Australian licence, and in 2024 refuses to offer pooling services to a Corporate bookmaker, does not meet the threshold of a ‘real chance or possibility’, but rather is speculative, dependent as it is on contingencies which may not come to pass.

The Tribunal then made some further comments about RWWA, noting its current pooling agreement with Tabcorp expires in 2024. It noted that Tabcorp and TWWA entered into confidentiality arrangements in a deed to address some concerns about ongoing access and that that ACCC had expressed concern that 'Tabcorp is seeking to address a substantial competition concern ... through a long-term behavioural commitment in a deed' (paras 287, 289). Much of the detail regarding the deed is, however, redacted, but the Tribunal concludes that 'State governments will have an ability to act strategically to counter the increased market power of a merged entity' (para 291)

Proposed conditions

The Tribunal then discusses some conditions proposed by the Victorian Racing Interveners. In response, the Tribunal stated that it agreed with Tabcorp that:

[para 294] The Tribunal agrees with the submissions of Tabcorp that the Victorian Racing Interveners’ conditions in relation to the bidding for the Victorian wagering and betting licence, which expires in 2024 or 2026, involve a degree of commercial and political unreality. In some respects, the proposed conditions are anti-competitive in themselves.

Further reasoning is provided in the paragraphs that follow.

Potential regulatory change

The Tribunal emphasised that the 'proposed acquisition will occur in a changing regulatory environment' (para 304), but nevertheless noted that, as there may be a number of responses to regulatory change:

[para 305] ... the Tribunal, whilst mindful of a potential impact on all participants in the market, puts little weight on the possible regulatory changes. Importantly, the Tribunal takes the view that whatever changes are made, corporate bookmakers will be able and have an incentive to remain competitive.

Conclusion

The Tribunal concluded that it was:

[para 314] ... of the view that no public detriment is likely to arise from any substantial lessening of competition in the market for wagering licences or the provision of pooling services to pari-mutuel wagering operators

The Tribunal observed that, as owner of Sky Racing, 'Tabcorp controls the dominant racing broadcaster and holder of racing media rights nationally' (para 315):

With respect to media rights, there are some exceptions to Sky’s dominance. Racing NSW has unbundled its thoroughbred rights, granting exclusive digital rights to the corporate bookmaker, William Hill. The Victorian racing industry has granted non-exclusive digital media rights to Tabcorp, CrownBet, Ladbrokes, Sportsbet, William Hill, and Bet365. Racing.com has won the rights to broadcast vision of thoroughbred racing in South Australia.

The acquisition of Tatts would:

[para 316] ... result in the combination of Sky with the totalisator and retail wagering operator in Tatts’ retail jurisdictions (Queensland, South Australia, Tasmania and Northern Territory). The proposed acquisition will therefore result in the vertical integration of the dominant racing broadcaster and holder of racing media rights and the exclusive totalisator and retail wagering operator in all States and Territories (except Western Australia). (emphasis added)

The ACCC noted that there was a complex question of whether the proposed acquisition would 'lessen the competition Sky faces for the acquisition of media rights':

[para 317] ... If it does, then the proposed acquisition would not only damage the interests of PRAs, as there will be less competitive tension in bidding for media rights, but it would also impact wagering competition by increasing the barriers to expansion by other wagering providers including corporate bookmakers. Further, the ACCC contended there would be the potential for other public detriments, as punters will have less choice in how they can view races (for example, they may not be able to view the race online unless they have an account with Tabcorp).

The Tribunal noted that evidence showed:

[para 318] ... broad support for the proposition that there is a strong relationship between wagering revenue and access to racing vision, particularly in retail venues.

[para 319] The pre-eminence of Tabcorp in racing media is linked to its position in the wagering industry. By virtue of its historical position as a major supplier of wagering services, and its current position as the only retail operator in the two largest wagering States, Tabcorp has longstanding relationships with the PRAs of all States.

Racing media rights

Market definition

Tabcorp claimed acquisition of racing media rights is not a market in itself; the ACCC claimed there was a 'distinct market for the acquisition and sale of racing and media content' (para 320).

[para 320] ... The Tribunal is inclined to the ACCC’s view; it is also inclined to agree with the ACCC’s statement that focus should fall not on the provision of racing media in isolation, but on the relationship between acquisition of media rights, competition in wagering, and funding for PRAs.

[para 321] Therefore, the Tribunal takes the view that whichever market definition is appropriate, it is important that the relationship between the acquisition of media rights, competition in consumer wagering, and the funding of PRAs is considered when assessing the effects of the proposed acquisition.

Competition for acquiring racing media rights

The Tribunal noted Sky already has a competitive advantage when bidding for media rights (para 322) but there is nevertheless a 'degree of competition', with Racing.com having the 'digital and free-to-air media rights in respect of Victorian thoroughbred racing' some of which are sub-licenced (par 323) so that rivals have limited media rights 'despite Tabcorp holding the retail wagering licence in the relevant state' (para 324).

The Tribunal considered that racing bodies (particularly in NSW and Vic) have 'sufficient degree of countervailing power to negotiate appropriately for media rights, and will have after the proposed merger' (para 324). Some evidence in relation to this was redacted.

Incentives for PRAs to provide exclusive rights to Sky

The Tribunal noted that each PRA periodically granted media rights in respect of races and this decision can affect the amount it receives in wagering revenue (para's 327-328):

[para 330] For this reason, if the proposed acquisition occurs, the PRAs will face a change to their tradeoff calculations identified above. This is because PRAs in States where Tatts is presently the tote operator currently have no financial relationship with Tabcorp. This will change under the proposed acquisition, however, and will provide PRAs in these States with some increased incentive in favour of granting rights exclusively to Sky in the former Tatts jurisdictions.

[para 301] Sky has a practice of seeking exclusive and bundled media rights, so that it controls the rights to broadcast racing content across free-to-air TV, pay TV, and all digital rights including online streaming.

The Tribunal noted that there may be increased incentives for racing bodies to provide exclusive media rights to Sky, but there were also countervailing factors requiring consideration (para 332)

Incentives for Sky and rivals to acquire media rights

The Tribunal noted:

[para 333] The value of media rights to Sky is influenced by different factors to those affecting the value of the same rights for its rivals. Because Sky is owned by Tabcorp, Sky’s strategy with media rights is aimed not only at benefitting Sky itself, but also benefitting Tabcorp’s broader wagering operations. ...

The proposed acquisition would increase the size of Tabcorp's wagering operations and this would increase benefits to Tabcorp of 'having exclusive access to racing vision' and the 'risk of not having exclusivity' (para 334)

Nevertheless, the Tribunal took the view that:

[para 336] ... an increase in Sky’s incentive to secure media rights would constitute a benefit to the sellers of such rights, since they ought to be able to command a higher price. The Tribunal does not take the view that the increase in Sky’s incentives in this way overlooks the extent to which its dominance in racing media, coupled with its vertical integration into wagering operations, will affect the wagering market in a future with the proposed acquisition.

The ACCC contended that the acquisition may also reduce potential rivals' incentives to acquire racing media rights because of the 'removal of Tatts as a potentially significant purchaser of racing vision' which would 'reduce the value to the rival bidder of acquiring media rights' with the result that 'Tabcorp may therefore be less constrained in relation to the price which it offers to acquire the exclusive media rights' (para 337). The ACCC further contended that post-acquisition Tabcorp

[para 33] ... intends to impose the requirement that venues obtaining its retail wagering services in the Tatts States acquire Sky Racing. At present, Tatts does not dictate the business from which its venues obtain racing vision

The ACCC and Racing.com therefore contended that:

[para 339] ... the proposed acquisition may impact the market for the acquisition of media rights by increasing the value to Tabcorp/Sky of acquiring exclusive media rights, and by virtue of the removal of Tatts as a likely customer of those rights, decreasing their value to Sky’s competitors. This increases the likelihood of Sky acquiring rights on an exclusive and bundled basis.

The Tribunal responded:

[para 341] Retail venues (pubs and clubs) are primarily in the business of providing food and beverages in social environments. The opportunity to wager increases the attractiveness of their venues to customers, and therefore their food and beverage turnover. The merger will align the interests of the retail licensee and racing vision suppliers in Tatts States, whereas previously each had incentives to try separately to exert market power over retail venues that wanted to provide wagering as part of their in-venue entertainment (a variation of the double marginalisation problem). With or without the merger, there is increasing likelihood that venues will be able to stitch together a form of wagering entertainment that does not rely on purchasing retail wagering services from a retail licensee and racing vision from Sky, for instance by displaying only Racing.com vision and relying on facilitating on-line wagering through offering free wifi. This is clearly likely to represent an inferior, although not necessarily less profitable, alternative to the Merged Entity’s wagering/vision products for as long as Racing.com or another rival is unable to offer wall-to-wall coverage of racing events. The Merged Entity has an incentive to package access to retail wagering and to vision in a way that maximises its combined retail service and vision fees and additional wagering revenue. It is not immediately obvious that this would necessarily be opposed to the objectives of the retail venue operator, to increase custom and possibly share in wagering turnover. (emphasis added)

The Tribunal did not consider the merger would result in a substantial lessening of competition with respect to racing media (para 342) for the following reasons:

1. 'the sale of racing media rights is the result of a bidding contest' (para 342)
2. 'Dr Forbes of Racing Qld, Mr Watters of TRSA and Professor Yovich of WATC made clear to the Tribunal that they believe their PRAs can set the parameters of the bidding contest as they see fit. If they choose to prioritise an up-front payment, it is likely to be to Sky’s advantage; if they choose to prioritise maximum exposure of their racing product to the Australian wagering market, it is likely to be to the advantage of a bidder such as Racing.com that commits to sub-licensing their content to as many platforms as possible' (para 342)
3. In Victoria and NSW 'thoroughbred digital vision has already been licensed to non-Sky entities'

The Tribunal goes on to discuss some possible impacts of the acquisition in relation to control over vision shown in retail outlets, but concluded that 'there is no competitive harm that is likely in relation to the matters put forward by the ACCC and the interveners' (para 346). In particular, the Tribunal observed that (emphasis added):

[para 348] Tatts has never sought to acquire vision rights nor does it intend to do so in the future. With the exception of Tasmania, Tatts has no involvement with negotiations between pubs and clubs on the one hand and Sky Racing on the other.

[para 349] The merger does not combine any media assets, as Tatts does not compete in this area, and has no plans to in the future. The position of Sky is not enhanced by the merger. The merger changes will put Tabcorp in a weaker bargaining position vis-à-vis the PRAs by reason of Tabcorp’s increased dependence on obtaining those media rights. That bargaining position is accentuated by the relatively recent emergence of Racing.com as a competing purchaser of those rights. Therefore, PRAs will continue to benefit from that competition post-merger.

[para 35] As to the possibility that Tatts would partner with a media company as a competitor to Sky, this seems unlikely. ...

The Tribunal accepted Tabcorp's contentions that, while Sky 'has a reasonable bargaining position relative to the PRAs ... that is unchanged by the merger' (para 361) and that, following the merger, Tabcorp would become the retail operator in Tatts states which would give it a 'stronger incentive to obtain media rights across all jurisdictions' which would in turn strengthen the 'bargaining position of PRAs' and weaken 'the bargaining position of Tabcorp, relative to the position without the merger' (para 361)

Previous conduct of Sky and Tabcorp

The Tribunal set out the ACCC and interveners' concerns that certain behaviour of Sky and Tabcorp in the past has been 'improper or tends to show a course of conduct that may be repeated' (for example, 'blackouts') (para 367). The Tribunal did not consider these concerns in detail but observed that 'the merger makes no material difference to the current position' (para 368) - the ability to behave in the way alleged is not altered by the merger (para 368)

Racing.com

The Tribunal then set out two particular contentions of Racing.com:

1. that Tabcorp/Sky would 'seek to leverage its advantage as the monopoly supplier of the wall-to-wall racing vision service to foreclose its wagering rivals from having access to racing vision or otherwise risk eroding the competitive advantages conferred by Sky and the retail network. In this endeavour, it will be particularly important for Tabcorp to limit or prevent the flow of racing vision to corporate bookmakers’ online wagering platforms, and it will also be desirable to retain limits on the extent of free-to-air broadcasting, particularly as such broadcasting can integrate advertising by rival corporate bookmakers.' (para 371)
2. that Tabcorp/Sky had 'existing market power through its "wall-to-wall" Sky Racing service' and 'Tabcorp has a strategy to leverage its retail monopoly assets into digital wagering. Post-merger, its control of access to the retail network will expand to seven out of eight jurisdictions. Post-merger, these considerations are likely to drive Tabcorp/Sky to utilise its strengthened monopoly grip on access to the wall-to-wall service to secure exclusive and bundled media rights, including free-to-air and digital, and to warehouse them. It has the economic incentive and ability to do so.' This in turn would have detrimental effects on 'downstream wagering markets and the wagering public' (para 372)

The Tribunal concluded, however, that in relation to the media rights the merger:

[para 373] ... materially changes nothing in respect of the media landscape other than putting Tabcorp in a weaker bargaining position vis-à-vis the PRAs by reason of Tabcorp’s increased dependence on obtaining those media rights. That bargaining position is accentuated by the relatively recent emergence of Racing.com as a competing purchaser of those rights. PRAs will continue to benefit from that competition post-merger.'

Conditions

The Tribunal noted that it considered imposition of conditions in relation to media, but concluded that none of the proposed conditions are necessary to address any competitive detriment.

Conclusion

The Tribunal therefore concluded there would be no 'substantial lessening of competition in the delivery of racing media services or the bidding for racing media rights' (para 380)

The Tribunal noted that the merger parties did not participate 'in the manufacture or supply of EGM hardware, nor do they operate EGMs on a day-to-day basis in retail venues'. As a result, although the services provided by the parties in relation to EGMs were 'complementary to EGM hardware manufacturing and day-to-day operation, the ACCC did not raise the possibility that the merger may cause public benefit or detriment to arise in the provision of EGM hardware or day-to-day EGM operations.' (para 381)

However, both Tabcorp and Tatts provide a suite of EGM services (via subsidiaries). Services include monitoring services, gaming systems and services (assisting venue operators 'to optimise EGM performance, including
assistance with financing, training, venue design, product advice, marketing, loyalty programs, and (non-monitoring) regulatory compliance' (para 384) and field services (on-site repair and maintenance).

Substantial lessening of competition?

The Tribunal observed that EGM services may be delivered as a bundled service or stand alone (para 386) and that in most jurisdictions a single operator is licenced to provide monitoring services (para 386); however, in Qld, for example, more than one supplier is licensed to supply monitoring services.

In the original ACCC informal clearance review the only anti-competitive concerns arising (before it was withdrawn) related to the combination of the Qld businesses and Tabcorp's application for authorisation offered, 'as a condition of authorisation, an undertaking pursuant to s 87B of the Act to divest the Odyssey business. The Tribunal agrees that any concerns with respect to a substantial lessening of competition in any market for EGM services were dealt with by this undertaking.' (para 387) It was noted that the undertaking allayed any anti-competitive concerns held by the ACCC in relation to this market (para 388).

Data misuse?

The ACCC raised a concern of potential data misuse by the merged entity in its NSW EGM services businesses, where Maxgaming (owned by Tatts) is the exclusive monitoring operator until 2032 (para 389).

The Tribunal accepted evidence by Mr Rytenskild (CEO, Keno & Gaming: Tabcorp) that 'regulatory and contractual obligations imposed upon Tabcorp which prevent the suggested misuse of data or foreclosure of competing suppliers' (para 391) and that as a result 'no competitive detriment arises in respect of EGM monitoring in New South Wales' (para 394)

[para 395] Tabcorp’s various legal, regulatory and contractual obligations mean that there is no real prospect of Tabcorp misusing the information obtained from monitoring EGMs.

The Tribunal also rejected the ACCC's concern that Tabcorp could foreclose 'competing suppliers of gaming systems by reducing or restricting the functionality of competing gaming systems that operate through the monitoring system.' (para 398)

[para 405] Whatever ‘inherent regulatory’ risk there is of improper conduct, this is not a basis for concluding that the competitive detriments identified may lead to a lessening of competition in respect of the supply of gaming systems and related services.

Lottery

The Tribunal set out the various lottery products offered by Tatts. It accepted (as did the ACCC) that there were separate relevant markets for lotteries and Keno, which employed 'different distribution channels' and can be played with greater regularity. The Tribunal observed:

[para 411] Ultimately, no participant brought any relevant public benefit or detriment to the Tribunal’s attention with respect to the competitive effects of the merger on the market for the provision of these services. The ACCC broadly expressed a preliminary concern with respect to the extent to which the proposed acquisition may reduce the value of future licences provided by State and Territory governments, with flow-on effects for government revenue. However, the ACCC made no further submissions with respect to the merger’s likely competitive effects in either the tender for these licences, nor in the provision of lottery services to consumers. The non-Tatts interveners were granted leave to intervene with respect to matters in which they brought some special expertise, or bore a special interest. They do not participate in the provision of lotteries, and their silence on this topic was to be expected.

The Tribunal took the view that Tabcorp did not compete with Tatts in relation to lotteries (para 413)

Keno

Tabcorp and Tatts are the 'only suppliers of Keno products in Australia' (para 414), but 'no participant raised any public benefits or detriments with respect to the competitive effects of the merger in the market that includes the provision of Keno services' (para 416); although the ACCC expressed preliminary concern about the effect of the merger on the value of future Keno licences, it did not further develop this in submissions (para 416).

Conclusions

[para 417] No competition concerns arise from the merger in the provision of lotteries and Keno, because there is no material overlap in the products supplied by the Merger Parties.

[para 418] Tabcorp is the only provider of Keno in retail outlets in Queensland, New South Wales, Victoria and the Australian Capital Territory, while Tatts is the only provider of Keno in retail outlets in South Australia. These retail businesses therefore do not overlap.

[para 419[ The only possible overlap between Tabcorp and Tatts is in South Australia, where residents can access Tabcorp’s online product, which is extremely limited

The Tribunal first addressed the factors that must be considered public benefits for purposes of merger authorisation before considered Tabcorp's specific claims.

Mandatory factors - Import competition

The Tribunal must regard 'a significant substitution of domestic products for imported goods' as a public benefit (s 95AZH(2)(a)(ii))

In this respect Tabcorp claimed products supplied by foreign-owned bookmakers are 'imports' and that 50% of claimed revenue synergy likely to result form the merger 'accounts for the substitution of imported goods and services for domestic goods and services, and is therefore a public benefit' (para 421).

The Tribunal, however, noted:

[para 423] ... The basis for Tabcorp’s claim that a transfer from a foreign-owned corporate bookmaker to Tabcorp involves a substitution of domestic products for ‘imported goods’, and thus is a public benefit, is not clear. The issue of import substitution is actually a question of how much of the services sold or supplied in Australia involve inputs from overseas, which is only addressed by Tabcorp and Dr Simes in the form of assumptions.

[para 424] Even if the question of foreign ownership of some corporate bookmakers in Australia was determined to be relevant as asserted by Tabcorp, significant complexities would arise in trying to determine the true extent of global ownership. ...

[para 425] General principles from cases that consider whether benefits accruing to a merger applicant’s foreign shareholders are public benefits can be applied to the question of whether revenue transferred from a foreign-owned competitor to the Australian-based applicant for merger authorisation is a benefit. Transfers of revenue from foreign-owned corporations to Australian corporations are not inherently positive, and could be welfare neutral (and hence not constitute a public benefit).

Public benefits claimed by Tabcorp

Tabcorp claimed the following public benefits (summarised at para 143):

1. That the 'Merged Entity would deliver substantial synergies'
2. That the resulting synergies would, in part, be retained by Tabcorp, but 'more than half would pass through to PRAs [Principal Racing Authorities - 'bodies established under State or Territory regulatory frameworks to manage the operation of a racing code in that jurisdiction' (page 197)], third party licensed venues, sporting bodies, and Federal and State governments'
3. That, because PRAs are 'responsible for managing the ongoing financial strength' in four key states, 'the financial benefit to PRAs would maintain the viability of the racing industry'
4. that 'greater investment in existing businesses and new product development would lead to enhanced customer experience'
5. that the 'Merged Entity would compete more effectively against other bookmakers, enhancing competition for the supply of wagering products and services'
6. that 'a national pari-mutuel wagering pool would be more efficient than two or more separate pools' and the 'likelihood of national pooling would increase by removing the need for two separate and competitive commercial entities to negotiate a mutually beneficial outcome'; and
7. the 'synergies would produce a consequential substitution of domestic products for imported products in such industries as tourism, improving the productive efficiency of the broader Australian economy ...'

Tabcorp did not concede any public benefit was likely to result from the merger.

At para 428 the Tribunal also notes that Tabcorp claimed 'the merger would lessen the ‘free-rider’ problem presented by corporate bookmakers who sell wagering products based on racing and sports industries to which, it was alleged, they do not provide financial support.'

Cost synergies/savings

Much of the data on claimed cost synergies/saving is redacted. Although the ACCC accepted some cost savings were likely to be achieved by removing duplication it was concerned that the 'costs savings will overstate the public benefits if they include economic transfers that should not be counted as public benefits; if they do not take into account integration costs, capital expenditure, or other costs; if they are not likely to be fully realised; if they are likely to exist in a future without the merger; or if they are not robust or verifiable.' (para 437)

The Tribunal observed:

• Transfer: some of the claimed cost savings were a 'transfer from suppliers in the form of better trading terms, and therefore not an economic benefit' (para 438)
• Integration costs: noted the ACCC's observation that '“integration costs [and] costs necessarily incurred in order to achieve the asserted cost savings should be ‘netted off’ … However, they do not appear to have been taken into account” but, while accepting this is relevant and that if 'the scale of integration costs exceeds the scale of costs savings over the long-term, this could have the effect of neutralising any claim of benefits arising from productive efficiencies' (para 439), it could not be 'said that Tabcorp did not take these costs into account' (para 440). The Tribunal noted that 'integration costs that are short-term should be given less weight than durable costs savings that adhere to the merged business in the long-term' (para 440).'
• Integration risks: observed that previous mergers provided evidence that Tabcorp was familiar with integration risks and 'would have been acknowledged by Tabcorp' (para 441) and that 'any missed opportunities in the past do not lead to the conclusion that they will be missed in the future' (para 444) (much of the related material is redacted)
• Merger specificity: accepted that where 'a proposed transaction may lead to anti-competitive detriments, it is critical that the Tribunal only considers benefits arising in a future with the merger; if they would arise without the merger in the same form, to the same scale, and with the same speed, they are not relevant to the Tribunal’s task' (par 445). Tribunal noted that it was argued that several claimed cost savings were not merger specific (para 446 - detail is redacted). In making the assessment, the Tribunal considered the most likely counterfactual against which to measure the 'future with'; in this case it considered the 'most likely counterfactual is one where Tatts remains a stand-alone entity' (para 447) and such an entity 'is not likely to achieve costs savings to the same degree' (para 448)
• Veracity of estimates: ACCC claimed some dated information with estimates 'delegated to unnamed analysts' (para 449); the Tribunal, however, was satisfied that the calculations, made in September and October 2015, remained 'relevant to the application for authorisation' (para 450) and that the calculations were 'verified by an independent third-party with sufficient rigour' (para 452). The Tribunal concluded there were 'subsantial cost savings which in the circumstances [it considered] to be sufficiently verifiable'

Revenue increases

Unsurprisingly much of the revenue data is redacted. The ACCC's claims (set out in para 463) and Tribunal response are set out below:

• ACCC claim: the revenue benefits were not merger specific; Tatts could make improvements alone or together with another corporate bookmaker
• Tribunal: the Tribunal's preferred counterfactual was a stand-alone Tatts with the result that arguments Tatts could merge with a 'corporate bookmaker to access superior management tools' did not assist their analysis (para 464) - it concluded that, at least 'to a significant extent, these revenue increases are merger-specific' (para 467)

• ACCC claim: 'improvements to Tatts' fixed-odds yield are not a public benefit' - claimed the merger could 'further reduce the competitive constraint that Tabcorp faces in the supply of fixed odds wagering products' (para 468)
• Tribunal: did not agree - noted that '[o]nce it is accepted that the Merger Parties and corporate bookmakers supply a range of differentiated products, it no longer immediately follows that higher average yields necessarily lead to any inference about the competitive constraints exercised on Tabcorp' (para 470)

• ACCC claim: 'transfers of market share from corporate bookmakers to the Merged Entity are not a public benefit'
• Tribunal: Agreed with ACCC that an 'increase in revenue that is comprised of the merged entity taking market share from a competitor due to improved products does not entirely constitute a public benefit. While material improvements in product quality and range may lead to an increase in the welfare of those who consume the products, resulting in consumer surplus, not all of the revenue represents the value of the quality improvement' (para 482) but concluded that 'the improvement in product offering or quality still constitutes a net benefit' (para 483)
  
  Tribunal further agreed with general principle put by ACCC questioning whether 'the claimed revenue increases are correctly characterised as public benefits because they “include transfers from corporate bookmakers, with no increase in producer or consumer surplus”, and because an increase in gross revenue “is not the appropriate measure of public benefits”.' (para 484), but noted that it did 'not follow that the anticipated increases in revenues do not indicate potential or likely sources of net public benefit. ... revenue increases derived from winning market share from competitors generally comprise a mixture of cost substitution and some element of increased total surplus. Similarly, increases in revenue from a given level of turnover could comprise no more than a transfer of surplus from consumers to producers; could be cost savings associated with an improvement in efficiency; could be increased consumer surplus associated with a perceived improvement in product quality; or some combination of all of these.' (para 485)

• ACCC claim: 'the estimated revenue increases ... were uncertain and unverifiable', noting that 'estimates of revenue benefits were based on calculations that were later qualified in cross-examination' (para 487)
• Tribunal: Did not accept that the estimates did not have requisite level of veracity; accepted 'that a significant proportion of the estimated revenue increases will be realised by Tabcorp if the merger proceeds' (para 489)

Flow through benefits to community

The Tribunal observed that:

[para 490] In a regulated industry such as wagering, where licensed bookmakers return a proportion of turnover, revenue or profit to governments and PRAs, it seems a matter of common sense that increased turnover, revenue or profit would provide flow-through benefits to those governments and the racing industry. However, the true extent of these flow-through benefits needed to be carefully outlined rather than assumed.

The Tribunal noted and dismissed a number of concerns raised by the ACCC and the Victorian Racing Interveners.

The 'free rider' problem'

The Tribunal noted Tabcorp's claim that the merger would:

[para 501] ... generate public benefits by addressing the ‘free-rider’ problem claimed to arise because corporate bookmakers are able to profitably offer wagering products on racing events without contributing sufficiently towards the costs of staging those spectacles.

Tabcorp claimed the improvements associated with the merger would lead to 'additional funding paid to State racing industries' which would help address the free rider problem (para 502). In particular:

[para 503] ... This ‘free rider’ problem is present in Australia, to some degree, because the State TABs contribute a greater proportion of their wagering revenue to the racing industry than Corporate Bookmakers. Due to the imbalance in funding between the State TABs and Corporate Bookmakers, the substantial increase in market share of Corporate Bookmakers in the past 10 years – estimated to be 16.5% in FY06 and 37.9% in FY15 – poses a challenge to the continued funding and health of the Australian racing industry.

The Tribunal, while accepting the 'general proposition that there has been an imbalance between the contributions of State TABs and the corporate bookmakers to the racing industry', did not agree that 'it is appropriate to characterise this as a ‘free-rider’ problem in the conventional sense' (para 504). It expanded on its reasons for this and set out the ACCC's objections from para 505-508, concluding:

[para 509] The Tribunal agrees with the ACCC and finds that the proposed merger would not assist in addressing the long-term financing issues facing the Australian racing industry in any significant way. This does not detract from the public benefit that will likely arise from the additional funding of the racing industries associated with the expected increase in the merged entities’ turnover and revenues. Without double-counting these increases as public benefits, it may be appropriate to weigh some part of the revenue increases more highly if they flow to industry than if they were retained by shareholders of the Merged Entity. (emphasis added)

Creation of a national pool

Tabcorp noted:

[para 510] Tabcorp noted that the proposed merger would lead to all three Australian pari-mutuel pools (SuperTAB, NSWTAB and UBET) being operated by the Merged Entity, removing a commercial barrier to unifying the pools for greater liquidity. ..

The ACCC, however, argued that:

[para 511] Tabcorp did not clearly identify which of the many barriers it anticipates that the proposed acquisition will overcome in order to make a national pool a likely outcome of the proposed acquisition or how they will be overcome. ..

The Tribunal noted that:

[para 5111] ... For its part, Tabcorp did not press the point, and never attempted to model costs or revenue benefits arising from a single national pool. ...

As a result:

[para 513] Because of lingering doubts regarding the ability of Tabcorp to further merge the Tabcorp and Tatts pools, the Tribunal has concluded that combined pooling arising as a result of the merger is too uncertain to constitute a public benefit.

Increases to Gross National Income

Deloitte Access Economics (DAE) was commissioned by Tabcorp to model public benefits of cost savings they anticipated from the merger DAE's Regional General Equilibrium computer general equilibrium model (CGE model) to estimate 'broader and long-term economy-wide benefits associated with the merger' (para 514)

The Tribunal noted that while the CGE model used was suited to certain forms of analysis, doubts were raised about 'the appropriateness of the model to measure consumer welfare, and about the model’s inputs and assumptions insofar as they caused benefits to be overstated, while ignoring detriments associated with the merger.' (para 516)

The Tribunal further observed that:

[para 517] CGE modelling ... has a number of weaknesses that make it unsuitable for assessing the net public benefits of a merger with potential impacts on the structure of the wagering and wider gambling industry.

• CGE models generally take the competitive structure of the economy as given and perpetuate this structure into a future in which other factors, ... the models measure the impact of efficiency improvements without putting them in context of the consequent new industry structure.
• Importantly, CGE models are unable to properly estimate the impact of changes within an industry sector without detailed structural information of the sort that only traditional partial equilibrium modelling can provide.
• Consequently, the CGE modelling makes no allowance for the interactions between market segments within the gambling and wagering market (such as the shift in market share from pari-mutuel to fixed-odds wagering or the growth of corporate bookmakers due to marketing or at the expense of the retail operators).

In addition, CGE modelling

[para 518] 'measures increases in Gross National Income (‘GNI’) rather than direct measures of consumer welfare' ... Although Dr Simes argued that GNI was a measure “closely associated with … welfare”, it is not related to the usual total surplus (combined consumer and producer surplus) measure of welfare that forms the basis for concepts of economic efficiency.'

The Tribunal accepted the criticism levelled at the model for purposes of merger authorisation:

[para 519] The Tribunal accepts the criticisms that use of a CGE model is neither appropriate nor useful as a means of addressing the issues raised in these proceedings. At best, the model only indicates that there may be wider economic consequences. ...

[para 521] The Tribunal therefore places no particular weight on the quantum of estimated further, economy-wide benefits claimed to arise from cost savings in the market for wagering productive efficiency, other than to note that such gains are likely to exist. Criticisms by CrownBet of the CGE model’s inputs, and of the use of unfounded assumptions, may well be valid, but because the Tribunal does not place any weight on the CGE model, claims of broader economic benefits based on the model do not even get to first base.

The Tribunal also noted that it was 'presented with some partial equilibrium modelling of the potential impact of the merger' but that it was 'also unsuited to the required purpose' (para 522), noting in part that the modelling 'was overly simplistic and highly aggregated' (para 522).

Reduced employee headcount

In one paragraph (para 525) the Tribunal noted concerns raised by CrownBet that reduced employee headcount resulting from the merger's cost-savings should be considered a public detriment rather than benefit, but took the view that this would constitute a 'reconfiguration of the purposes of the Act'. The Tribunal noted that:

[para 525] ... CrownBet itself was at pains to emphasise that the Act was concerned with “the promotion of public benefit through the processes of competition”. A public benefit is “anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress”: Re QCMA at 510. It is difficult to conclude that, under the Act, benefits from efficiency gains are negatived by detriment in the form of unemployment. It is impossible to draw that conclusion in the absence of evidence that employees made redundant as a result of the merger will remain unemployed in the future.

Longitude: revitalising the tote

Longitude is a proprietary system 'which assists to increase liquidity of pari-mutuel pools' and has been adopted by Tabcorp (para 526). CrownBet argued that this would allow Tabcorp to 'introduce a range of differentiated exotic products and thereby increase turnover' (para 526) which by implication (it was argued) would give Tabcorp 'additional power in the market for consumer wagering, exacerbating concerns about the anticompetitive effect of merger authorisation' (para 526).

The Tribunal noted that it was 'not greatly assisted by discussion of the competitive advantages conferred by Longitude' and Tabcorp's use of it seemed 'just as likely to continue in a future with the merger as a future without the merger' (para 526).

Dire future for Racing.com?

The Tribunal accepted several reasons why Racing.com's ongoing presence was useful for facilitating competition (para 529) and indicated it was 'concerned to ensure that racing media remains a competitive space', but was satisfied this would occur if the merger proceeded and did not agree with 'predictions of a dire future for Racing.com' (para 530)

Future negotiations between Racing Queensland and Racing.com?

The paragraph dealing with this is nearly entirely redacted; the Tribunal concludes that 'existing arrangements will not reduce competition with respect to the future acquisition of these media rights' (para 531)

Retail arbitrage

The Tribunal noted that Victorian Racing Interveners expressed concern about 'retail arbitrage' - 'shifting of revenue by a vertically integrated Tabcorp from its wagering division to its broadcasting division' (para 532). In particular:

[para 532] ... The concern raised is that it would be beneficial for Tabcorp to shift revenues and profits earned from pubs and clubs from its wagering division to its broadcasting division, and thereby minimise its payments to the racing industry. ...

The Tribunal concluded that it 'did not hear enough to conclude that “there is a real chance, and not a mere possibility” of retail arbitrage' (para 533)

Impact of funding on tourism exports

Victorian Racing Interveners argued decreasing in funding for Vic racing industry would 'lead to a decline in participation in premium events by international horses' and a corresponding decline in international tourism (classified as a reduction in exports: s 95AZH(2)). The Tribunal did not consider the merger would lead to a 'decreasing in funding for the Victorian racing industry' (para 534).

Falsification of race results?

Concerns of fraudulent activity were raised by Mr Fowler (no affiliation provided - listed under lay witnesses and interested third parties) about fraudulent activity in the industry. The Tribunal noted, however, that it was 'not taken
to any evidence of the alleged falsification of race distances or results, and therefore cannot conclude that such a public detriment will arise from the merger.'

Ability of exclusive licensee to drive down race field fees

Racing Clubs Tasmania noted that in some jurisdictions governments fund racing industries directly rather than PRAs. The Tribunal noted:

[para 536] It seems to the Tribunal that RCT took the view that the exclusive licensee in each jurisdiction negotiates race field fees, and can use its bargaining power to drive this funding lower. The evidence put before the Tribunal was that race field fees are established under legislative and regulatory provisions. It may well be that the exclusive licensee has some influence in lobbying governments for change, but this is not the same as driving down its obligations at the negotiating table. It must be kept in mind that it is not only the exclusive licensee, but also the corporate bookmakers, who carry obligations under the regulatory framework of race field fees in each jurisdiction.

Resistance to regulatory reform

Responsible Wagering Australia, an organising comprising a number of competitors of Tabcorp and Tatts, claimed the Merged Entity would have 'strong incentives to resist regulatory reform in favour of consumers as well as reform in support of sports and racing integrity, deterring organised crime and tackling problem gambling' (para 537, quoting Mr Stephen Conroy). The Tribunal noted it has 'no basis to conclude that Mr Conroy's claim has any substance or is other than speculation

The Tribunal discussed the issue of problem gambling under the banner of market definition. This is perhaps because, while it was generally agreed (and the Tribunal proceeded on this basis) that there were separate markets for 'wagering, gaming, lotteries and Keno' (para 80), there was some evidence that problem gamblers switched between these different types.

After making this point, however, the Tribunal observed that:

[para 81] ... The ACCC cited the Productivity Commission’s Inquiry Report into Gambling (2010), which estimated that the social cost of problem gambling was at least $4.7 billion a year. The Productivity Commission noted definitional difficulties with respect to ‘problem gamblers’, but concluded that the concept relates to people experiencing a cluster of significant harms. Those harms include health problems, financial distress, difficulties controlling gambling and psychological impacts.

[para 82] Wagering, EGM machines, lotteries and Keno are services lawfully provided under regulatory regimes. The merger does not of itself constitute an attempt to target problem gamblers with services that may be harmful if not used in a controlled manner. However, Tatts has the largest database of customers who engage in some sort of gambling through its user accounts. ... [redacted] ... Several witnesses raised the possibility that the Merged Entity would have an increased ability to engage in customer profiling, targeted digital marketing and cross-selling of gambling products to customers on this database. These witnesses included Mr Tyshing of CrownBet, Mr Twaits (formerly of Racing Victoria and Betfair), and the ACCC’s economic expert, Mr Mellsop. The ACCC raised the possibility that increased profiling and promotional efforts would inevitably be received by vulnerable problem gamblers. Mr Joy of the Australian Lottery and Newsagents Association also raised concerns that the merger may lead to the increased availability of lotteries services to children and problem gamblers, and would certainly increase the prevalence of impulse purchases of lottery tickets.

[para 83] As a competition regulator, the ACCC may not be best-placed to assess the implications with respect to problem gambling of the Merged Entity having access to a more extensive customer database. Tabcorp’s economic expert, Dr Simes, addressed the issue most directly. Consistent with the need to balance benefits and detriments under the net public benefits test, Dr Simes concluded that increased consumer welfare outweighed the corresponding detriment from problem gambling, with Mr Mellsop agreeing.

[para 84] The net public benefits test must also compare the future with the merger and the future without the merger. According to Mr Cooke, Chief Executive Officer and Managing Director of Tatts, the database of approximately two million user accounts is largely made up of lotteries consumers. Mr Cooke also stated that Tatts had already tried to leverage that database to increase turnover in Tatts’ wagering operations. Whether or not that leveraging had been successful, it was occurring before merger authorisation was sought, and (if it brings commercial results) is likely to continue regardless of whether the merger occurs. There may be questions of efficiencies arising when the databases of Tabcorp and Tatts are merged, but the Tribunal saw no evidence that the intensity of profiling and promotional activity would increase because of the combination of those two databases, or that a larger database would cause problem gambling in the community. The Tribunal notes the broader concerns surrounding problem gambling, but also again notes that the merger does not target vulnerable members of the community, nor does it alleviate any service providers of their obligations under responsible gambling regulations.

General principles

The Tribunal noted (para 128) that the ACCC may accept written s 87B written undertakings in connection with an application for merger authorisation and that the Tribunal may grant authorisation subject to conditions - including a condition that the applicant make and comply with an undertaking given to the ACCC under s 87 B (s 87AZJ). Whether to require a condition in the form of an undertaking will be 'a matter for the Tribunal to assess' (para 133). The Tribunal further observed that (at para's 134-135):

... the discretion to set conditions is not limited to factors relevant to the satisfaction of the statutory test for authorisation. The Tribunal in Medicines Australia at [133] decided that “in a case in which the proposal has satisfied the relevant public benefit test”, a discretion remained to impose conditions.

[135] For instance, conditions may be imposed to reduce the weight – relative to the likely public benefits – to be given to anti-competitive detriment if such detriment is likely to arise from the proposed merger. ... emphasised. ... The Tribunal should not just impose conditions to give comfort to potential competitors of the Merged Parties or impose conditions not likely to be required or be of any real impact in the future with the merger in place....

Absent an enforceable undertaking the only recourse to breach of a condition would be for the ACCC or another party to apply to the Tribunal for a revocation of authorisation (s 95AZM(6)(b)) or commence proceedings in the Federal Court alleging contravention of s 50 by reason of s 95AT(2) (para 129), neither of which would result in enforcing the terms of the conditions imposed (para 130). The Tribunal did observe, however, that the prospect of revocation of authorisation would provide a strong incentive for compliance (para 131). Nevertheless, the Tribunal accepted that 'the enforcement of behavioural conditions of authorisation may raise practical difficulties unless they are contained in an undertaking provided to the ACCC under s 87B' (para 132).

Condition in this case

In the ACCC's Statement of Issues, published as part of its original informal clearance review, it expressed a preliminary view that the proposed merger 'was likely to substantially lessen competition in Queensland for the supply of EGM monitoring and repair and maintenance services by combining Maxgaming and Odyssey Gaming
...' and prior to the Tribunal hearing Tabcorp adopted the position it would divest its Odyssey Gaming business in Queensland if authorisation was granted.

The Tribunal concluded that the public benefits it found existed in this case were 'substantial' and that there were 'no material detriments weighed in the balance which are of significance or likely to arise that outweigh the benefits' (para 539). Further:

[para 540] The proposed merger is consistent with the trend towards industry consolidation, with the Merged Entity reaching a sufficient scale to compete. The creation of the Merged Entity will lead to greater competition particularly in online wagering. This increased competition brings about competition benefits to the racing industry and to consumers, and the net effect of the proposed merger will likely be positive.

[para 541] Consequently, the Tribunal is satisfied that the proposed merger should be authorised and it is hereby granted under s 95AT of the Act.

[para 542] As the Tribunal is satisfied that the proposed merger is likely to result in substantial public benefits and that the public detriments identified by the ACCC and the interveners are unlikely to either arise or are not of significance, the Tribunal is satisfied in all the circumstances that the proposed merger would result, or would be likely to result, in such a benefit to the public that the acquisition should be allowed to occur.

[para 543] Accordingly, for the various reasons detailed herein, the Tribunal has determined to grant the authorisation Tabcorp seeks for the proposed merger subject to one condition.

[para 544] Tabcorp and the ACCC have agreed the terms of an undertaking pursuant to s 87B of the Act to address the detriment arising from the combination of monitoring companies in Queensland, involving the divestment of Odyssey.

[para 545] Tabcorp and ACCC agree that if the merger is authorised, it should be on condition that Tabcorp provide that undertaking to the ACCC.

There is no mechanism for appeal on the merits from a decision of the Tribunal in relation to merger authorisations. However, it is possible to seek judicial review. On 10 July 2017 the ACCC applied to the Federal Court seeking judicial review of its decision in Tabcorp. It alleges three reviewable errors. These are set out in its media release as follows:

1. The ACCC is seeking a review of the Tribunal’s reasoning that it could only conclude that the proposed acquisition was likely to result in a detriment if the Tribunal concluded that there would be a substantial lessening of competition.
   
   The ACCC will submit this is not the correct application of the statutory test, and is inconsistent with previous Tribunal decisions. In previous decisions, the Tribunal has taken into account the detriment constituted by any lessening of competition when assessing authorisation applications.
   
   The ACCC observes that all benefits are counted, not just those which are found to be substantial and will submit that this must also be the case with detriments.

 

2. The ACCC is also seeking a review of the Tribunal’s failure to compare the likely future state of competition both with and without the proposed acquisition in its consideration of whether the proposed acquisition was likely to result in any detriment.
   
   The Tribunal reasoned that such analysis was not necessary unless analysis of the market demonstrated that the merger was likely to result in a detriment, and that would only be the case if there was a substantial lessening of competition.
   
   The “future with and without” comparison is, however, fundamental to the assessment of likely detriment in all competition cases. The ACCC will submit that without this analysis, it is impossible to isolate and assess the impact of a merger from other factors in the market that would occur absent the merger.

 

3. Finally, the ACCC is seeking review on the ground that the Tribunal made an error in the weight it gave to benefits, such as cost savings and revenue synergies, which would be retained by Tabcorp and not shared with consumers more broadly.
   
   The ACCC will submit that the correct application of the statutory test required that the weight attributed to such private benefits be discounted relative to benefits that flow to consumers.

See ACCC media release.

On 12 July 2017 CrownBet also filed for judicial review.

On 21 July 2017 the ACCC withdrew its application for an injunction to stop Tabcorp/Tatts deal.

The judgment of the Full Federal Court was delivered at 2:15pm on 20 September 2017. The appeal was successful and the matter will return to the Tribunal for review.

Of the ACCC's three grounds of judicial review:

• that the Tribunal was wrong to reason that it could only conclude the acquisition would result in a detriment if it found there was a substantial lessening of competition;
• that the Tribunal wrongly failed to compare the likely future state of competition with and without the proposed acquisition
• that the Tribunal erred in the weight it gave to private benefits relative to benefits that would flow to consumers

only the first succeeded. In this respect, the Tribunal stated:

[11] ... a mandatory consideration in the Tribunal’s assessment of an acquisition will include any non-trivial competitive detriment which will result, or is likely to result, from the acquisition whether it occurs on a market-wide basis or not. Secondly, ... the Tribunal is not centrally concerned in assessing whether there is a competitive detriment for the purposes of s 95AZH(1) with the different question posed by s 50 of whether the acquisition will, or will be likely to, result in a substantial lessening of competition in a market. The inquiry thrown up by s 95AZH is concerned with all benefits and detriments resulting from the acquisition including, no doubt, competitive ones. But so far as the competitive factors are concerned, the focus is much broader than it is under s 50; it is not limited only to detriment in a market nor, even where markets are concerned, with competitive lessenings to which s 50 might otherwise apply. ...

[42] There is little doubt, in light of the principles discussed above, that the competitive effect advanced by the ACCC was a detriment within the scope of s 95AZH(1) and thus a mandatory relevant consideration that had to be considered. If the Tribunal failed to take account of this matter then, at least prima facie, its decision must be set aside. ...

[45] It is not possible to say that if the Tribunal had concluded that the narrower detriment to which the ACCC pointed to in fact existed that this balancing exercise would necessarily have concluded the same way that it did.  Consequently, it is not possible to say that the failure to take into account the detriment put forward by the ACCC was immaterial to the outcome ...

[54] ... the argument that the Tribunal failed to take into account the detriment in the segment which it had put forward should be accepted. ... Consequently, the ACCC is entitled to an order that the Tribunal’s decision be set aside ab initio... One way of characterising the legal error is that the Tribunal failed to carry out its task and made a jurisdictional error by omitting to deal with a central issue raised by the ACCC in Tabcorp’s application to the Tribunal ....

On the second ground (failure to apply 'with and without' test) the Tribunal observed that while the test might be useful and is not forbidden to the Tribunal, it is not essential - in particular, it is not a substitute for the words of s 95AZH(1) which adopts the phrase: 'would result, or be likely to result, in' (para 56). The Court observed in this respect that as the Tribunal found the detriments alleged did not exist that the issue did not arise; they therefore rejected this ground.

Importantly, on the third ground, the Court noted that all that is required of the Tribunal is to assess the benefit to the public likely to result from the merger in all the circumstances; while it was legitimate to apply the modified total welfare standard, this does not require the Tribunal to explicitly give weight to each benefit (para 68). On this the Court concluded:

[para 68]: ... we are sceptical of the ACCC’s submission, even on the favourable assumption that s 95AZH(1) does carry within it the modified total welfare standard, that it would require the Tribunal to give explicit weightings. Apart from showing how far the ACCC’s submission has wandered from the text of s 95AZH(1), the submission ignores the reality that much administrative decision making involves the weighing of imponderables or incommensurables. It would be unworkable to require the Tribunal explicitly to give a weight to each benefit and we would strain to avoid such a construction were it necessary. It is not, however, necessary so to strain. Section 95AZH(1) does not require what the ACCC suggests. The assessment of benefits and detriments must be complete and the Tribunal must, no doubt, weigh them. This is not necessarily, however, an arithmetical or accounting process. As we have said above, it may involve an instinctive synthesis of otherwise incommensurable factors.

All Grounds put forward by CrownBet were rejected.

Following the decision of the Federal Court Tabcor re-applied for authorisation before the Tribunal. On 17 November the Tribunal granted authorisation ... again. This time the reasons for decision were 100 pages longer ...

Applications by Tabcorp Holdings Limited [2017] ACompT 5

On 1 December the ACCC announced it would not appeal the Tribunal's decision to authorise the Tabcorp/Tatts merger, observing that although it takes a different view from the Tribunal about public benefits/detriments in this case, it does 'not consider there is any error of law that needs to be corrected' (ACCC, 'ACCC won't seek review of Tabcorp-Tatts determination' (1 December 2017))

Media

• Ben Butler and Sarah-Jane Tasker, 'Tabcorp-Tatts tie-up talks falter' (The Australian, 27 September 2017)

• Ben Butler, 'ACCC seeks new hearing on Tabcorp-Tatts merger' (The Australian, 26 September 2017)
• Carter and Scott Murdoch, 'Lawyers sweat on gaming merger as value evaporates' (The Australian, 26 September 2017).

• 'Tabcorp remains positive over merger issues' (Focus Gaming News, 25 September 2017)

• John Durie, 'Tabcorp-Tatts tie-up hits fresh hurdle as doubts loom over tribunal’s jurisidiction' (The Australian, 22 September 2017)
• Damon Kitney, 'ACCC "won't be rushed on Tatts"' (The Australian, 22 September 2017)
• Nick Toscano, 'Tabcorp, Tatts confident of merger despite dangers of longer delay' (SMH, 22 September 2017)

• Damon Kitney and John Durie, 'Federal Court lifts embargo on Tabcorp-Tatts tie-up ruling' (The Australian, 21 September 2017)
• Damon Kitney and Scott Murdoch, 'Tabcorp-Tatts up in air as court orders new hearing' (The Australian, 21 September 2017)
• Elizabeth Knight, 'Tabcorp and Tatts marriage gets questioned at the alter' (SMH, 21 September 2017)
• Stephen Letts, 'Tabcorp bid for Tatts hits a hurdle as ACCC has a win in court' (ABC News, 21 September 2017)
• John Stenshold, 'Tabcorp Tatts deal faces further delays' (AFR, 21 September 2017)

• Scott Murdoch, 'Tabcorp merger with Tatts sent back to Australian Competition Tribunal' (The Australian, 20 September 2017)
• John Stensholt, 'Tabcorp suffers court setback in $11b Tatts pursuit' (AFR, 20 September 2017)
• Nick Toscano, 'Tabcorp and Tatts merger derailed in Federal Court' (SMH, 20 September 2017)
• Tom Wadlow, 'Tabcorp-Tatts merger falls at the final hurdle? Why the ACCC filed for judicial review' (Australia Business Review, 20 September 2017)

Blogs

• Julie Clarke, 'Reasons out in Tabcorp' (Australian Competition Law Blog, 22 September 2017)
• Julie Clarke, 'Federal Court sends Tabcorp/Tatts Deal Back to the Tribunal' (Australian Competition Law Blog, 20 September 2017)
• David Curtin, 'When Agencies Clash' (Economics New Zealand Blog, 25 September 2017)

Media

• Ben Butler, 'Federal Court ruling on Tabcorp-Tatts tie-up looms' (The Australian, 19 September 2017)

• Sarah-Jane Tasker, 'ACCC withdraws injunction to stop Tabcorp completing Tatts takeover' (The Australian, 21 July 2017)

• Sarah-Jane Tasker, 'CrownBet joins battle against Tabcorp-Tatts merger' (The Australian, 13 July 2017)

• John Durie, 'Federal Court hearing on ACCC challenge to Tabcorp-Tatts merger' (12 July 2017)

• Ben Butler, 'ACCC appeals Tabcorp-Tatts merger ruling by tribunal' (The Australian, 11 July 2017)
• John Dagge, 'ACCC appeals over Australian Competition Tribunal ruling on Tabcorp-Tatts merger' (Herald-Sun, 11 July 2017)
• John Durie, 'ACCC’s Tabcorp-Tatts merger appeal means all bets are still off' (The Australian, 11 July 2017)
• Nick Toscano, 'Tabcorp to defend $11b merger from ACCC threat' (SMH, 11 July 2017)

• John Durie, 'ACCC appeals competition tribunal’s approval of Tabcorp-Tatts merger' (The Australian, 10 July 2017)
• Max Mason and James Thomson, 'ACCC appeals Tabcorp merger approval to get clarity on competition laws' (AFR, 10 July 2017)
• James Thomson, 'Plenty at stake for ACCC in Tatts-Tabcorp merger appeal' (AFR, 10 July 2017)
• James Thomson, 'ACCC to appeal Competition Tribunal approval of Tabcorp-Tatts Group merger' (AFR, 10 July 2017)
• Nick Toscano, 'ACCC applies for Federal Court review of Tabcorp-Tatts merger' (SMH, 10 July 2017)

Other commentary and blogs

• Julie Clarke, 'The Tabcorp/Tatts case should end the clash between the ACCC and the Competition Tribunal' (The Conversation, 12 July 2017)
• Julie Clarke, 'ACCC appeals Tribunal's Tabcorp/Tatts Merger Authorisation' (Australian Competition Law Blog, 10 July 2017)

Law firm commentary

• Clayton Utz, 'Groundbreaking Australian merger clearance - lessons from the Tatts/Tabcorp decision' (Michael Corrigan, Ian Reynolds, Mihkel Wilding, 22 June 2017)
• Gilbert + Tobin, 'G+T and Herbert Smith Freehills advise Tabcorp on merger with Tattersalls' (21 June 2017)
• Herbert Smith Freehills, 'Herbert Smith Freehills assists Tabcorp in securing competition approval for landmark A$11 billion merger with Tatts Group' (26 June 2017)
• Johnson Winter & Slattery, 'Merger with benefits: Lessons from the Tabcorp/Tatts case' (John Kench & Johanna Croser, June 2017)

Media

• Simon Segal, 'Broader interests must be considered in M&A' (The Australian, 5 July 2017)
• Elizabeth Knight, 'Tabrop's massive punt produces $11 billion jackpot' (SMH, 21 June 2017)
• John Durie, 'Tabcorp’s high-risk strategy pays off as tribunal approves Tatts merger' (The Australian, 20 June 2017)
• John Stensholt, 'Tabcorp-Tatts $11b merger gets green light from Competition Tribunal' (AFR, 20 June 2017)
• John Stensholt, 'Uncertainty looms for losers of the Tabcorp Tatts deal' (AFR, 20 June 2017)
  
• Ben Butler, 'Competition tribunal approves Tabcorp’s merger with Tatts' (The Australian, 20 June 2017)
• Brad Davidson, 'Australian Competition Tribunal approves merger between Tabcorp and Tatts Group' (The Daily Telegraph, 20 June 2017)

Other/Blogs

• Julie Clarke, 'Tribunal Clears Tabcorp/Tatts Merger' (Australian Competition Law Blog, 30 June 2017)
• Tom Lodewyke, 'Tatts and Tabcorp go all in' (Lawyers Weekly, 26 June 2017)

• John Durie, 'Tabcorp's bet could sour' (The Australian, 2 June 2017, p 38)
• John Stensholt, 'ACCC "not satisfied" Tabcorp Tatts merger in public interest' (AFR, 2 June 2017)
• Richard Gluyas, 'ACCC leaves $11bn Tabcorp-Tatts merger hopes in tatters' (The Australian, 2 June 2017)
• John Durie, 'ACCC off leash over Tabcorp-Tatts' (The Australian, 1 June 2017)
• Patrick Bartley, 'Cashed-up corporates need competition, tribunal told' (SMH, 16 May 2017)
• Ben Butler and Sarah-Jane Tasker, 'Tatts, Tabcorp merger will produce a behemoth, says ACCC' (The Australian, 17 May 2017)
• John Stensholt, 'ACCC hits out at Tabcorp as merger hearings begin' (AFR, 16 May 2017)
• Sarah-Jane Tasker, 'Victorian Treasurer Tim Pallas weighs in on Tabcorp-Tatts tie-up' (The Australian, 16 May 2017)
• Patrick Hatch, 'Competition watchdog "not connected to reality", says Tabcorp' (The Border Mail, 13 May 2017)

• John Stenshold, 'ACCC flags Tabcorp and Tatts merger concern' (AFR, 1 May 2017)
• Sarah-Jane Tasker, 'ACCC concerns put dampener on Tatts-Tabcorp deal' (The Australian, 2 May 2017)
• Sarah-Jane Tasker, 'Tatts deal: Tabcorp ditches ACCC review, goes to tribunal' (The Australian, 14 March 2017)
• Paul Gilder, 'Tabcorp cracking the whip in push to get merger past the post' (Herald Sun, 14 March 2017).
• John Durie, 'Tabcorp decision to switch regulators mid-race is being led by lawyers' (The Australian, 13 March 2017)
• James Thomson and John Stenshold, 'Tabcorp takes Tatts Group merger case straight to Competition Tribunal' (Australian Financial Review, 13 March 2017)
• AAP, 'Tabcorp takes Tatts bid to tribunal' (SBS, 13 March 2017).

• John Durie, 'ACCC reaction shortens odds of a Tass-Tabcorp tie-up' (The Australian, 9 March 2017).

ACCC and Tribunal pages

• View ACCC page
• View Tribunal page

Case links (Federal Court)

• ACCC v Australian Competition Tribunal [2017] FCAFC 150 (Jade) (20 Sept 2017)
• ACCC v Australian Competition Tribunal [2017] FCAFC 150 (AustLII) (20 Sept 2017)
• Crownbet Pty Ltd v Australian Competition Tribunal [2017] FCAFC 157 (AustLII) (27 Sept 2017)
  (very brief reasons explaining why Crownbet's application failed despite the fact that the ACCC's succeeded)

Case links (Tribunal)

• Applications by Tabcorp Holdings Limited [2017] ACompT 5

• Application by Tabcorp Holdings Limited [2017] ACompT 1 (ACT 1 of 2017) (22 June 2017) (Tribunal page)