The Australian Competition and Consumer Commission (ACCC) has published a Statement of Issues on the proposed acquisition of Ernst & Young’s Australian tax compliance software products by Thomson Reuters (Professional) Australia Limited.
ACCC has said that the statement seeks further information on certain competition issues which have arisen from its market inquiries to date. It is now inviting further submissions from the market by September 3, 2009, with ACCC's final decision expected by September 23, 2009.
In the statement, ACCC said that Thomson Reuters and Ernst & Young overlap in relation to the supply of income tax and fringe benefit tax compliance software products. The ACCC’s preliminary view is that there is a separate market for the supply of these products to large companies, and that its market inquiries have indicated that, for most large companies that use such software, there is only one other substitution possibility, apart from Thomson Reuters and Ernst & Young who hold a very substantial share of the national market.
It adds that its inquiries have indicated that Ernst & Young is “Thomson Reuters’ closest competitor for the supply of income tax compliance software to large companies. Evidence provided to the ACCC illustrated that most large companies wanting to switch from in-house developed solutions to income tax compliance software products choose either a Thomson Reuters’ product or an Ernst & Young product.”
The statement therefore concludes that: “The ACCC’s preliminary view is that the proposed acquisition is likely to substantially lessen competition … in relation to the supply of income tax compliance software to large companies. The likely effect of the proposed acquisition is that the merged entity would have an increased ability to raise prices to customers, reduce the quality of its products and services, and/or delay development in its products and services.”
It holds similar views with regard to fringe benefit tax compliance software, and also considers that there is little likelihood of new entrants to either market, as “product development requires a high level of tax expertise and a high level of IT expertise.”
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