The ACCC will not oppose the acquisition of Credit Data Solutions Pty Ltd (illion) by Experian Australia Credit Services Pty Ltd (Experian).
Experian and illion both supply consumer credit reporting services in Australia, as well as other services, including credit decisioning software solutions, marketing services, categorisation solutions and identity verification services.
"While the proposed merger is between two of the three consumer credit bureaux, our investigations indicate that Experian and illion provide only a weak competitive constraint against the market leader Equifax and this is unlikely to change if the merger does not go ahead. This lack of competitive constraint is a result of factors particular to consumer credit reporting and to the entrenched position of Equifax," ACCC Commissioner Liza Carver said.
"The ACCC found that the majority of credit providers use a single credit bureau and most often that bureau is Equifax. The ACCC also found that even where the large credit providers contract with multiple bureaux, most see Equifax as the primary bureau and utilise Experian and illion as a secondary data source."
"There are strong network effects in this industry, as customers tend to direct more enquiries to their primary bureau, which in turn allows the bureau to obtain more enquiry data, allowing the bureau to further cement its position in the market," Ms Carver said.
As credit providers are generally only required to share data with bureaux with which they have a credit services agreement, the more agreements a bureau has, the greater the amount of data accessible to that bureau, and the more detailed their credit reports will be.
The ACCC's review found that the datasets of Experian and illion are less comprehensive than that of Equifax, which reduces the competitive constraint they are able to provide. The merger may have a pro-competitive effect by enabling the combined Experian-illion to provide a more attractive service offering due to its more comprehensive credit data.
"We concluded that the merger is unlikely to lessen competition, and may actually provide a greater competitive constraint on Equifax than if the two players continued to operate alone," ACCC Commissioner Liza Carver said.
"Without the merger, and given their lack of scale and access to a large, high quality comprehensive dataset, it is difficult to see how Experian or illion could, by operating separately, materially expand their individual service offerings to compete more effectively with Equifax for primary bureau status."
"Due to its lack of scale, Experian has failed to gain traction in the market for consumer credit reporting services in Australia despite its joint venture arrangements with the four major banks, which are key sources of credit data."
Another focus of the review was whether the acquisition would substantially lessen competition in the supply of credit decisioning solutions. These are software tools that automate or support business decisions in relation to credit risk assessments during the originations (application) phase of credit providers' relationships with end customers.
The ACCC also assessed whether the acquisition would provide the merged entity with the ability or incentive to restrict the sale of credit header data to other third-party suppliers of identity verification services. Credit header data is a common input into identity verification services and typically includes names, addresses, dates of birth of consumers.
"After carefully examining these services affected by the proposed acquisition, we concluded there would be no substantial lessening of competition," Ms Carver said.
The ACCC consulted with a wide range of market participants, including large and small credit providers across banking, non-banking, auto finance, telecommunications providers and utilities as well as ancillary service providers.
More information can be found on the ACCC's website at Experian - illion.
Background
Experian is a joint venture, between Experian Australia Pty Ltd which holds a majority share, and the four major banks (ANZ Bank, Commonwealth Bank, National Australia Bank and Westpac), Latitude Financial Services Australia Pty Ltd and American Express Australia Limited.
illion is majority owned by funds that are managed and advised by Archer Capital.
Consumer credit reporting services are important to a credit provider's ability to assess potential borrowers. Credit providers look for credit bureaux with access to the most valuable data, namely:
- Data breadth: ideally, a credit bureau holds data in relation to every individual and every business in Australia. This is referred to as the 'match rate' and a high match rate is critical for credit providers to identify their potential end-customers in the bureau's database; and
Data depth: ideally, a credit bureau holds all credit-related data in relation to any individual or business. This is critical for credit providers
