Keeping Armaguard in business looks like being a supremely costly exercise for the major banks and the other ‘funding parties’ that bailed the firm out nine months ago.
“I have consistently stated that Armaguard’s sustainability relies upon a combination of pricing adjustments, efficiency savings and ongoing capital contribution” Peter Fox, the executive chairman of Linfox Armaguard wrote in a revealing letter to the ACCC chair in late February.
“We are particularly concerned to reach a position on an independent pricing mechanism, analogous to pricing, which would apply to regulated services in respect of each future cash services agreement with each of the funding parties” Fox said.
Beginning from July 2024, the four major banks, Australia Post and retailers, supermarkets and other industry participants have collaborated so they can ensure there is continuity of cash-in-transit services, at least via Armaguard.
In September, the ACCC granted interim authorisation that allows banks and others to provide financial contributions to Armaguard, discuss, share information, and reach in-principle agreement on operational sustainability of the dominant provider of cash-in-transit services.
If banks thought Linfox Armaguard would be subsidised for a manageable period of time it is now clear that on the Armaguard side they expect their major customers to dig deep for a very, very long time.
“With the significant bargaining power of the major banks in mind, we are concerned that the ACCC … [develops] … an independent pricing mechanism that is likely to assist the funding parties to develop a future price setting mechanism which seeks to balance pricing certainty and transparency.”
The Armaguard chair made clear “we do not see the process as one by which the funding parties, or Armaguard, develop the price setting mechanism.”
Peter Fox suggested this mechanism be overseen by “a reputable accounting firm”, the Reserve Bank, the ACCC or a committee of Treasury.