The proposed merger of cash logistics giants Armaguard and Prosegur appears to be stoking division within the Australian banking sector, with banks taking different stances on whether the competition regulator should allow the deal to proceed.
Banks and chain retailers rely almost exclusively on either Armaguard or Prosegur to transport cash across their enterprises and have told the ACCC they are concerned that the formation of a cash transit monopoly would lead to substantial price increases.
However, most banks also acknowledge in their submissions to the ACCC’s consultation process that the strategic decline in demand for cash has created unique challenges that threaten the viability of the merger partners.
The combined share of the merger applicants in the cash logistics market is believed to be 90 per cent, with Armaguard currently holding a presence of around 65 per cent.
Banks such as National Australia Bank and Bendigo Bank are concerned that if the regulator blocks the merger it might force the Spanish-owned Prosegur to withdraw from the local market, leaving an uninhibited path for Armaguard to extend its market share in cash logistics to beyond 70 per cent.
While NAB, Bendigo and the Bank of Queensland say there would be negative impacts on competition if the merger was approved, they each stop short of expressing opposition to the application.
“With only two suppliers and significant barriers for any new entry into the CIT market, NAB believes the transaction will reduce competition,” NAB told the ACCC in its submission.
“NAB recognises the declining usage of cash and the challenges this represents for all parties involved in the cash eco-system.
“All participants have a role to play in creating a sustainable and cost-effective payment channel.”
If the deal is given a green light Bendigo wants the ACCC to give banks and other customers of the resulting cash logistics monopoly special authorisation to bargain collectively with the merged entity.
“The proposed transaction would reduce customers’ bargaining power, because they will be dealing with one large entity in the market,” Bendigo said in its submission.
“The Bendigo Group does not dispute the Participants’ statement that the competition between them is unsustainable.
“However, this does not mean that the detriment of a merger will fall short of a substantial lessening of competition.
“The potential detriment in the cash-in-transit market requires a consideration of appropriate remedies, even if it arises only from a loss of rivalry between the applicants which was unsustainable.
“One possible remedy is a collective negotiation authorisation.”
In 2017 Bendigo and three other banks – CBA, NAB and Westpac – were unsuccessful in an effort to bargain collectively with Apple over access to a proprietary iPhone operating system.
The ACCC rejected the move by the banks arguing that allowing the banks to bargain together would have stymied local innovation in digital wallets and payments, and disadvantaged Apple’s competitive position against Google.
Although NAB (a client of Prosegur and Armaguard) and Bendigo (a Prosegur customer) took diplomatic stances on the relative merits of the planned merger in their submissions, other banks offered the ACCC more strident assessments.
Cuscal, which sold its RediATM