The Australian Competition and Consumer Commission will not oppose AFG’s proposed acquisition of rival mortgage aggregator Connective Group, giving the green light to a A$120 million deal announced last August.
In February, the ACCC raised concerns about the merger, saying: “Combining AFG and Connective would create the largest aggregator in Australia by a significant margin, accounting for almost 40 per cent of all mortgage brokers operating in Australia.”
The regulator said aggregator market was already concentrated and it was concerned there would be limited similar alternatives for brokers to switch to.
“This may negatively impact the services offered to brokers,” it said.
The merged entity will have a network of 6575 brokers. Combined mortgage settlements in 2018/19 totalled $76 million.
It said the combined AFG-Connective may have the ability to reduce commissions payable to brokers, increase fees or reduce service levels.
It also said the merged entity may have an increased ability and incentive to “foreclose” small lenders by denying access to its panel, raise costs and induce affiliate brokers to recommend AFG-Connective branded products.
However, in yesterday’s statement the ACCC said it had completed a second round of inquiries, including a public review and consultation with interested parties, and said it believed the merged entity would continue to face “robust competition”.
ACCC chair Rod Sims said in a statement: “While the ACCC found that AFG and Connective compete closely with one another, other established aggregators, including Finsure and the aggregators owned by the National Australia Bank are likely to continue to provide strong competition.
“Mortgage brokers will still have a range of other aggregators, should they become dissatisfied with the combined AFG-Connective’s pricing or service. Lenders will likewise have a range of aggregators through which they can access potential consumers.
“The combined AFG-Connective is likely to have the incentive to retain lenders on their panel who are popular with consumers. More generally, aggregators have an incentive to maintain a broad and diverse panel of lenders to attract brokers.
“Ultimately we found that a substantial lessening of competition was not likely.”