ACCC correspondence re Endeavour expansion

From: Stephen Mayne <stephen@maynereport.com>

Sent: Thursday, 15 July 2021 6:35 AM
To: Mergers <mergers@accc.gov.au>
Subject: ACCC Complaint about Endeavour Group

Dear ACCC,

I am writing to formally complain about the expansion aspirations of the newly demerged Endeavour Group which is Australia's largest retail liquor operator, pub operator and owner of poker machines.

Endeavour already controls a majority of Australia's retail liquor sales through its BWS and Dan Murphy's brands and I am not aware of another developed country where one player has such a dominant position in retail liquor.

In addition to this, it is Australia's largest owner and operator of poker machines with more than 12,000 machines which drain around $1.5 billion a year from gamblers, although Endeavour continues to lies about this, claiming that its gaming revenue is only $700 million.

Under the previous ownership of Woolworths, expansion in the ALH hotels business was constrained because Woolworths was embarrassed about the harm caused to the community by Australia's biggest operator of poker machines.

However, as billionaire pokes baron and 14.6% Endeavour Group shareholder Bruce Mathieson, one of 7 directors of Endeavour, explained in this recent interview with The Australian, the business is planning aggressive expansion now that it has been set free from Woolworths. These are the relevant quotes from Mathieson:

Mr Mathieson said Endeavour had been “constrained” from joining in the pub and hotel buying spree in the past year but would now enter the market in a big way.

“We are 100 per cent in a different situation now and can be a lot more aggressive now that we are free [from Woolworths],” he said.

“I think people will be surprised by what we will buy. In fact, I know so.”

Lo and behold, just 2 weeks after demerging, Endeavour has joined with Charter Hall to pay $40 million to buy the Terrey Hills Tavern in Sydney. See today's Sydney Morning Herald for details, as unfortunately Endeavour has refused to make an ASX announcement about the acquisition.

This is likely to be the first of many acquisitions by Endeavour so this email is formally requesting that ACCC assign personnel and resources to provide clarity as to the level of expansion it will tolerate from Endeavour, including a specific inquiry into the Terrey Hills Tavern acquisition that will provide regulatory clarity on all future proposed incremental acquisitions by Endeavour.

The company is already notorious in the liquor industry for screwing suppliers and under-cutting competitors, particularly small independent bottle shops which find it increasingly difficult to compete.

In recent years they have even started buying up wineries and craft brewers, further turning the screws on independent suppliers.

There a number of markets which the ACCC should analyse during its inquiries, including beer, wine, spirits and poker machines. The market dominance in poker machines is most pronounced in Victoria followed by Queensland.

The Mathieson family is already arguably in breach of Victoria's legislation limiting individual pub owners to no more than 35% of all Victorian hotel poker machine licences. The AFR's Rear Window column recently wrote about that issue, pointing out that Mathieson's two daughters are both separately in the top 10 pokies pub operators in the state, at the same time as Endeavour is bumping up against the 35% cap.

Could you please confirm in writing that ACCC has received this email and will be making some inquiries about the proposed Terrey Hills Tavern acquisition along with the broader market dominance of Endeavour Group.

Yours sincerely

Stephen Mayne

ACCC response emailed on July 22

Dear Stephen

Thank you for your email dated Thursday 15 July 2021 in relation to the expansion aspirations of Endeavour Group. We confirm receipt and appreciate you raising these concerns with the ACCC.

The ACCC is aware of the recently announced proposed acquisition by Endeavour of the Terrey Hills Tavern and media reports of further possible acquisitions that it may be contemplating. We note the concerns raised in your email and confirm we are actively monitoring acquisition activity in these markets and engaging with Endeavour on certain transactions to determine whether any of the transactions would require a public review to assess the impact on competition.

When assessing such acquisitions we take into consideration:

· the competition impacts in the local area

· the competition impacts arising from vertical integration

· broader competition impacts in regional or Australia-wide retail markets and up-stream markets (e.g. the impact on suppliers from the company increasing its control of routes-to-market for products).

The test we must apply is section 50 of the Competition and Consumer Act 2010 (Act) which prohibits an acquisition of shares or assets (including a merger between two companies) which is likely to have the effect of substantially lessening competition in any market.

Although we do investigate impacts on competition in gaming/poker machines, as you would be aware the ACCC does not have broader roles in gaming regulation.

This ACCC fact sheet explains our approach to merger reviews, including local markets, and covers some of the common Q&As relating to acquisitions by large firms or chains.

Kind regards

Tom

Tom Leuner

Executive General Manager | Mergers, Exemptions and Digital
Australian Competition & Consumer Commission

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