SIGMA Healthcare Limited's proposed acquisition of Chemist Warehouse Group Holdings has been thrown into doubt as the Australian Competition and Consumer Commission (ACCC) has expressed preliminary concerns over it (PD breaking news).
In a Statement of Issues released today, the ACCC outlined potential competition problems.
"This is a significant structural change for the pharmacy sector, with the largest pharmacy chain by revenue merging with a key wholesaler to thousands of independent pharmacies that compete against Chemist Warehouse (CW)," said ACCC Commissioner Stephen Ridgeway.
Wholesaler Sigma also has under its banner Amcal , Discount Drug Stores, PharmaSave, and Guardian.
CW, which is also a wholesaler and distributor, operates various brands, including CW, MyChemist, Ultra Beauty, My Beauty Spot, and Optometrist Warehouse.
The ACCC's concerns span both the retail and wholesale levels and it plans to gather input from other parties, including rival pharmacies.
"The transaction would create a uniquely vertically integrated company across the pharmacy supply chain, potentially raising barriers to rival expansion or entry, thus lessening competition," Ridgeway stated.
The ACCC is specifically focused on whether the merged entity might favour CW stores or impose less favourable terms on non-CW stores, thereby increasing their costs and reducing competitiveness.
There are also concerns about CW accessing commercially sensitive data from pharmacies supplied by Sigma, which could be used to undermine competition.
Currently, Ridgeway said, independent pharmacies have three main wholesaler options.
Post-acquisition, this may effectively reduce to two, raising the risk of competitive harm.
The ACCC is also wary of the merger's potential to lessen competition in pharmacy retailing, possibly leading to higher prices and reduced service quality for Australian consumers.
Additionally, the proposed merger could impact upstream markets for pharmacy retail products, particularly those that compete with CW and Sigma's many private label products.
The ACCC has not yet reached a final decision on these issues. JG
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