The ACCC has outlined preliminary concerns with Forestry Corporation of New South Wales’(FCNSW) proposed acquisition of the assets of Hume Forests Ltd (Hume) which is being sold in a competitive bid process.
The Australian Furniture Association also supports the ACCC’s concerns by the announcement as this acquisition is likely to lead to price increases or reductions in service levels for the supply of softwood logs by removing a significant competitor to FCNSW,’ said AFA CEO Patrizia Torelli.
Hume owns softwood plantation estates in the Tumut/Tumbarumba and Bathurst/Oberon regions of NSW and is the only alternative supplier of significant size in the Bathurst/Oberon region and one of the few alternatives of significant size in the Tumut/Tumbarumba region.
Barriers to entry and expansion are very high in the forestry industry. Market shares reflect access to land in these regions and that is unlikely to significantly change in the long term.
Given the nature of the industry, we are considering competition issues with a long-term time horizon of 25 years or more.
‘This industry is characterised by long-term contracts and infrequent tenders by plantation owners. In this context, we are carefully considering the extent to which FCNSW and Hume are likely to competitively constrain one another,’ Ms Torelli concluded.
The ACCC is considering the claims by FCNSW that it will be constrained from exerting market power post acquisition due to its status as a state-owned corporation, existing long-term contracts, the constraint from downstream imports, and customer buying power.
The ACCC is exploring these issues, considering the potential for FCNSW to be privatised in the future.
The ACCC’s final decision is scheduled for 27 January 2023. More information, including the statement of issues, is available at: Forestry Corporation of NSW – Hume Forests Ltd
*Courtesy ACCC