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Court Upholds Appeal to Block Tabcorp’s $6.15B Takeover of Tatts

Thu, Sep 28, 10:38am by Staff Writer

In a letter sent to all involved parties on September 20, Justice John Middleton of the ACT Federal Court directed the Australian Competition Tribunal to reconsider the merits of Tabcorp’s proposed multibillion dollar merger with Tatts Group.

In June, the Tribunal elected to approve Tabcorp’s $6.15 million buyout of Tatts, the terms of which both gambling companies had mutually agreed upon in October of last year.

Within one month, that ruling was appealed by the Australian Competition and Consumer Commission (ACCC), which questioned whether a newly created Tabcorp / Tatts entity would violate antitrust laws.

Specifically, the ACCC cited Section 50 of the Competition and Consumer Act 2010, which “prohibits acquisitions that would have, or would be likely to have, the effect of substantially lessening competition.”

In filing the appeal, ACCC chairman Rod Sims outlined his organisation’s objections to the Tribunal’s ruling:

“The ACCC is alleging the Tribunal made three reviewable errors. It is therefore seeking clarification of these three points of law which are central to the Tribunal’s assessment of Tabcorp’s proposed acquisition of Tatts.

We are seeking judicial review because we believe these legal principles are fundamental not only to the Tabcorp decision but to all future merger and non-merger authorisation assessments.”

As part of a three-judge panel, Justice Middleton ruled in the ACCC’s favor, directing the Tribunal to set aside its original ruling and reexamine the merger’s merits:

“The court orders that the decision of the tribunal … be set aside (and) be referred back to the tribunal for further consideration.

The tribunal is tentatively of the view that it may be possible that any further consideration can be dealt with on the papers without an oral hearing.

The lawyers for the parties and participants are fully aware of the issues involved and the factual matrix already determined by the tribunal.

The tribunal would then further consider and determine the matter.”

Justice Middleton also ordered the Tribunal to expedite the process to the best of its ability. This directive was issued in hopes of reaching a conclusion ahead of Tabcorp’s upcoming annual general meeting, which was scheduled for October 18:

“We’ve got to proceed as quickly as possible, but with all due process.

If the issues in contention are of small compass, the tribunal would endeavour to make a new determination by September 28 after considering the submissions of the parties and the participants.”

The Tribunal scuttled those plans, however, by scheduling its second round of hearings on the matter for October 24.

In response, Tabcorp rescheduled its general meeting for October 27.

Justice Middleton also addressed the role played by Crown Resorts, which joined the ACCC in appealing the Tribunal’s original ruling. Crown Resorts has long opposed any merger between Tabcorp and Tatts, claiming that the new company would monopolize the online betting market at the expense of its own CrownBet platform.

In his letter to the claimants, Justice Middleton suggested that CrownBet’s presence as an “intervenor” in the case would be reduced going forward:

“I was very generous [in the original application process] in allowing the intervenors in taking a full role.

I’m not currently disposed to allow the intervenors to have this same ‘open-door’ policy.”

Further complicating an already complex case, on September 25 the ACCC filed a submission to the Tribunal which questioned whether or not the body holds jurisdiction in the matter:

“There is considerable doubt as to whether the tribunal still has jurisdiction to make a determination on Tabcorp’s application.

In the circumstances, the most efficient and practical course would be for Tabcorp to make a further application for approval, so as to avoid debate and potential further dispute about the issue.”

If this argument holds sway with the courts, Tabcorp may be forced to submit a new merger application altogether – thus invalidating the previous years’ worth of legal manoeuvring.

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