AFG-Connective merger: ACCC warns of risks to market competition

by Victoria Ticha 13 Feb 2020

The ACCC has said the proposed acquisition of Connective by Australian Finance Group (AFG) could stymie market competition in Australia.

“Combining AFG and Connective would create the largest mortgage aggregator in Australia by a significant margin, accounting for almost 40 per cent of all mortgage brokers operating in Australia,” said ACCC chair Rod Sims.

Over half of all home loans lodged each year originate from the broker channel, and brokers play an important role for customers seeking a home loan and for lenders reaching those consumers, he added.

The concerns were raised by the ACCC in a statement of issues regarding the merger, which is seeking further information about the supply of mortgage aggregation, distribution services and home loans in Australia.

“AFG and Connective operate in an already concentrated market, and not many other mortgage aggregators offer a similar level or type of service. Additionally, potential entrants or small players may be deterred from expanding by various barriers, including compliance costs,” continued Sims.

“The ACCC is concerned there will be limited similar alternatives for brokers to switch to. This may negatively impact the services offered to brokers.”

But Glenn Lees, director and CEO of the Connective Group, said, “We firmly believe there will be no substantial lessening of competition in any relevant market from Connective’s merger with AFG.

“In fact, our merged businesses will be in a position to offer consumers greater choice and a market with greater competition.”

He added, “Mortgage brokers and lenders can expect a greater investment in technology and compliance, all resulting in better outcomes for homebuyers.”

The industry has until 5 March to offer and submit their own concerns, and the final decision will be announced on 7 May 2020.