November 7th 2024.
The Australian competition watchdog has given its approval for a massive $8.8 billion merger between two major players in the pharmacy industry. This merger between Chemist Warehouse and Sigma Healthcare, one of the largest pharmacy wholesalers in Australia, has been in the works for some time now. Sigma is not only a wholesaler, but also a franchisor for popular pharmacy chains like Amcal and Discount Drug Store.
With this merger, the new company will have a whopping 1000 retail stores and 16 distribution centers across Australia and New Zealand. The news of this merger has caused quite a stir, especially because of its potential impact on competition in the pharmaceutical sector. However, the Australian Competition and Consumer Commission (ACCC) has reassured the public that there will still be effective competition in the market, with other pharmacies and non-pharmacy retailers continuing to compete.
In a statement released this morning, ACCC chair Gina Cass-Gottlieb explained that their analysis has shown that the merger will not substantially lessen competition. This is despite the ACCC initially raising concerns about competition in June when the merger was first proposed. ACCC Commissioner Stephen Ridgeway had stated that this was a major change for the pharmacy industry, as it involves the largest pharmacy chain merging with a key wholesaler that supplies thousands of independent pharmacies.
However, after accepting a court-enforceable undertaking from Sigma, the ACCC has decided not to oppose the merger. This undertaking includes various obligations that the merged company must adhere to. These obligations aim to ensure that pharmacy customers still have a choice between smaller, personalized stores and larger, more affordable stores like Chemist Warehouse. Retail pharmacies will also still have the option to switch between wholesale suppliers, although some concerns remain for those in longer term contracts with Sigma.
To address these concerns, the enforceable undertaking requires Sigma not to enforce contractual restrictions on pharmacies that wish to switch to a different wholesaler. It also ensures that any payments under these contracts will not make it expensive for pharmacies to make the switch. Additionally, Sigma is required to safeguard and delete the data of any pharmacies that choose to switch and to continue as a pharmaceutical wholesaler for at least five years. Overall, the ACCC believes that with these measures in place, the merger will not harm competition in the market.
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