The Australian Competition and Consumer Commission (ACCC) has outlined its competition concerns with MYOB’s (ASX:MYO) proposed $180 million acquisition of Reckon (ASX:RKN).
ACCC commissioner, Roger Featherston, said if the acquisition went ahead, MYOB would be the only supplier of practice software suitable for medium to large accounting firms.
“If MYOB has a monopoly on this software, it would substantially lessen competition,” Featherston said. “We think there’s a significant risk for customers that prices will increase and service levels will decrease.”
Featherston said it had received feedback from the accounting industry that MYOB’s AE product and Reckon’s APS product, were the only two capable of meeting software needs for medium to large accounting practices.
“There are other suppliers of this software, but market feedback suggests those products are less sophisticated, and are unlikely to be able to develop more advanced functionality for several years at least,” he said.
On top of this, Featherston said it also identified several barriers to expansion for other competitors.
“These include the time and cost to develop better functionality, switching costs for accounting firms, and a cautious approach from the industry towards changing to untested suppliers,” he said.
MYOB CEO, Tim Reed, said it was working with both the ACCC and NZCC to enable them to complete their due diligence and provide an outcome.
The ACCC is inviting submissions from interested parties in response to its Statement of Issues by 13 April and its final decision is scheduled for 30 May.
MYOB’s $180 million cash acquisition for Reckon’s Accountants Group was announced in November.
Under the deal, MYOB will take on all clients, intellectual property, systems, processes and more than 120 employees from its fellow publicly-listed accounting software vendor.
Reckon will retain its Business and Legal Practice Management divisions, which make up about 50 per cent of its group revenue and EBITDA.
According to Reckon, the move will help accelerate its long-term strategy to offer small businesses a complete suite of cloud solutions as well as pursue opportunities in the legal market.