SYDNEY, AUSTRALIA: The Australian Consumer and competition Commission (ACCC) will not oppose the proposed acquisition of Citigroup Australia Pty Limited’s Australian consumer business (Citi) by National Australia Bank Limited (ASX: NAB) after a review found the transaction would not substantially lessen competition.

NAB and Citi overlap in the supply of consumer banking products and services, including credit cards, personal loans, wealth management and investment products, transaction and savings accounts and home loans in Australia.

The ACCC’s review focused on competition in the supply of credit cards, as Citi is a substantial provider of credit cards and credit card services. Evidence showed that the proposed acquisition was unlikely to raise competition concerns in any other areas of overlap, given Citi’s minimal market share in these markets.

The review considered whether NAB’s acquisition of Citi would reduce competition both in the overall market for credit cards and in particular segments such as credit cards with rewards programs.

During its review process, the Australian Consumer and competition Commission (ACCC) consulted with a broad range of stakeholders including credit card suppliers, third party distributors of Citi’s white label credit cards (known as white label partners), and consumer groups. Very few concerns were raised by those stakeholders.

The ACCC concluded that, following the proposed acquisition, NAB would continue to face competition from a range of suppliers of credit cards.

“Credit cards continue to be an important product for consumers, despite increasing use of other unsecured lending products such as Buy Now, Pay Later,” ACCC Chair Rod Sims said.

“However, market feedback suggested that Citi is not unique with respect to its credit card offering, and many different credit card providers remain for consumers. NAB today is smaller in credit cards than its major bank rivals, and we don’t consider adding Citi’s card operations to NAB will materially change the level of competition.”

Another area the Australian Consumer and competition Commission (ACCC) focused on was the provision of ‘white label’ credit card services, because, following the acquisition, NAB will be the dominant white label credit card supplier to a number of commercial partners, and will compete with those partners in the consumer-facing credit card market.

The ACCC was particularly focussed on whether post-acquisition NAB might offer less favourable terms to these white label partners, such as smaller banks, with the aim of enhancing the position of NAB’s own branded credit cards.

However, the ACCC found that post-acquisition, NAB would be unlikely to have an incentive to act in that way.

Firstly, scale is very important in credit card operations, including white label credit card operations, such that issuers have strong incentives to have a larger consumer base For personal use only(including white label consumers) over which to spread out the significant fixed costs of investment in a credit card issuing platform.

Secondly, the ACCC considered it likely that if NAB caused white label partners’ credit card offerings to become less competitive, or exit the market altogether, many consumers would switch to non-NAB credit cards, making such a strategy unprofitable for NAB.

Finally, banks who are white label partners may also have the ability to invest in their own credit card issuing platforms, although at a cost, which could limit or remove their reliance on NAB’s white label credit cards post-acquisition.

“We are very concerned to ensure that mergers in the financial industry do not limit the competitive constraint provided by providers outside of the major four banks, however, in this case the ACCC did not consider there would be a substantial impact in any market,” Mr Sims said.