In 2019, the Australian Competition and Consumer Commission (ACCC) investigates the acquisition of Adelaide Tools by Bunnings in Adelaide. The ACCC considers Adelaide Tools to be Bunnings’ closest and...

Question 1
Identifying the goods cu
ently or theoretically sold by the merging parties is the ACCC's starting point for identifying specific markets in order to determine the proposed acquisition's competitive results. The ACCC then examines whether other companies sell (or may offer) identical goods or products that are sufficiently similar to the merging parties' products. As a result, the combined company faces major restrictions from the other companies.
The ACCC's investigation begins with the procurement of T&E, which is a field of convergence between Bunnings and Adelaide Tools. . Bunnings is Australia's leading tool store with a one-stop-shop supermarket format. Supplying software and supplies to do-it-yourself (DIY) retail clients has become a large part of Bunning's tool business. However, it has announced publicly in recent years that it intends to expand its trade consumer market and has taken a series of moves in that direction.
Last October, Bunnings revealed that it had signed a deal to purchase the five family-owned outlets, as well as one specialty mower outlet, for an undisclosed amount. Adelaide Tools is a family-owned and operated company with a 70-year history. Following the takeover, it will continue to work independently. Bunnings has 302 stores throughout Australia, with 15 in the Adelaide region.
However, after conducting further market research, the ACCC concluded that the acquisition is unlikely to result in higher costs or lower service levels. The ACCC claimed that due to Adelaide Tools' limited aggregate scale, the existence of Complete Tools, and the possible presence of Sydney Tools, a major lessening of competition would be impossible as a result of the merger. The Australian Competition and Consumer Commission (ACCC) accepted the takeover of the Adelaide-based firm on Tuesday, noting that due to the growing number of specialist tools retailers across Australia, the transaction was unlikely to decrease competition.
2.
The market structure of household hardware in Australia is perfectly competitive one before merging Buning and Adelaide tools. The word "perfect competition" refers to a business system in which competition is at its most severe. To explain, a market with the characteristics mentioned below in its layout is said to have perfect competition. 1. There are a lot of buyers and sellers.2. Any business produces a homogeneous commodity.3. Unlimited entry and exit of businesses. 4. There are no promotional costs.5. Consumers have a clear view of the industry and are well educated of any improvements. Fair decision-making is practiced by consumers. 6. In the industry, all drivers of production, such as labour, money, and so on, have perfect mobility and are not hampered by any market factors or market powers. 7. There will be no official interference.8. There are no transportation fares.9. Each company makes regular profits, and no company will make abnormal profits.10.Any company is a price taker. It considers the price as determined by the powers of supply and demand. The below diagram represents the market structure of household hardware in Australia.
From above graph we can see that the household hard ware supply curve is upward sloping (S).When price increases the quantity supply for hardware also increase. The household hard ware demand curve is downward sloping (D).When price increases the quantity demand for hardware decreases. Market for hardware reaches equili
ium at a point where demand equals supply. The equili
ium price level will be P and quantity Q. The market structure of hardware changes from perfect competition to oligopoly after the announcement of ACC, where Bunning merged with Adelaide.
There are only a few interdependent companies who jointly control the industry in an oligopoly market system. While each of these companies is strong in its own right, neither of them can deter other companies from dominating the industry. Depending on the market, each of the companies can sell products that are slightly different from those of the others.
1 Firm interdependence
A few interdependent organizations are unable to operate individually. When making decisions in an oligopoly environment with few rivals, businesses must consider the reactions of their nearest competitors.
2. Entry Obstacles
There are a few hurdles to tackle on the way in and out. As previously reported, any of these industries necessitate significant economies of scale in order for companies to remain sustainable. They can also need minimal capital to run, similar to airport slots. To discourage potential competitors, companies often aim to lower their rates as much as possible. They often promote aggressively and often use discount schemes. Customers do not know the right price or supply, because the competition is characterized by incomplete information.
The below diagram indicates the oligopoly market structure of household hardware.
From above diagram we can say that the market price for hardware before merging is P and quantity supplied is Q. After merging the dominated firms altogether fixes price at P0 for same level of output Q. Here area adf represents the consumer surplus, area adQO represents producer surplus in oligopoly market. Area bcf represents the consumer surplus, area bcQO represents producer surplus in prefect competition market. From this we can say that in oligopoly market the consumer surplus reduced and producer surplus increased. The dead weight loss due to merging is represented by the area ced. The market be inefficient due to merging.
3.
The type of market structure ACC wants to promote in the type of market structure ACCC wants to promote for the market of tools and outdoor power equipment in Adelaide is perfect competition market. In perfect competition the consumer and producer surplus is equal; the firms will earn normal profit. There are no ba
iers for entry and exit. This market will allocate the resource efficiently.
4.
A monopoly is a form of market system that exists in the...