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MYOB’s Reckon Buyout Raises Antitrust Concerns

Competition regulators in Australia may have thrown a wrench in MYOB’s planned takeover of Reckon.

Reports in ZDNet on Thursday (March 29) said the Australian Competition and Consumer Commission (ACCC) raised concerns about the merger of the two small business accounting companies in its preliminary investigation of the $138 million deal, announced last November.

The ACCC announced earlier this year that it would be probing the deal.

“The ACCC understands that medium to large accounting firms require more sophisticated features from practice software, reflecting larger sizes, more complex structures and processes and more diverse needs of their clients,” the competition authority stated in its Statement of Issues. “Market feedback indicates that for those firms, the MYOB AE and Reckon APS products are generally considered to be the only options available. Market feedback indicates that practice software products from other suppliers are mainly designed for smaller accounting firms and do not provide many of the more sophisticated features generally required by medium to large firms.”

In a statement, ACCC Commissioner Roger Featherston raised the issue of MYOB’s monopoly on the market for accounting software designed for larger enterprises.

“We think there is significant risk for customers that prices will increase and service levels will decrease,” he stated. “There are other suppliers of this software, but market feedback suggests those products are less sophisticated and that they are unlikely to be able to develop the more advanced functionality for several years at least.”

The ACCC’s review also found issues of barriers to expansion for other industry players, including the cost associated with developing more complex functionality to compete with MYOB.

The regulator noted that it did not find competition concerns in MYOB’s small business services.

MYOB and Reckon said they are cooperating with the ACCC.

“We understand that the extension by the ACCC is a standard part of their assessment process, and we will continue to work with each of the regulators to enable them to complete their due diligence and provide an outcome,” MYOB CEO Tim Reed said in a statement issued to the ASX.

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