Geographic Market Definition and Competitive Effects of the Santos-SAGASCO Merger in Australian Natural Gas
Overview
This case study examines the 1993 Trade Practices Commission consideration of the Santos Limited and SAGASCO Holdings merger in Australia. It analyzes whether Australia should be treated as a single geographic market for natural gas and evaluates the merger's impact on market power across multiple natural gas basins.
What this case study covers
- Introduction of the Santos-SAGASCO merger and its significance to Australian trade hierarchy
- Analysis of geographic market definition rejecting single-market approach in favor of basin-specific regional markets
- Assessment of merger effects on market power across Cooper Basin, Surat-Bowen Basin, and Amadeus Basin markets
Preview
SAGASCO Holdings Case Study
Introduction
During the summer of 1993, the Trade Practices Commission in Australia considered whether to enjoin Santos Limited from permanently acquiring SAGASCO Holding Limited. The merging of the two companies was critical within the trade hierarchy in Australia (SAGASCO Holdings Limited, 2020) This is because Santos Limited was the largest onshore natural gas producer, while SAGASCO was the third largest Australian market. Since SAGASCO opposed the merger of the two companies, they argued that authorizing the merger would reduce competition and make Santos Limited monopolize the market. On the other hand, Santos Limited argued that the gas sector was very concentrated, and there was much competition from alternative energy sources. Through the case study, we can see the potential impacts of mergers. Moreover, the policy also reveals the relationships in competition policy and regulation of monopolizing the market.
Question A: Is it appropriate to think of all of Australia as a single geographic market for natural gas? If so, explain why. If not, how would you define the relevant geographic market(s)?
When we consider all the aspects presented within the case study, I can say that it is not appropriate to think of Australia as a single geographic market for natural gas. This is because the country lacks a national readily available wholesale market for gas. The production, transportation, and retailing process is delivered by different companies and is never located within a single geographic market (SAGASCO Holdings Limited, 2020).