IAG will pursue its next avenue for convincing the regulator that its proposed RAC Insurance acquisition should be cleared, potentially extending the process into next year.  

The insurer confirmed last week it would make a public benefits application to the Australian Competition and Consumer Commission (ACCC)  after the regulator on Wednesday opposed the transaction. 

Once an application is lodged, the ACCC has 50 business days to decide whether public benefits outweigh competition detriments. 

JP Morgan says in a research note that the public benefits test provides a stronger avenue for IAG to pitch its case compared to the process so far, but the likelihood of approval is still less than 50%. 

If the deal is still rejected, IAG can seek a review from the Australian Competition Tribunal, which can affirm, set aside or vary the decision after mainly considering information that was before the ACCC. Other dissatisfied third parties can also pursue that avenue. 

IAG CEO Nick Hawkins says RAC will remain local and continue to deliver high-quality, competitive insurance products and services following the transaction. 

“The RAC-IAG partnership will create long-term benefits for members, customers and communities across Western Australia through IAG’s advanced technology platforms, claims management expertise, financial stability and global reinsurance protection,” Mr Hawkins said. 

RAC says the plan to team with a national insurer reduces the risk it carries alone and it supports IAG lodging a public benefits application. 

“We continue to believe in the benefits of the proposed partnership with IAG, which would strengthen RAC's ability to respond to a changing insurance landscape and maintain a competitive offering for members,” Group CEO Rob Slocombe said. 

The Motor Trades Association of Australia has welcomed the ACCC decision to oppose the transaction. 

“Behavioural commitments are no substitute for the competitive discipline that comes from having strong and independent participants in the market,” executive director Bruce Billson said.