ACCC not sold on Wesfarmers LPG sale

The competition watchdog has raised concerns the proposed sale by Wesfarmers of its east-coast LPG business to competitor Elgas could leave customers vulnerable to price increases.

Wesfarmers' Kleenheat gas business signed an agreement in April to sell its east-coast liquid petroleum gas assets to Elgas, a subsidiary of German energy giant Linde Group, for an undisclosed price.

The Australian Competition and Consumer Commission says the proposed acquisition could lead to further concentration in a market where there is already little competition, potentially driving prices up.

The competition watchdog today released a statement of issues outlining its concerns, calling for comment from interested parties as it prepares to make its decision on the deal.

The three major distributors of non-automotive LPG on the east-coast - Elgas, Kleenheat and Origin - have a combined market share of about 90 per cent, the ACCC says.

In some regional areas, the only distributors are Elgas and Kleenheat or dealers supplied exclusively by them.

“The ACCC’s preliminary view is that the proposed acquisition raises significant competition issues for the distribution of LPG to customers in a number of different markets,” ACCC chairman Rod Sims said.

“Market inquiries have identified concerns that the transaction would remove Kleenheat as a significant competitor to Elgas and Origin.

“The ACCC is concerned that the proposed acquisition would leave customers vulnerable to price increases."

LPG's non-automotive uses include hot water systems, heaters, gas stoves and portable generators.

The ACCC will make its final decision on the transaction next month.