Chemist Warehouse and Sigma $8.8 Billion Merger Approved

Chemist Warehouse store at The Grove Liverpool shopping site in Sydney, Australia, on Dec. 2, 2021. AAP Image/Bianca De Marchi

The Australian Competition and Consumer Commission (ACCC) has given the green light for Chemist Warehouse and Sigma Healthcare’s $8.8 billion merger, concluding that the deal will not reduce competition in the pharmacy sector.

Chemist Warehouse runs a pharmacy franchise model, and Sigma operates similar franchises, including Amcal+ and Discount Drug Store.

“The ACCC’s analysis found that the proposed merger is unlikely to substantially lessen competition nationally or locally because other pharmacies and non-pharmacy retailers will continue to compete to the same extent they compete now,” ACCC Chair Gina Cass-Gottlieb said

The approval process saw Sigma’s legal team, led by Elizabeth Avery and Liana Witt, working closely to secure ACCC clearance.

Avery expressed pride in the outcome, calling it “a significant step towards such an important and transformational merger for Sigma.”

The ACCC concluded that consumers would continue to have a wide range of options, given the distinct differences between Chemist Warehouse’s large discount stores and Sigma’s smaller, service-oriented pharmacies.

“Importantly, consumers will continue to have choice between smaller format stores offering personalised services and the Chemist Warehouse offering, focused on larger format discount stores and front-of-store offerings,” Cass-Gottlieb said.

To address concerns regarding the supply of pharmacy products, the ACCC noted that there are multiple channels through which suppliers and manufacturers can distribute their products, even outside of the newly merged entity.

Concerns Over Reduced Competition

The Pharmacy Guild of Australia has expressed concerns over the merger saying it will reduce wholesaling options which many mean higher costs for patients.

“Reduced competition ultimately leads to higher prices for patients and lower service standards,” a Guild spokesperson stated.

The Guild argued that consolidation in healthcare markets, including pharmacy, could hurt small businesses and reduce personalised services for communities.

“It is disappointing the ACCC accepted limited behavioural undertakings and did not explore structural undertakings,” the spokesperson added, citing concerns that market consolidation in healthcare services generally leads to non-competitive duopolies.

Assurances from Sigma

To alleviate competition concerns, Sigma has provided enforceable undertakings to the ACCC.

This includes a commitment to protect and delete data of pharmacies that opt to switch providers and a pledge to remain a pharmaceutical wholesaler under the Commonwealth Government’s Community Service Obligation for the next five years.

“The evidence gathered, augmented by the undertaking given by Sigma, led us to conclude that a substantial lessening of competition is unlikely,” Cass-Gottlieb said.