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In a report to the Australian Competition Tribunal, The Australian Competition and Consumer Commission (ACCC) says the merger will also result in less competition for wagering licences and racing broadcast rights.
The ACCC, under chairman Rod Sims, argues that the $130 million in annual claimed savings and synergies which will result in more funding to racing bodies could ultimately prove to be detrimental to wagering customers as that revenue would be made from improving Tatts' fixed odds betting system.
"In other words, the revenue increases are expected to come from Tabcorp giving less to (and taking more from) Tatts' fixed-odds consumers," the ACCC says.
"Whilst the proposed acquisition may result in some of the public benefits claimed, the magnitude and likelihood of the benefits are uncertain and Tabcorp's estimates may be overstated."
The proposed $11 billion merger between Tabcorp and Tatts will be heard in hearings over 14 days at the Australian Competition Tribunal later in May with a decision expected by June.
The timing of the submission of the ACCC report is significant as it is just five days since Tatts rejected a revised all-cash $6 billion offer from the private equity group Pacific Consortium and refused to grant due diligence or deal with them.
The Tatts board told shareholders that it had assessed the revised $4.21 per share bid from Pacific Consortium and decided it would not proceed with the deal.
The Pacific Consortium which includes Kohlberg Kravis Roberts, Morgan Stanley and Macquarie Group, have made two earlier bids in April and December which were rejected by the Tatts board.
Business News Australia
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