Armaguard is facing a new investigation by the competition watchdog, as it comes under intense scrutiny over its troubled monopoly on cash transportation around the country.
Armaguard has warned several times that the declining use of cash has made its business model unsustainable, raising serious concerns about people’s ability to access bank notes and coins if it were to fold.
Emergency talks in recent months led to an offer of an emergency $26 million financial bailout from the nation’s major banks and retailers to keep Armaguard afloat. The offer was ultimately rejected, with Armaguard’s parent company Linfox throwing it a temporary lifeline.
Now, the Australian Competition and Consumer Commission chair Gina Cass-Gottlieb has told a parliamentary hearing she is “considering the conduct” of Armaguard since it merged with its main rival Prosegur in September last year.
The ACCC is already monitoring Armaguard to ensure it is complying with the conditions attached to that merger, such as maintaining its distribution network and not increasing prices.
But the new process is in addition to that, with the ACCC using its broad remit to look at misuse of market power to scrutinise the cash transporter.
“We have also been considering the conduct that has occurred since September in terms of our general powers,” said Ms Cass-Gottlieb.
ACCC approved merger
The ACCC-approved merger with Prosegur was supposed to put Armaguard on a sustainable footing with control of 90 per cent of the market.
But use of cash continues to plummet, with cash purchases falling from 60 per cent to just 13 per cent in a little over a decade.
While the volume of cash being used is tumbling, almost all Australians still use it occasionally and it is still needed everywhere around the country.
The ACCC had approved talks between Armaguard, the major banks, major retailers the Reserve Bank, Australia Post and the federal Treasury Department on how they can make the business of moving smaller amounts of cash around a financially sustainable business.
The ACCC has also approved the banks and retailers to discuss the future of cash transport without Armaguard to assist their “business continuity planning” should Armaguard fold.
“[This] planning enables banks and retailers to plan alternative solutions if either there is an insolvency or there is an apprehension of administration,” Ms Cass-Gottlieb told a budget estimates hearing on Wednesday.
Armaguard is angry about its exclusion from those talks, with CEO Mick Cronin describing it as an “anathema to best practice” and “contrary to the notion of a public benefit” for cash distribution plans to be made without its involvement.
‘We’re committed to cash’, treasurer says
Federal Treasurer Jim Chalmers has promised that cash will be available around the country even if Armaguard goes into insolvency.
“Oh, we’re committed to cash,” Mr Chalmers said on Wednesday. “We want to make sure communities right around Australia can have access to cash.
“I’m pretty confident that there is sufficient understanding and goodwill that these issues can be overcome … but I don’t want to pretend they are not significant.”
Australia Post has been involved with the talks, given its nation-wide network of post offices and its role in providing cash in regional and remote communities where there are no bank branches.
“I’ve been speaking to all of the players, including Australia Post about this,” Mr Chalmers said.
“We say to the Australian community that we are committed to cash being available right around our country.”