The Australian Competition and Consumer Commission (ACCC) is investigating purchases of iSelect Ltd (ASX: ISU) shares over competition concerns.
The watchdog was prompted into action after learning Innovation Holdings Australia (IHA), would soon own 35% of all iSelect shares.
According to the ACCC, Innovation Holdings, via related entities, owns CompareTheMarket.com.au, which offers very similar services to iSelect.
Both iSelect and CompareTheMarket.com.au allow consumers to compare insurance, energy and financial products online.
"We are considering whether the completed and proposed acquisitions are likely to substantially lessen competition," said ACCC commissioner, Stephen Ridgeway.
"iSelect is a competitor to Innovation Holdings in offering comparison services for a range of financial and energy products to consumers and minority stakes held between competitors can give rise to competition concerns."
Never told ACCC it was slowly buying iSelect shares
Innovation Holdings had already slowly acquired iSelect shares over the past two years, resulting in a 29% stake. None of those transactions were reported to the ACCC.
The commission is now starting a probe as Innovation Holdings proposes to acquire another 6%.
"Companies acquiring strategic or potentially controlling stakes in a competitor will continue to attract ACCC scrutiny," Ridgeway said.
A spokesperson for CompareTheMarket.com.au (CTM) denied that Innovation Holdings' shares equated to CompareTheMarket.com.au having a stake in iSelect.
"CTM is owned by Financial Holdings Australia (FHA) which has shareholders in common with IHA but the two are separate entities. The CTM business operates independently of FHA and IHA," she said.
"The group structure is convoluted but while Compare the Market and Innovation Holdings Australia share common investors, it is not accurate to state that CTM acquired shares in iSelect."
Notwithstanding this, the spokesperson said it welcomed the ACCC's enquiries.
"Any step that helps consumers' ability to make more informed choices about how they spend money is a good thing."
iSelect acknowledged to the ASX on Friday morning that ACCC is making enquiries regarding IHA's shareholdings.
"iSelect wishes to confirm that there is no current negotiations with IHA," stated the board.
The ACCC is calling for submissions from the public on the matter by 20 November. Correspondence should be directed to mergers@accc.gov.au.
Innovation Holdings, through a complex group of entities, also owns insurance brand Budget Direct, and also underwrites policies for third parties like ING, Qantas Airways Limited (ASX: QAN) and Virgin Money UK (ASX: VUK).
iSelect runs the comparison sites iselect.com.au and energywatch.com.au. Its new chief executive, Warren Hebard, only started this week.
iSelect shares were down 1.79% on Thursday, to sit at 28 cents at market close.
