Proposed merger will erode quality in before and after school care

5th July, 2017 General News

Sherpa Kids Australia warns ACCC that proposal will accelerate ‘industrialisation’ of child care. Before and after school care provider Sherpa Kids Australia has objected to a potential merger of its competitors Camp Australia and Junior Adventures Group (JAG).

In a submission to the Australian Competition and Consumer Commission (ACCC) Sherpa Kids Australia says Camp Australia owner Bain Capital is a US-based firm, and that the potential merger would see millions of dollars of Australian tax-payer funds in the form of Child Care Benefit (CCB) and Child Care Rebates (CCR) spirited out of the country each year.

“It’s bad enough now, with Bain Capital owning just Camp Australia, but bringing JAG into the equation will make the situation many times worse,” said Sherpa Kids Australia.

“This US firm will be able to engineer a killing for its shareholders from Aussie battlers who have their children in childcare so they can work to make ends meet. There’s something deeply distasteful about that scenario.”

Sherpa Kids Australia says in the submission it has lodged with the ACCC that the merger will make Bain Capital the largest single service provider in the Australian childcare sector, with approximately 1,200 services and school partnerships.

“This will be essentially a monopoly as their competitors will be small to medium independent providers, whose entire livelihoods depend solely on their relationships with as few as one or two schools each,” the company says.

These providers, small and uncoordinated as they are, would be in no position to respond to, or match, predatory marketing and pricing behaviour.

This will obliterate choice and competition, pushing prices for before and after school care “through the roof” in the medium to long term.

It was likely that all this would ultimately stifle innovation, erode quality and create a heavily fortified position that will discourage new competitors from entering the market.

“Is this really the landscape that ACCC wants for our early education system? I’d hope not.”

Sherpa Kids Australia cites in its submission evidence that the tendering process for Out of School Hours (OOSH) care services in New South Wales particularly, has been driven over the past four years by financial incentives offered by the major service providers.

“Camp Australia is particularly well known for leading with its cheque book when visiting or tendering to schools. The recent change in the NSW tender process has altered this slightly but there is strong evidence that the change remains slow.”

Tendering for services in NSW would become even more difficult under the potential merger as Bain Capital would be able to offer aggressive pricing on fees that smaller competitors would not be able to match.

“This sounds wonderful from a school’s perspective, except for two things. Firstly, once predatory pricing has done its job the dominant merged provider would be able to charge what it likes and schools would very quickly see a change in their financial situation that could well result in the loss of a significant number of OOSH services, adversely impacting working parents.

“Secondly, we have for some time been warning about the industrialisation of OOSH care and the negative impacts of this. Predatory pricing accelerates this.”

Sherpa Kids Australia says one of the most under-discussed aspects of the potential merger is the impact it could have on employment terms and conditions right across the Early Childhood Education and Care sectors.

“These are highly vulnerable sectors anyway and this merger would exacerbate the situation significantly.”