Chemist Warehouse is a pharmacy franchisor that distributes to its own stores under the MyChemist, Ultra Beauty, My Beauty Spot, and Optometrist Warehouse brands.

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The competition watchdog had previously raised concerns that the proposal could lessen competition on the retail and wholesale levels, hinder rivals from growing or expanding, and result in the closure of chemists.

The Pharmacy Guild has also been a staunch opponent of the deal, arguing in a submission that there was “no way to prevent this structural market change and the associated consumer harms from occurring if the merger proceeds, [...] no matter what undertakings are proposed”.

Cass-Gottlieb acknowledged that many pharmacists and other industry members had expressed concern about the deal, with Sigma and Chemist Warehouse’s internal documents subjected to detailed analysis.

Sigma’s court-enforceable undertaking requires it not to enforce contractual restrictions or expensive fees on pharmacies that want to exit the group and to safeguard and delete the data of those pharmacies that switch.

As part of the undertaking, Sigma will also appoint an independent auditor to monitor, supervise and report to the ACCC on its compliance in this regard.

“The ability of pharmacies to readily exit their existing agreements with Sigma will maintain and enhance the ability of alternative wholesalers to constrain the merged entity,” Cass-Gottlieb said.

Competing wholesalers like Australian Pharmaceutical Industries (API), which is owned by Wesfarmers and operates Priceline and Soul Pattinson, EBOS and CH2, act as competitive constraints, which was critical to the watchdog’s conclusion that substantial lessening of competition was unlikely.

Chemist Warehouse CEO Mario Verrocchi welcomed the ACCC’s decision.

“By bringing together Sigma’s advanced distribution and logistics capabilities with Chemist Warehouse’s strengths in retail and marketing, we are creating an opportunity that will benefit both companies’ shareholders and customers,” he said in a statement.

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“The proposed merger sets the stage for a new chapter of growth for both Chemist Warehouse and Sigma, aimed at delivering greater value to our customers, employees, franchisees, and shareholders.”

Sigma chief executive Vikesh Ramsunder said the decision was a critical milestone and provided “conviction” to progress to the next steps of the merger plan.

“We believe the proposed merger will create a stronger business and accelerate our long-term growth ambitions for the benefit of our stakeholders,” he said in a statement.