SYDNEY, Nov 5 (Reuters) - Australia's competition regulator said an agreed A$2.7 billion ($1.9 billion) buyout of data management firm Recall Holdings Ltd by U.S. rival Iron Mountain Inc may hurt competition, drive up prices and lower customer service.
The Australian Competition and Consumer Commission (ACCC) said in a statement on Thursday that joining the country's two biggest data security firms would give the new company market share of up to 71 percent nationwide.
The deal may "leave customers vulnerable to price increases or reduced service levels," ACCC Chairman Rod Sims said in the statement, adding that "smaller suppliers or new entrants would be unlikely to constrain the merged entity".
The ACCC's statement highlights the antitrust regulator's growing role as volatile equity markets set off a flurry of M&A activity globally.
Last month, the government body raised concerns about oil services giant Halliburton Co's proposed $35 billion buyout of rival Baker Hughes Inc, saying joining the world No. 2 and No. 3 players "may create conditions that would facilitate coordinated behavior in the market".
The ACCC statement also suggests another setback for the Iron Mountain-Recall takeover, which the companies agreed to in April. In June, Reuters reported the Australian firm wanted to renegotiate the scrip component of the deal following a decline in Iron Mountain's share price.
However, Recall said then that it continued to recommend the offer, and on Thursday repeated that statement.
It said in a statement that its potential acquirer "is working closely with the ACCC to address the issues raised and is committed to making any divestments required to obtain the competition approvals in Australia without any monetary cap".
Recall shares were down 5 percent at A$7.20 in early trading, lower than Iron Mountain's A$8.50 offer price, as doubts about the deal grew. The broader market was down 0.3 percent.
The ACCC said it planned to give a final ruling on Dec. 15.
$1 = 1.3994 Australian dollars Reporting by Byron Kaye; Editing by Richard Pullin annd Stephen Coates