ACCC Chair provides important new details on proposed shake up of Australias merger control laws
17 April 2023
17 April 2023
The ACCC Chair has reaffirmed the ACCC's push for the introduction of a mandatory and suspensory merger regime, and provided new details on its proposed formal model:
1. The proposed reforms will include changing Australia's "voluntary" merger review regime to a "formal clearance model" comprising of a "mandatory" regime which would require merger parties to notify the ACCC of mergers when specified thresholds are met.
2. The ACCC has confirmed that threshold considerations are likely to be based on the size of the proposed transaction, the size of the business being acquired globally and/or within Australia, or a combination of these factors.
3. The merger system would become "suspensory" meaning merger parties would be prohibited from completing a transaction until the merger is cleared by the ACCC (currently, there is no rule preventing merger parties from completing a transaction pending ACCC clearance).
4. The ACCC would have a "call in" power to review mergers that do not meet the specified notification thresholds but which the ACCC considers could give rise to competition concerns.
5. Merger parties would need to provide a range of specified information upfront to support their notification (currently, under the informal review process, merger parties can decide for themselves how much information to provide upfront, and then respond to any information requests from the ACCC as and when they arise).
6. A simplified process for non-contentious mergers under which merger parties could apply for a notification waiver to ensure that mergers that are unlikely to have anti-competitive effects can be dealt with in an expeditious manner.
The ACCC has backed away from its earlier suggestion that the Federal Court should not have a role in the merger review system. The current proposal is that the ACCC, or Australian Competition Tribunal on review, would not clear a merger unless it is positively satisfied that the transaction is not likely to substantially lessen competition. The Federal Court could, however, continue to consider applications for declaration of non-contravention and judicial review. The role of the Federal Court in considering merger enforcement matters would also continue for transactions that do not trigger the notification thresholds.
The ACCC has proposed that the new regime should incorporate a public benefits test, as the current merger authorisation process does (but not the informal merger clearance process). However, it appears that consideration of the public benefits test would not occur concurrently with the assessment of the competitive effects of a merger. Rather, the ACCC proposes that merger parties would have the option of subsequently being able to apply for clearance on public benefits grounds if the applicants are not able to first satisfy the ACCC or Tribunal that a transaction can be cleared on competition grounds.
The ACCC has also proposed changes to the substantial lessening of competition test to include wording to confirm that “entrenching, materially increasing or materially extending a position of substantial market power” satisfies the test. This would assist with addressing the ACCC's concerns with 'creeping acquisitions' – the accretion of market power through a strategy of small serial acquisitions that may not amount to a substantial lessening of competition on their own, a particular concern in digital platforms markets.
The ACCC has also proposed new merger factors to be taken into account when assessing mergers including:
1. the loss of actual or potential competitive rivalry;
2. increased access to, or control of data, technology or other significant assets;
3. whether the acquisition is part of a series of relevant acquisitions; and
4. whether the acquisition entrenches or extends a position of substantial market power.
These factors reflect the position consistently adopted by the ACCC in recent years that greater focus on market structure issues is needed in merger control.
The reforms, if enacted, will represent a fundamental shake-up to Australia's merger control regime with impacts on deal viability, timing and review options. The reforms will mean that:
The ACCC is particularly concerned for consumers and the Australian economy in the current environment of uncertainty and vulnerability from supply chain pressures, geopolitical issues and the climate change transition.
ACCC Chair, Gina Cass-Gottlieb has emphasised that the reforms to Australia's merger laws are important to protect competition in Australia’s economy during a critical period of economic transition. It remains to be seen to what extent the current Government will adopt the ACCC's proposals, what any draft bill may look like, and the timeframe for the enactment of reforms. In the meantime it will be important to reflect on the proposed reforms and prepare for the possibility of a major shake-up to Australia's merger laws.
For now, the current merger control regime lives on, and businesses contemplating mergers in the near future should keep this update in mind but need not panic.
Authors: Alyssa Phillips, Partner; Peter Armitage, Partner; John McKellar, Senior Associate; and Zoe Huang, Graduate.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.