In a speech to the National Press Club , Chair Gina Cass-Gottlieb said in her first year as Chair she has observed first-hand the challenges with the current merger regime settings in Australia’s Competition and Consumer Act 2010 (Cth) (CCA) and considers that changes are required, based on three key factors that the ACCC asserts exist under the current voluntary and non-suspensory model:
Alleged high levels of market concentration.
Alleged lack of cooperation by merger parties in informal clearance process.
Alleged underenforcement against anticompetitive mergers.
What is the ACCC proposing?
The ACCC’s suggested reforms are currently under consideration by the Commonwealth government, and will be subject to legislative amendments, the terms of which are yet to be released.
The ACCC’s proposals have two key reform planks:
1. Process elements: The ACCC proposes to introduce a mandatory and suspensory notification system with the following elements:
Mandatory notification above certain thresholds. While proposed threshold terms have not yet been identified, Chair Cass-Gottlieb said the thresholds could be based on the size of the proposed transaction , the size of the acquired business globally and/or within Australia, or a combination of these factors.
Call in power below thresholds . The ACCC would have a “call in” power to formally review acquisitions that fall below the thresholds but “still raise competition concerns”. This will mean parties still have to self-assess risk of intervention and need for ACCC engagement below this level.
Suspensory. Transactions would not be able to complete until clearance granted.
Notification waivers available for non-contentious acquisitions.
Upfront notifications. Parties would have to file all required information upfront, at time of filing.
Tribunal Review. Australian Competition Tribunal (Tribunal) review of ACCC decisions would be available.
Limited recourse to Court. Parties could still go to Court to obtain a declaration that the transaction does not breach the CCA or apply for judicial review of the Tribunal decision.
Onus of proof. The ACCC or the Tribunal on review would not be able to clear a merger unless they were “positively satisfied” that it would not breach the CCA.
2. Changes to the substantive merger test: The ACCC is proposing the following key reforms to the merger test:
A “second-stage” public benefit-based test: If the parties were not able to satisfy the ACCC that the merger did not have anticompetitive effects, parties could then seek approval on public benefit grounds.
Expansion of the prohibition on mergers. The statutory prohibition would be expanded to prohibit not only mergers that substantially lessen competition, but also to prohibit mergers that entrench, materially increase, or materially extend a position of substantial market power.
Updating the merger factors that are considered when assessing whether a merger is anticompetitive to include:
the loss of actual or potential competitive rivalry;
increased access to, or control of data, technology or other significant assets;
whether the acquisition is part of a series of relevant acquisitions;
whether the acquisition entrenches or extends a position of substantial market; and
the impact of a merger on structural conditions, such as the height of barriers to entry that result from the merger.
Of course, the devil will be in the legislative detail. Chair Cass-Gottlieb confirmed that the ACCC has provided a paper to Treasury on its proposals for merger reform. The ACCC is awaiting Treasurer Jim Chalmers’ views.
We will be sharing our deeper analysis and insights soon. Stay tuned.