On 24 July 2024, the Australian Government released the exposure draft of the Treasury Laws Amendment Bill 2024: Acquisitions. This draft legislation seeks to implement the government’s merger reforms announced on 10 April 2024, as we previously reported.

The proposed changes are complex, substantial, and consequential, with broader application than just merger control under the Competition and Consumer Act 2010 (Cth) (CCA) and significant ramifications for advising on competition clearances of deals in Australia.

Do they deliver more certainty and transparency? That is a live debate we’ll leave for another day. So much to talk about, so we’ll have more to say. But, for now, we leave you with this brief summary.

What do you need to know?

In short, the exposure draft sets out the framework for the merger reforms, including:

1.    Notification and timelines:

• Notification thresholds will be set by regulation using metrics such as turnover, transaction value, and market concentration, which will be determined at a later stage and will be subject to consultation. 
• The Minister may set targeted notification obligations in response to evidence-based concerns regarding certain high-risk acquisitions.
• Regarding timelines, the initial ‘Phase 1’ review period will be up to 30 business days or a ‘fast-track’ determination if no concerns are identified after 15 business days. The in-depth ‘Phase 2’ review period will be up to 90 business days, subject to any extensions.
• A key promise for the new regime was greater transparency. This is proposed to be delivered through the ACCC providing merger parties with a new “notice of competition concerns” during phase 2, which must set out the case against the deal and the material facts, information, and evidence relied upon by the ACCC.
• While parties can agree on different timelines with the ACCC, they then have only 3 weeks to respond.
• Another new concept is that deals will become ‘stale’ 12 months after an ACCC or Tribunal clearance if they are not completed.
• The ACCC may still take action against acquisitions that are not notifiable. This is because the proposed amendments will make any acquisition of shares or assets that has the purpose, effect or likely effect of substantially lessening competition (SLC) a type of anti-competitive agreement that is prohibited.

2.    Definition of acquisitions:

• The proposed amendments focus on acquisitions that provide control or the ability to materially influence the acquired business or are capable of affecting the competitive structure of a market.
• For acquisitions of shares, if the acquiring person’s voting power is 20% or more, the person is presumed to control the body corporate and is therefore subject to the mandatory notification regime, if the thresholds are met. 
• This presumption is rebuttable if it can be proved that the person does not have control of the body corporate. Conversely, a person who acquires less than 20% of the voting power can nonetheless be taken to control of the body corporate if proven.

3.    Test to be applied for considering competition impacts and substantial public benefits:

• The proposed amendments clarify that SLC can result from creating, strengthening or entrenching substantial market power. This will apply not just to mergers but to other conduct that is prohibited if there is a purpose or likely effect of SLC, such as misuse of market power, concerted practices and/or contracts, arrangements or understandings.
• A subsequent process for considering public benefits applies if deals fail to be cleared based on an SLC analysis.
• Guiding principles have been included to assist the ACCC in its role as an administrative decision-maker and ensure explicit emphasis is placed on economic methodology and analysis of competitive effects. Critically, this includes a range of new efficiency-type arguments that would previously have been more commonly used as public benefits.

4.    Procedural safeguards – including a new form of internal ACCC review:

• Critically, the draft legislation includes a new form of internal review by the ACCC in addition to a right to refer a deal to the Australian Competition Tribunal.
• As previously foreshadowed, the merger reforms reflect a significant change from a judicial enforcement model to an administrative model with limited merits review before the Australian Competition Tribunal. ACCC determinations will be subject to limited merits review by the Australian Competition Tribunal, based on material before the ACCC, subject to limited exceptions.  
• Despite criticism about the operation of the limited merits review regime, the proposed approach to limitations on merger parties' procedural rights mirrors that today in the merger authorisation process.
• There will be an option of fast-track or standard procedure for Tribunal review. 
• The ACCC, the Minister, transaction parties, or third parties can also seek orders from the Federal Court where they have concerns that an acquisition may contravene the law.

5.    Review of serial acquisitions:

• As foreshadowed in the government’s policy proposal document, the combined effect of all acquisitions within the previous three years by the acquisition parties may be considered as part of the review of the notifiable acquisition and aggregated for determining if the notification thresholds are met. 

Separately, later this year, Treasury will consult on the notification thresholds, fees and regulations including associated transparency safeguards.

What are the review timeframes?

The government has set out the following review timelines for Phase 1, Phase 2 and the substantial public benefit phase, as well as for Tribunal review.

Key points for the deal timetable:

• The earliest time that the ACCC may make a determination is 15 business days after the effective notification date of the notification. 
• After that 15-business day period in Phase 1, the Commission may make a determination at any point in Phase 1 or at any point in Phase 2.
• The Phase 1 determination period is 30 business days starting on the first business day after the effective notification date, subject to any extensions. 
• The Phase 2 determination period is 90 business days starting immediately after the end of the Phase 1 determination period, subject to any extensions. 
• The ACCC has 50 business days from the effective application date to make a ‘substantial public benefit determination’, unless that period is extended. If the ACCC does not make a determination within that period, it is taken to have not made the determination applied for. 
• The ACCC has a substantial period to issue its notice of competition concerns, which is likely to be a substantial document. However, the standard time for merger parties to respond is very limited (15 business days) – unless they agree an extension of time with the ACCC. This is a key pressure point for parties in the process. 
• The substantial public benefit application process is only available for acquisitions that have been determined to be SLC (which are prohibited) or where conditions have been specified to address a potential SLC. Therefore, if the ACCC makes no decision, the original determination stands.

Next steps

Responses to the exposure draft are due by 13 August 2024 – approximately three weeks from the date the exposure legislation was published.