Trusting the process: ACCC releases new merger process guidelines for consultation

While a significant portion of the guidelines summarise the requirements in the legislation, the guidelines also clarify new aspects of the regime, including details on notification waivers, the public Acquisitions Register and the steps in each review phase (Phase 1, Phase 2 and any Public Benefits Phase). It’s anticipated that the guidelines will be built out further over the coming weeks and months, including to reflect details in legislative instruments.

Our key takeaways on the ACCC’s draft process guidelines are set out below.

Key takeaways

Proposals that are speculative cannot be notified to the ACCC, and a careful engagement strategy will be required for bidders in competitive bid processes.
Early upfront engagement with the ACCC will be critical, particularly for complex transactions.
Parties who are in doubt about whether to notify are encouraged to seek a waiver or voluntarily notify the ACCC.
The guidelines provide further guidance on global mergers and deals that are subject to FIRB review.
The provision of complete, accurate and up-to-date information to the ACCC will be crucial to avoid delays and more serious repercussions under the legislation.
The establishment of the Acquisitions Register will provide greater transparency to merger parties and third parties.
Further guidance is expected on the ACCC’s new powers to impose conditions.

Proposals that are speculative cannot be notified

The draft guidelines clarify that proposals that are merely speculative cannot be notified to the ACCC. As set out in the legislation, acquisitions can only be notified if at least one of the following applies:

a contract, arrangement or understanding has been entered into,
the parties intend to enter into a contract, arrangement or understanding,
the acquisition is a takeover bid and meets certain conditions, or
the acquisition is to take place via a scheme of arrangement and the arrangement has been publicly proposed.

This has important flow on implications for bidders in competitive processes, who will not necessarily meet one of the above triggers (at least early on in any sale process), and who will not have the benefit of the ACCC’s view pre-bid. For these parties, a careful ACCC engagement strategy (including pre-notification discussions) is likely to be needed.

Early upfront engagement with the ACCC encouraged

Engaging in pre-notification discussions with the ACCC will be crucial in the new mandatory merger clearance regime to get on the ‘front foot’ with possible ACCC concerns and to minimise the risk of extensive information requests that could delay timelines. The draft guidelines note that the nature, timing and duration of this engagement will vary for each acquisition. It may involve providing a draft notification, proactively raising issues that are likely to be relevant to the ACCC’s assessment and discussing possible areas of ACCC focus. Parties involved in deals with potential competition issues are also encouraged to discuss potential remedy proposals in these pre-notification discussions.

The draft guidelines note that pre-notification will generally be confidential and should be commenced (by completing a pre-notification engagement request on the ACCC’s mergers portal) at least two weeks before the proposed date for formal notification, and much earlier for complex or global transactions.

When in doubt – seek a waiver or notify

The ACCC encourages parties that are in doubt about whether to notify an acquisition to seek a notification waiver or notify under the voluntary pathway. The draft guidelines provide details on the process to seek a waiver, including the factors that the ACCC must have regard to when making its decision and the timing for any waiver decision (as set out in the legislation). Parties that are unsuccessful in obtaining a waiver will have the opportunity to engage with the ACCC prior to lodging any notification.

The draft instrument released by Treasury late last week will also be updated in due course to include requirements in relation to making a notification waiver.

Where a party chooses to voluntarily notify the ACCC of an acquisition, it will be subject to the same process – including the same forms, fees and time limits – as any review under the mandatory notification pathway.

Further guidance on global mergers and deals subject to FIRB review

The ACCC expects parties to global mergers to initiate early pre-notification discussions, and to inform the ACCC if their deal is (or will be) under review by agencies in other jurisdictions.

Consistent with the ACCC’s current practice, it may consult with overseas agencies in relation to these acquisitions. The guidelines note that this will benefit businesses by allowing agencies to adopt a consistent approach to remedies, and by increasing investigative efficiency. Parties may be asked to provide a bilateral confidentiality waiver to facilitate these discussions.

The guidelines also provide that (as is the case currently) Treasury may refer an acquisition notified to it under the Foreign Acquisitions and Takeovers Act 1975 to the ACCC, including those that are not independently notifiable to the ACCC.

The guidelines highlight that the foreign investment framework operates independently from the ACCC’s merger control regime and as a result, parties may be required to notify both the ACCC and Treasury. The ACCC and Treasury are working together to provide further guidance on the interaction between the foreign investment framework and the mandatory merger clearance regime.

Significant repercussions if parties don’t provide complete, accurate and up to date information to the ACCC

The process guidelines emphasise the importance of providing complete, accurate and up to date information to the ACCC and set out the significant consequences that can apply if a notification is materially incomplete, materially misleading or contains false information, or the ACCC becomes aware of a material change of fact – these range from the ACCC finding there is no effective notification date, setting a new effective notification date once additional information is provided or extending the statutory timeline.

Significant penalties may also apply in more serious cases – such as where a person knowingly or recklessly gives information relating to an acquisition that is false or misleading in a material particular in contravention of the legislation.

Greater transparency through Acquisitions Register

The establishment of the public ‘Acquisitions Register’ under the new mandatory merger clearance regime will provide greater transparency to merger parties and third parties regarding the ACCC’s assessment of deals and reasons underpinning its decisions.

The process guidelines provide that the Acquisitions Register will generally include:

details of the notified acquisition such as party names, a non-confidential description of the acquisition, effective notification date, end of determination period and relevant industry,
a description of the public benefit and detriment claims for public benefit applications,
the ACCC’s determination and reasons,
any ACCC decision that a notification is subject to a Phase 2 review,
any applicable Notice of Competition Concerns or Public Benefit Assessment, and
any other information or documents prescribed by a legislative instrument.

The ACCC does not intend to publish the parties’ notification application or any public benefits notification application, nor will it publish other submissions from the parties or third parties. The legislation requires the ACCC to update the Acquisitions Register within 1 business day after the effective notification date, after making a determination or after making a decision that a notification is subject to a Phase 2 review.

There are two circumstances where notifications will not be published on the Acquisitions Register 1 business day after the effective notification date:

certain surprise hostile takeovers, and
certain voluntary transfers of authorised deposit-taking institutions and other regulated entities under the Financial Sector (Transfer and Restructure) Act 1999 (Cth).

More generally, the ACCC’s starting point is to not disclose confidential information, but it will balance this against the need for it to make robust, well-informed and transparent decisions as an administrative decision maker. The guidelines note that while there may be circumstances in which the ACCC will consider it appropriate to make a disclosure, it will generally only do this to the most limited extent required, and will consider steps to mitigate any potential adverse impact on the party who provided the information. Where the ACCC receives confidential information that raises a material issue of concern, the issue will be described in the Notice of Competition Concerns in sufficient detail to enable the parties and third parties to understand it, even if the information itself isn’t disclosed.

New powers to approve with conditions

Under the new mandatory merger clearance regime, the ACCC has the ability to approve a deal subject to conditions if it is satisfied that without the conditions the proposed acquisition could have the effect of substantially lessening competition. The ACCC’s ability to impose conditions is a significant step-change from the current voluntary regime, where parties can voluntarily offer undertakings to the ACCC, but the ACCC lacks the ability to impose such conditions.

The ACCC has broad powers to determine the nature, form and scope of these conditions, which could include a requirement for a party to offer the ACCC a court-enforceable undertaking under s 87B of the Competition and Consumer Act (Cth). The ACCC can impose conditions in a Phase 1 determination, Phase 2 determination or during the Public Benefit Phase.

The legislation provides that in considering whether to include conditions the ACCC must have regard to all relevant matters, and may have regard to:

the effect that compliance with the conditions would likely have on the interests of consumers, and
any consumer benefits that would likely result from compliance with the conditions.

Failure to comply with the conditions imposed by the ACCC will constitute a contravention of the CCA.

The guidelines note that the ACCC is continuing to consider its approach to conditions and will provide updated guidance in due course.