Australian merger control overhaul: 6 key takeaways from the draft merger reform legislation (including some surprises)

Yesterday, the Government released exposure draft legislation for its proposed new merger clearance regime.  As covered in our previous alert, the Government is proposing to replace Australia’s existing informal merger notification process and formal merger authorisation regime with a new mandatory and suspensory merger clearance regime, due to commence on 1 January 2026.

The Treasury Laws Amendment Bill 2024 sets out the legal framework for the regime, including the types of transactions excluded from the regime, the timeframes for review, and the appeal rights.  Crucially, the Government has not released details of the thresholds above which merger parties must obtain ACCC clearance.   

The Government has invited submissions and feedback on the exposure draft legislation before 13 August 2024.

Key takeaways from the exposure draft

Some clarity on which acquisitions would require ACCC clearance but thresholds yet to be released

1. Thresholds yet to be set. The thresholds that determine which acquisitions require ACCC clearance have not been published. These details will be released later this year following further consultation.  The thresholds are likely to be set by reference to turnover, profitability, deal value, and/or market shares.

2. Definition of “notifiable acquisition” based on a very broad concept of “control”. ACCC clearance will only be required for acquisitions of shares or assets (above the thresholds) that give the acquirer “control”. "Control” is defined very broadly.  There is also a rebuttable presumption that a post-acquisition holding of 20% or more of the voting power in a body corporate will give an acquirer control.  This could be difficult to rebut, with “control” defined in the draft legislation to include the ability to directly or indirectly determine the “policy” of the target, having regard to the “practical influence” that can be exerted (rather than the rights that can be enforced). Depending on how this definition is interpreted and applied, this has the potential to result in a larger number of transactions falling in the definition of a notifiable acquisition than previously understood. This includes likely implications for ‘creeping’ acquisitions under Australia’s takeover laws, which may not have been intended. 

Timing certainty likely to be illusory for contentious reviews

3. ACCC to have a high degree of control over timing. The statutory timeframes for review will not start until the ACCC reasonably considers the notification is complete and not misleading or false in any material respect. The timeframes for review will also pause if the ACCC exercises its compulsory information gathering powers (i.e., between the issuance of and response to a s155 notice) or the parties don’t respond to an ACCC RFI in the timeframe set by the ACCC.

Broader changes to the substantive law than what was expected

4. Changes to the definition of “substantial lessening of competition” to apply to other competition law prohibitions. The new definition of “substantial lessening of competition” — which now includes “creating, strengthening or entrenching” a substantial degree of market power — will also apply to the prohibitions on misuse of market power, anti-competitive agreements, exclusive dealing, and concerted practices in the Competition and Consumer Act 2010. This was not flagged in Treasury’s previous papers or consultation and has the potential to capture a broader range of conduct within the scope of these other competition law prohibitions.   Embedding the concept of ‘creating, strengthening or enhancing market power’ into the definition of ‘substantial lessening of competition’ means that companies with substantial market power risk contravening section 46 of the Competition and Consumer Act 2010 by doing anything that strengthens or enhances their market power.

5. Higher threshold to establish public benefit. The threshold for obtaining clearance on the basis of public benefits will be higher than under the current merger authorisation process. Under the new regime, clearance can only be obtained on the basis of public benefits if the public benefits substantially outweigh any public detriments arising from the transaction. By contrast, under the current regime it is sufficient if the public benefits simply outweigh the detriments. As covered in our previous alert, the process for obtaining clearance on public benefit grounds will also be more time-consuming than under the current regime, with merger parties having to wait until the ACCC determines the transaction is anti-competitive before being able to apply for clearance on public benefit grounds.

Transition to new merger control regime will start from mid-2025

6. From 1 July 2025, parties will no longer be able to make applications under the existing formal merger authorisation process. The exposure draft provides that parties would be able to voluntarily make applications under the new laws from 1 December 2025 (although the ACCC will not be able to determine these applications until after 1 January 2026). So, from 1 July 2025 to 30 November 2025, it appears that the only clearance pathway available to merger parties will be the current informal merger clearance process.  This means that, during this period, there will be no ability for parties to make an application for merger clearance on the basis of public benefits. 

The explanatory materials state that the current laws will continue to apply to transactions entered into prior to 1 January 2026, even if they have not completed by that date.  However, it remains somewhat unclear how transactions entered into prior to 1 January 2026 but not yet completed by that date will be treated if they are otherwise notifiable transactions under the new regime – particularly where those deals have received informal clearance from the ACCC prior to the introduction of the new regime or are still in the informal clearance process when the new regime comes into effect.