This alert follows our alerts in August 2021 and March 2023 about the ACCC’s calls for changes to Australia’s current merger clearance laws and processes.
The Chair of the ACCC, Gina Cass-Gottlieb, today outlined the recommendations that it has made to Treasury in relation to these reforms.
Since the previous ACCC Chair’s speech in August 2021, the ACCC has publicly expressed its view that Australia’s merger clearance laws are no longer fit for purpose, and that change is needed to address concerns arising from increased market concentration. Treasury is now considering the ACCC’s proposals.
The ACCC’s proposed clearance process
The proposed reforms would abandon the current informal clearance regime which is used in the vast majority of mergers reviewed by the ACCC, and introduce a formal, mandatory, and suspensory regime that more closely resembles the merger clearance processes internationally. This would mean that:
- Mandatory notification: Mergers meeting certain thresholds must be notified to the ACCC for its review.
- Mandatory suspension to closing: Merger parties cannot complete a merger or acquisition meeting the thresholds until the ACCC has completed its review.
- Upfront information requirements: Merger parties will be required to provide certain information before an application for clearance is considered valid for assessment.
The ACCC has also proposed that it is able to ‘call in’ for formal assessment mergers that don’t meet the prescribed thresholds but nonetheless raise potential competition concerns that the ACCC wishes to examine.
The ACCC also proposes retaining a form of its current ‘pre-assessment’ process, which would allow non-contentious transactions (which presumably otherwise meet the thresholds for notification) to be granted a ‘waiver’ from the requirement to provide detailed information as part of an application for formal clearance. Ms Cass-Gottlieb stated that the ACCC would expect the ‘overwhelming majority’ of transactions would be dealt with through this more expeditious process.
It appears that further specifics of the proposed process are being left open at this stage, including the nature of thresholds that will trigger the mandatory and suspensory notification (for example, these could be based on the size of the transaction, the size of the merger parties, or a combination), the timeframe for the ACCC’s review, when a transaction can be treated as ‘non-contentious’ and qualify for a possible notification waiver, and what the application and assessment process for seeking that waiver might look like.
The ACCC’s proposals for changes to the substantive test for clearing and prohibiting mergers
The ACCC has also recommended a number of changes to the substantive legal test that applies to mergers.
- Reversing the onus of proof: Currently, if the ACCC challenges a merger in the Federal Court, it must establish on the balance of probabilities that the merger would have the effect or likely effect of substantially lessening competition in a market in Australia. Under the ACCC’s proposal, the ACCC (or the Tribunal on review) would need to be positively satisfied that the merger would not be likely to have the effect of substantially lessening competition. The ACCC proposes that if the merger parties are unable to satisfy this test, they may then seek clearance on the basis that the merger nonetheless has public benefits that outweigh public detriments. The ACCC did not, today, provide details about how this process would work.
- Expanding the ‘substantial lessening of competition’ test: The ACCC also proposes that, consistent with its focus on changes to market structure, the prohibition should be widened to include in the substantial lessening of competition test an assessment of whether the merger would entrench, materially increase, or materially extend market power. Ms Cass-Gottlieb highlighted so-called ‘creeping acquisitions’ – particularly in the digital economy – as examples of transactions that result in accretion of market power over time but which on an individual level may not result in a substantial lessening of competition. Ms Cass-Gottlieb also highlighted the ACCC’s view that this would bring Australia more into line with the position in other jurisdictions like the European Union.
- Expanding the express factors that the ACCC will take into account: The ACCC proposes that the factors it must take into account in any assessment are expanded to capture broader changes that result from a merger, including the impact on barriers to entry, the loss of potential competitive rivalry, and access to or control of data. As the ACCC can already consider any factors that are relevant, this is not a material change. However, it is likely to provide further clarity in relation to the ACCC’s focus on changes to market structure which may arise from a merger.
The ACCC’s prior proposal to introduce a new statutory definition of ‘likely’ (relevant to the test of whether a merger is ‘likely’ to substantially lessen competition) doesn’t appear to be on the list of proposed reforms.
The ACCC’s proposals for judicial oversight of decisions
The ACCC considers that the Australian Competition Tribunal is the appropriate judicial body to review decisions made by the ACCC under the proposed formal regime. It is unclear whether this would involve full merits review or whether the Tribunal would have only a more limited review role.
The ACCC’s proposal would involve limiting the role of the Federal Court of Australia to applications for judicial review of the ACCC’s and Tribunal’s decisions (i.e., based on errors of law).
No new industry-specific merger laws
In his speech in August 2021, the previous ACCC Chair, Rod Sims, indicated that the ACCC considered that there was a need for a specific merger test – potentially with lower thresholds – for acquisitions made by large digital platforms. Based on the ACCC Chair’s speech today, it appears that the ACCC is not pursuing any industry-specific merger laws (although it remains possible that the ACCC might advocate for different notification thresholds in different industries).
What comes next?
With the ACCC’s recommendations now with Treasury, the proposed reforms are a matter for Government to consider and - we expect - consult on in due course.
