A new merger clearance process
Australia's current merger clearance processes were described in the ACCC Chair's address as a 'voluntary enforcement' model, where merger parties are not required to notify nor provide any prescribed information to the ACCC upfront, and can complete deals without ACCC clearance. The ACCC is concerned that this enables parties to provide it with late, incomplete or incorrect information, threaten to complete before the ACCC has finished its review and requires the ACCC to pursue enforcement action in the Federal Court where a deal is completed without clearance. Prioritisation of merger filings in mandatory regimes overseas over Australia was also raised as an issue with the current model.
To address these concerns, the ACCC is proposing a single formal clearance model similar to that of other OECD jurisdictions. The proposed model would include:
- Mandatory notification of transactions above certain thresholds. Specific thresholds are yet to be proposed, but the ACCC has proposed they will relate to the size of the transaction and / or of the business being acquired.
- A 'call-in' power for the ACCC to assess transactions that do not meet the specified thresholds.
- An option to apply for a notification waiver for non-contentious transactions.
- Prescribing information that the parties are required to provide to the ACCC up-front.
- Suspending transactions from completion until they have been cleared;
- The option to apply for clearance on public benefits grounds if the transaction is not initially cleared on competition grounds.
A revised substantive test
The ACCC Chair also raised concerns that the existing test applied to transactions may not be suited to the 'inherent uncertainty of the future' and dynamism of markets. She also raised concerns around creeping acquisitions – the accretion of market power through a strategy of small serial acquisitions that may not amount to a substantial lessening of competition on their own.
The ACCC is proposing:
- a revised test, which continues to prohibit transactions that are likely to substantially lessen competition, but expressly includes in that concept reference to entrenching, materially increasing or materially extending a position of substantial market power; and
- New factors which must be considered in applying that test, including the loss of actual or potential competitive rivalry; increased access to, or control of data, technology or other significant assets; and whether the acquisition is part of a series of relevant acquisitions.
The proposals in context
The ACCC's previous Chair, Rod Sims, had for several years been calling for similar changes to Australia's merger clearance regime. The justification for these proposals has consistently emphasised the increasing role played by large digital platforms and wider concerns about increased market concentration.
While it is a matter for the Australian Government and then Parliament as to whether these proposals will be implemented, they echo the strong concerns about increases in market concentration in the Australian economy expressed by the Minister responsible for Competition in the Albanese Government, the Hon Dr Andrew Leigh MP. Finally, it should be noted that the proposals floated are high level and conceptual – it will be important for there to be appropriate consultation and debate on the detail of any proposed reforms, to ensure they are workable and appropriately balanced.
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