The ACCC continues to build its case to the Government regarding the need for reform to Australia's merger control regime. The ACCC's narrative about the inadequacies of the current regime is playing out in its submissions to Treasury's Competition Taskforce and also through deals subjected to public review.

The ACCC's strategy is evident in a recently announced review concerning real estate software that:

• Reinforces the ACCC's concern with instances where it considers a deal should have been notified.
• Illustrates a trend toward testing alternate theories of harm including vertical and portfolio issues.
• Demonstrates a trend of examining deals involving platforms and software products.

Building the case for merger reform

The ACCC continues to relentlessly advocate for reform to Australia's merger control regime. Its public campaign for reform is being pursued in submissions to Treasury's Competition Taskforce, speeches and media interviews. The ACCC is also using its own processes to highlight what it regards as deficiencies within the current system. This strategy has evolved and is reinforced by the ACCC's decision to initiate a Phase II review of REA Group's (realestate.com.au) proposed acquisition of Dynamic Methods Pty Ltd.

In announcing its decision to release a Statement of Issues (SoI) regarding the proposed deal, the ACCC led with the fact that the transaction had not been proactively notified to the ACCC. Commissioner Carver described it as "yet another example of a potentially concerning merger not being notified to the ACCC".

This builds on comments by the ACCC in relation to the proposed sale of a controlling interest in specialty pet retailer, PetStock Pty Ltd. In the context of reviewing that deal, the ACCC became aware of various acquisitions that PetStock had made between 2017 and 2022. The ACCC opened an investigation and, in response, PetStock offered a divestiture package to address the ACCC's concerns. During that process the ACCC reinforced on several occasions that the earlier acquisitions had not been notified to the ACCC.

The ACCC's review of REA Group / Dynamic Methods adds to a select handful of examples that the ACCC is highlighting to prosecute its case that the current regime is no longer fit for purpose. Businesses should expect that the ACCC will continue to search for deals that may potentially raise competition concerns which have not been notified. While the reform debate plays out, it is clear that businesses and advisors are operating in an elevated risk environment and should carefully consider if notification is warranted.

Testing alternate theories of harm

The ACCC's SoI in relation to the proposed REA Group / Dynamic Methods transaction also reflects a broader trend by regulators to test alternate theories of harm, including vertical issues (deals that involve parties at different levels in the supply chain), and portfolio or conglomerate issues (deals that involve businesses supplying goods or services that do not overlap, but are related or somehow complementary).

In relation to the REA Group / Dynamic Methods deal, the ACCC is assessing various issues including:

• Foreclosure risks and whether the deal creates an ability and incentive to bundle or restrict access.
• Potential foreclosure risks or entrenching market positions as a result of aggregating data sets.

The review is ongoing and the ACCC has not yet reached a concluded view on these issues. Nevertheless, the SoI is consistent with a global shift toward exploring theories of harm beyond traditional concerns that focus on an increase in concentration from deals that involve parties that directly compete with one another.

Merger parties will need to carefully assess all effects on competition that may arise from a proposed deal. This analysis also needs to account for an environment of heightened scrutiny where, as noted above, the ACCC is searching for any transactions of potential interest that have not been notified to the regulator.

A growing focus on software products - Australia and abroad

It is difficult to identify industry trends or areas of focus because of the large volume of transactions that are assessed by way of ACCC confidential pre-assessment (as a result, those reviews are never made public).

Having said that, there has certainly been a trend toward public reviews involving platforms or software related products. This is perhaps unsurprising, given our reliance on technology products and platforms. In recent years, the ACCC has carefully assessed software and platform related deals including, for example:

• CRM related software products and solutions.
• Conveyancing and property settlement software.
• Cybersecurity products.
• Specialist anti-plagiarism and education related software.

Finally, while unrelated to the current transaction and the products offered by the parties, it is worth noting that real estate software is being carefully scrutinised in other jurisdictions. In particular, several actions have been commenced in the United States in relation to RealPage, a software product for landlords that includes recommended rent functionality. It is alleged that the platform leveraged non-public data, and that the recommended rent tool led to increases (in some cases substantial) in the rents charged to tenants.

We have previously written about consumer law risks arising from AI. The RealPage litigation illustrates the application of orthodox competition law in new areas and, if it proceeds, may test the extent to which software can be regarded as facilitating anti-competitive conduct (so-called 'algorithmic collusion').

Please reach out for further information about the reforms that the ACCC has proposed to Australia's merger control regime, either generally or in the context of a proposed transaction.