In April 2023, Chair of the Australian Competition and Consumer Commission (“ACCC”), Gina Cass-Gottlieb, outlined recommendations for reform of Australia’s merger laws and processes. In her speech to the National Press Club, Ms Cass-Gottlieb called for changes to existing merger laws to protect competition in Australia.
Proposals for a major overhaul of Australia’s merger regime were first floated by former Chair Rod Sims in 2021. In her April speech to the National Press Club, Ms Cass-Gottlieb confirmed that it remains the ACCC’s view that a shift towards a more prescriptive merger framework is needed. In particular, Ms Cass-Gottlieb called for the introduction of a mandatory and suspensory regime combined with changes to the substantive merger laws.
A mandatory and suspensory merger clearance process
While Australia’s current competition laws prohibit mergers that would have the effect or likely effect of resulting in a substantial lessening of competition, they do not require parties to notify the ACCC or wait for clearance before proceeding. Rather, companies may either seek an informal pre-assessment from the ACCC, or apply for formal merger authorisation. Both of these options to notify the ACCC are voluntary.
The reforms proposed by the ACCC would introduce a formal and mandatory assessment. This process would include:
a) Mandatory notification: The ACCC would be required to be notified of mergers above (so far unspecified) thresholds for its review. This threshold could consider a range of factors including either size of the transaction, the size of the parties (both globally and in Australia) or a combination of both.
b) Suspension from completion: All transactions subject to mandatory notification would be suspended pending the ACCC’s clearance, with the onus shifted to parties to satisfy the ACCC that the proposed transaction would not substantially lessen competition; and
c) Information Requirements: Parties would be required to provide certain information upfront before an application for clearance is considered.
In instances where parties are proposing a “non-contentious transaction”, which would likely account for the majority of transactions, the option to apply for a waiver could be granted (i.e., parties would not be required to lodge a formal application). This formal process would bring Australia’s merger regime closer in line with many OECD countries. All ACCC decisions would be reviewable by the Australian Competition Tribunal.
A recalibration of the substantive merger test
Against the backdrop of concerns about growing levels of market concentration, Ms Cass-Gottlieb argued that Australia’s existing merger regime does not allow the ACCC to sufficiently consider how a proposed merger will change the structural conditions in a market.
To address these concerns, the ACCC also proposes amendments to the existing ‘merger factors’. These are factors which must be considered when assessing whether a merger will have the effect or likely effect of substantially lessening competition (and include, for example, the level of concentration in a market). Proposed new factors include:
a) the loss of actual or potential competitive rivalry;
b) increased access to, or control of data, technology or other significant assets;
c) whether the acquisition is part of a series of relevant acquisitions; and
d) whether the acquisition entrenches or extends a position of substantial market power.
Other proposed changes include defining “likely”, expressly permitting agreements between merger parties to be considered in assessing the effect on competition, and including a deeming provision for mergers that “entrench, materially increase or materially extend positions of substantial market power”.
While Mr Sims had previously flagged a separate merger test for digital platforms, Ms Cass-Gottlieb’s speech did not suggest that the ACCC intends to pursue this option. However, while the potential reforms raised by My Cass-Gottlieb would operate across the economy, the inclusion of data in the proposed merger factors together with a focus on “creeping” acquisitions – successive small acquisitions that do not individually results in a substantial lessening of competition – suggests that competition concerns in digital markets are a key driver behind the ACCC’s latest proposals.
Moreover, the ACCC has recommended a range of other competition measures, including mandatory codes of conduct, to address competition and consumer issues caused by digital platforms.
For further information, please contact:
Thomas Jones, Partner, Bird & Bird