Competition law in Australia continues to evolve. Through an address to the National Press Club,1 the Chair of the Australian Competition and Consumer Commission (ACCC) has released its proposal to Government for a new mandatory merger regime, changes to the substantial lessening of competition test and factors to be considered in the assessment of mergers under the Competition and Consumer Act 2010 (Cth) (CCA). These amendments are proposed to assist with driving investment and innovation in Australia, particularly during a time of economic transition.
Merger reform
The ACCC is of the view that Australia's current merger framework is not fit for purpose. The ACCC has proposed measures common in overseas merger regimes to ensure that it has the tools to scrutinise those mergers that are likely to result in a substantial lessening of competition (SLC). The ACCC indicates that consolidation is particularly problematic in markets where barriers to entry are high or there are already large incumbents with positions of market power. It considers that where there is no requirement to seek clearance or wait for the ACCC's view before clearance, no upfront information requirements, and merger parties do not give Australia the same weight as mandatory notification regimes in other global jurisdictions, this puts the ACCC at a significant disadvantage in protecting competition in Australia.
To address these concerns, the ACCC is proposing the following merger clearance regime:
- Adopting a mandatory requirement that transactions above certain (yet to be determined) thresholds will be notified to the ACCC, with parties suspended from completing their transaction prior to the ACCC's decision
- Upfront information requirements
- For transactions below notification thresholds, the ACCC proposes that it will retain call in powers to assess the competitive effects of the transaction
- Notification waivers to be available for non-contentious mergers. The ACCC anticipates that the majority of transactions will be dealt with in this way, similar to the existing pre-assessment system
- The ACCC will need to be positively satisfied that the transaction is unlikely to result in a SLC
- Appeal of the ACCC's decision to the Australian Competition Tribunal will be available
- The ACCC will retain the public benefit test where merger parties are unable to satisfy the ACCC or the Australian Competition Tribunal that the transaction is unlikely to result in a SLC. Significantly, this will be through a second stage merger clearance option, post the initial SLC determination
- The Federal Court will retain the power to declare that a transaction is not likely to SLC in breach of the CCA.
Change to the SLC test
The ACCC indicates that there needs to be greater focus on how a merger changes the structural conditions in the market that are detrimental to competition. Currently, the SLC test requires an assessment of the current level of competition, concentration and availability of substitutes resulting in changes to the overall level of competition. The ACCC is proposing that the SLC test is expanded to include "entrenching, materially increasing or materially extending a position of substantial market power". The ACCC considers that this would ensure that the focus is not just on incremental change in concentration or market share, but also the overall enhancement of market dominance. This is intended to address creeping acquisitions, and while the ACCC has not at this stage proposed an industry specific notification threshold, the combination of its call in powers and the change to the SLC test is likely to provide the ACCC with the ability to prevent incremental acquisitions in concentrated markets, such as digital platforms.
Additional merger factors
The ACCC also announced its support for changes to the 'merger factors' to be taken into account when considering whether a transaction will SLC. It has proposed new factors that refer to:
- The loss of actual or potential competitive rivalry
- Increased access to or control of data, technology or other significant assets
- Whether the acquisition is part of a series of relevant acquisitions
- Whether the acquisition entrenches or extends a position of substantial market power.
Although the ACCC notes that it is the Government that must ultimately decide on any amendments to the CCA, it proposes these amendments as critical to shift the balance to better protect competitive markets and consumers in Australia.
We will continue to track these developments and explore the implications for specific industries.
1 Gina Cass-Gottlieb, ACCC Chair, addressed the National Press Club on the role of the ACCC and competition in a transitioning economy on Wednesday 12 April 2023
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