Labor open to ACCC’s new merger regime

This forces the regulator to apply to the Federal Court to have the merger unwound if the parties fail to abandon or revise elements of a proposed deal that the regulator considers anticompetitive. During Mr Sims’ 11-year stint, the ACCC lost almost every court case it brought challenging a merger.

Companies can voluntarily seek the ACCC’s view either through an informal pre-assessment process or a voluntary formal authorisation process, as parties in the current ANZ-Suncorp and Brookfield-Origin deals have done.

But an emerging problem Ms Cass-Gottlieb said were businesses “pushing the boundaries of the informal regime”.

“Given that there are no up-front information requirements for an informal review, merger parties are increasingly giving us late, incomplete, or incorrect information,” she said.

“An increasing number are threatening to complete their transaction before we have finalised our review. This leads to the situation where we find ourselves negotiating with the merger parties to obtain sufficient information and time to conduct our review.

“In global transactions, we often find that merger filings in other regimes that require mandatory clearances are prioritised over our voluntary informal regime. This has hamstrung the ACCC’s ability to assess mergers and prevent potentially anticompetitive mergers.”

The watchdog was only given three weeks’ notice of Qube’s plan to buy the Newcastle Agri Terminal in 2021, for example, which was insufficient to allow it to scrutinise the competition risk before the deal completed.

Changes bring Australia into line with other countries

Under the proposals, companies seeking to merge would have to notify the Australian Competition and Consumer Commission of deals that meet specified materiality thresholds. These transactions would be suspended without ACCC clearance and the watchdog would get a “call in” power to scrutinise transactions that did not meet the notification threshold but still raised competition concerns.

These thresholds would be decided through public consultation, but the EU’s system, which considers a combination of transaction size, party size and the size of sales within the jurisdiction, could offer guidance.

Making her case for reform on Wednesday, Ms Cass-Gottlieb said the changes would bring Australia’s merger regime into line with many developed countries and were needed to protect competition at a time the economy was undergoing massive changes in the transition to green energy and increased digitisation.

“The ACCC needs to have the tools necessary to be able to properly scrutinise and, if necessary, prevent mergers that are likely to substantially lessen competition.

“Without these tools, some markets are particularly vulnerable to being adversely affected by further consolidation. In particular, markets that already have large incumbents with positions of market power and markets where it is difficult for new rivals to enter.”

Treasurer Jim Chalmers’ office suggested on Wednesday that he was open to Ms Cass-Gottlieb’s new plan, which she flagged at The Australian Financial Review Banking Summit last month.

“It is important Australia’s merger regime supports competitive markets and productive economic growth,” a spokesman for the treasurer said.

“The government recognises there are a range of perspectives on our current merger regime and will carefully consider the proposals put forward by the ACCC.”

Entrenched market power

On merger laws specifically, Ms Cass-Gottlieb said the ACCC’s proposed legislation would make it clear that the substantial lessening of competition test included “entrenching, materially increasing or materially extending a position of substantial market power”, similar to the European Union’s merger test.

“This would also assist with addressing concerns about 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,” she said.

This would allow the watchdog to block deals where a significant market player acquired a small one even if the latter was a major competitor, on the basis that it would still entrench the dominance of the bigger company.

It would just be one factor of several considered by the regulator when deciding whether competition was lessened, however, compared to Mr Sims’ proposal which would have made failing this critical to rejecting a deal.

Ms Cass-Gottlieb’s proposal would also keep current rules allowing mergers that substantially decreased competition to still go ahead if they were in the public interest, unlike Mr Sims’ plan which got rid of this exemption.

Compromise welcomed

Mr McDonald said the ACCC deserved “some credit” for winding back Mr Sims’ initial proposals.

“The Sims proposals were way too extensive, if they had been made it would have been bad for Australia and the ACCC are sensibly walking the more extreme elements of that back,” he said.

“It is substantially better and I give the ACCC credit for listening and not just sticking to its guns and saying we’ve made our predetermined position that was right. They have made material changes.”

He said he believed the current voluntary notification scheme “worked well” and did not need reforming, however. He conceded that “there was no Goldilocks merger regime” though and that some compromise was necessary.

Gilbert + Tobin partner Elizabeth Avery warned that whether the changes “became burdensome red tape or [were] a manageable requirement” would depend on the detail of the materiality thresholds.

But she said the mandatory notification regime may appeal to overseas investors, as it provided clarity and was consistent with many other jurisdictions’ approach.

“Large sophisticated local clients generally already know that, but sometimes merging parties don’t realise that when the process is so-called voluntary, particularly multi-jurisdictional clients.

“The Australian regime may not be clear for them and if they’ve got mandatory filing requirements for merger filings in many other jurisdictions, having a black and white rule on when to file in Australia may be appealing for those clients.”

Lawyer push back

Clayton Utz partner Kirsten Webb said that many of the deals put before the ACCC were cleared “with little scrutiny”, however, and that the new rules would slow down deals.

“Many proposals put before the ACCC are cleared with little scrutiny and it has never been suggested the vast majority have given rise to issues in the national economy,” she said,

“The proposals seem likely to dramatically increase the scrutiny of non-problematic proposals with an associated drag in terms of delay and expense.”

If the ACCC wanted more information on mergers before they occurred or more notice, they should update the guidance they provided companies seeking to merge, she added.

“In our experience most parties seek clarity around these expectations and the current guidelines are somewhat out of date.”

Under the reforms, companies would be obliged to provide relevant information to the ACCC upfront. Non-contentious transactions could be granted a notification waiver so they could be dealt with quickly. The Australian Competition Tribunal would have the ability to review ACCC decisions.