ACCC announces updated reform proposals to the Australian merger control regime
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Market Insight 30 June 2023 30 June 2023
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Asia Pacific
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Technology risk
On 12 April 2023, the Australian Competition and Consumer Commission (ACCC) Chair Gina Cass-Gottlieb announced the ACCC’s revised proposal for the Australian merger control regime, updating and adding to the proposed merger control regime announced by the ACCC in 2021. Ms Cass-Gottlieb cited the rising cost of living, limitations to the current model of merger control, and a lack of cooperation by merger parties in the informal clearance process as key drivers for the need for the reform.
In brief, the proposed reforms to the Australian merger control regime announced in 2021 include:
- that Australia's "voluntary" merger review regime is changed to a "mandatory" and "suspensory" regime, with the effect that merger parties would be required to notify and obtain approval from the ACCC of mergers that meet certain thresholds prior to completing transactions;
- providing for limited merits reviews of the ACCC’s decisions by the Australian Competition Tribunal; and
- amending various elements of the merger test and factors in section 50 of the Competition and Consumer Act 2010 (Cth) (CCA) to lower the threshold that the test currently applied, which the ACCC has indicated it views as being too a high a threshold for the ACCC to prove that section 50 would be breached by a merger.
Following a consultation process, the updates announced by the ACCC’s Chair seek to adjust the reforms proposed in 2021, while still maintaining many of these initial proposals.
The proposed changes as they stand are summarised as follows:
New formal merger regime
The ACCC is advocating for a shift from the current voluntary and non-suspensory regime towards a mandatory and suspensory regime, in line with most other jurisdictions. The table below summarises the proposed changes and compares them with the current regime:
Summary of proposed merger review regime and comparison with current merger review regime
| Current regime | Proposed reform | |
|---|---|---|
| Notification threshold | None. Instead, parties are encouraged to notify in certain circumstances. | Acquisitions above specified thresholds must notify before proceeding and are prohibited from completing without clearance. |
| Notification waiver | None. Instead, confidential pre-assessment process available. | Available for non-contentious acquisitions, averting the need for a full formal application. |
| Call-in power | None. However, the ACCC can initiate an independent investigation. | Used for acquisitions that fall below the thresholds but still raise competition concerns which then become subject to public review. |
| Information requirements | None. Parties determine what information to provide. | Parties file all required information upfront to support notification. |
| Review of decision | Parties can seek the following:
|
No change |
Changes to the merger test
The ACCC is also advocating for changes to the merger test under section 50 of the CCA. The table below summarises the proposed changes and compares them with the current test:
Summary of proposed changes to the merger test and comparison with current merger test
| Current merger test | Proposed merger test | |
|---|---|---|
| Merger factors | Include the following:
|
Expand to include the following:
|
| Legal test | An acquisition of shares or assets that has the effect or likely effect of substantially lessening competition (SLC) is prohibited. | Expand to include an express clarification that ‘entrenching, materially increasing or materially extending a position of substantial market power’ constitutes an SLC. |
| Alternative merger authorisation process | ACCC can also authorise merger if the likely public benefit from the proposed acquisition outweighs the public detriment. | Parties can seek clearance on public benefit grounds through a secondary application if they are refused clearance on competition grounds. |
What’s next?
Much is still unclear as key details are limited. However, the ACCC has provided a paper to Treasury with its proposal which has since indicated that it was open to considering the new plan. Given that the Australian Government appears to be amenable to supporting changes to the merger control regime at this juncture, this could mean that a major overhaul of the current system may be undertaken in the near future with a generally more restrictive merger control system in Australia. In practice, this could introduce delays to transactions requiring mandatory ACCC merger approval, and require more extensive self-assessments be carried out by those below the mandatory approval thresholds to avoid the risk of being subject to the proposed call-in provisions.
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