Formal clearance for an acquisition confers protection to the person to whom clearance was granted from the application of s. 50 of the Act. This protection means that neither the ACCC nor any other party may initiate legal action on the basis of an alleged contravention of s. 50 of the Act for an acquisition which has been granted clearance, so long as the acquisition takes place in accordance with the clearance.
The Act provides that the ACCC may grant a clearance to a person:
to acquire shares in the capital of a body corporate, or
to acquire assets of another person.
If we grant a clearance, s. 50 does not prevent the person from acquiring the shares or assets in accordance with the clearance.
We may not grant clearance to acquisitions that have already taken place. Applicants who apply for formal clearance will be required to give an undertaking under s. 87B of the Act to the ACCC that they will not proceed with the acquisition while the ACCC is considering the application.
Our determination will result in either:
clearance being granted
clearance being granted, subject to conditions, or
clearance being refused.
Should clearance be rejected by us, s. 50 will apply to the acquisition. Contravention of s. 50 permits the Federal Court to make a range of orders under Part VI of the Act including injunctions (s. 80), penalties (s. 76) and divestiture orders (s. 81 of the Act).
Applications may also be made to us for minor variation, revocation and revocation and substitution of clearances.
The test for clearance
The test for clearance set out in the Act requires that we must not grant a clearance in relation to a proposed acquisition of shares or assets unless we are satisfied that the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition (within the meaning of s. 50).
Accordingly, we will, on application, grant clearance to a proposed acquisition only if we are satisfied that it would not have the effect, or likely effect, of substantially lessening competition in a market or markets. We must be satisfied that the acquisition will not have such an effect, and so justify the clearance.
Time limits for decisions
The Act requires that we issue a determination on a clearance application within 40 business days of receiving a valid application. If no decision is made within this period, it is taken that the application has been refused.
The time allowed for the ACCC to make a determination may be extended if the applicant agrees to the ACCC taking a specified longer period to make the decision. If we consider that an extension is required, we will request an extension, in writing, and expect that an applicant would respond to such a request by close of business the following day. More than one extension may be sought by us and granted by the applicant.
If before the end of the 40-day period (or an extended period that has been agreed to by the applicant) we decide that we cannot make a determination on the application because of its complexity or because of other special circumstances, we may extend the period to make a determination by a further 20 days. It is expected that we will make a decision to extend the period to make our determination infrequently and only in complex and/or contentious matters. If we decide that such a further extension is required, we will notify the applicant in writing as early as possible during the clearance application process.
Reviewing ACCC clearance determinations
ACCC determinations of applications for clearance, minor variation, revocation and revocation and substitution may be reviewed by the Tribunal.
Only applicants have a right to apply to the Tribunal for review of an ACCC determination on a clearance application. Applicants may proceed down this path if they are dissatisfied with a determination made by the ACCC (for example, if we refuse a clearance or if we grant a clearance subject to conditions that the applicant finds unsatisfactory).
Third parties (including the target) do not have a right of review to the Tribunal in respect of an ACCC determination.
In reviewing a clearance determination, the Tribunal must only have regard to:
information which was given to us in connection with the making of the determination to which the review relates
any other information referred to in our reasons for making the determination
any information sought by the Tribunal for the purposes of clarifying information that we took into account in connection with making our determination
any information or report given to the Tribunal which the Tribunal has required us to give.
The Tribunal applies the same test for clearance as the ACCC uses in its assessment of formal merger clearances—that is, it must be satisfied that the proposed acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition in one or more markets.
The Tribunal must make a decision on the review within 30 business days of receiving the application for review.
If, before the end of the 30-day period, the Tribunal decides that the matter cannot be dealt with within that period because of its complexity or for any other special circumstance, the period within which it must make a decision will be extended by a further 60 business days. If the Tribunal decides that an extension is necessary, it must notify the applicant that this is the case before the expiry of the initial 30-day period.
If the Tribunal does not make a decision within the specified period (or the period so extended), the Tribunal is taken to have affirmed the ACCC’s determination.
Further details about the information to be provided with an application for review can be found in the Tribunal's practice directions which are available at www.competitiontribunal.gov.au.
For more details on formal merger clearances and the processes involved, see chapter 3 of the ACCC’s Formal merger review process guidelines 2008.
