Competitive and open markets are critical to the prosperity of Australians. Competitive markets work much better for consumers, they increase innovation and productivity, and they lead to better outcomes for primary producers and small businesses.

Effective merger[1] control is essential to ensure markets remain competitive by preventing anti-competitive mergers. Australia’s current merger laws are failing to adequately protect competition, however, and so need to be changed.

Many Australians will be surprised to know that Australia does not require companies to obtain ACCC clearance for mergers. Further, contrary to popular myth, the ACCC does not currently “approve” mergers.

Instead, Australia relies on a “merger enforcement” model. To stop a merger that we consider is anti-competitive, the ACCC must persuade the Federal Court that the proposed acquisition is likely to have the effect of substantially lessening competition in the future, in breach of section 50 of the Competition and Consumer Act 2010 (the CCA).

The Australian approach to merger control is out of step with most merger regimes internationally, under which mergers are required to be notified as part of a formal assessment regime, and must obtain clearance before they can proceed.

There are also flaws in the way our merger law is applied. Changes to the test for assessing mergers are necessary to ensure the focus is on the competition that will be lost if the merger proceeds, and on the impact of the merger on structural conditions for competition in the relevant market.

Market power in Australia

Many markets are dominated by a small number of providers, including banking, supermarkets, mobile telecommunications, internet service provision, energy retailing, gas supply and transport, insurance, pathology services, domestic air travel, internet search and social networking services.

While the available evidence is not definitive, it appears that market power is increasing in Australia.[2] This trend has also been observed in many advanced economies, including by the International Monetary Fund.[3]

Without action, market power in Australia will become further entrenched; and will certainly not reduce.

Market power is hurting Australians across many walks of life.

Consumers are paying more than they should for a wide range of goods and services.  

Market power is squeezing the incomes of farmers. For example, chicken growers and dairy farmers have little option but to sell their produce to large buyers with substantial bargaining power. Farmers purchase many of their rural supplies from highly concentrated sellers.

Small businesses generally are becoming increasingly reliant on a few buyers to access markets for their products and a few sellers for their key inputs. This can damage their innovation and their productivity.

Many small businesses and farmers are largely reliant on Coles and Woolworths to access grocery shoppers. As recent history has shown us, this power imbalance places small businesses and farmers in particularly precarious positions with consequent damage to our economy.

In digital markets, we are exchanging access to our personal data and attention for so-called ‘free’ services, but have little choice, knowledge or control over how our data is being used.

Market power, or the lack of competition, is having broader effects on the Australian economy. It appears to be a contributor to the slowdown in overall productivity[4] and wages growth.

Market power can contribute to economic inequality by promoting the interests of the few with power over the interests of many. It also undermines trust in the operation of markets, and encourages wasteful rent-seeking activities to protect monopoly profits.

There are also increasing concerns that market power reduces the efficacy of macroeconomic policy. The International Monetary Fund recently stated:

… although the overall macroeconomic implications have been modest so far, further increases in the market power of these already-powerful firms could weaken investment, deter innovation, reduce labor income shares, and make it more difficult for monetary policy to stabilize output.[5]

It is now recognised in the U.S. that more must be done to address increasing market power and market concentration. The President of the United States Joe Biden recently issued an executive order to undertake actions to promote competition in the American economy.[6] The President noted:

… over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans of the benefits of an open economy and widening racial, income and wealth inequality. Federal Government inaction has contributed to these problems, with workers, farmers, small businesses, and consumers paying the price.[7]

Among other reforms, the President has reinforced that antitrust laws, including merger laws, are a “first line of defense against monopolisation of the American economy”.[8]

This should be a wake-up call for Australia, given many of our markets are more concentrated than those in the U.S. 

Starting a debate

Today I am aiming to begin a key debate that, at one level, discusses the appropriateness of our merger control regime and, at another, asks whether we want an open, innovative and competitive economy.

The reason we are proposing change is not because we are worried about losing court cases; it is because we have serious concerns about the level of competition in our economy and our ability under the current law to prevent further consolidation via anti-competitive acquisitions.

Unless something is done, these concerns will only intensify in the years ahead.

We consider four areas need particular attention.

One is the process by which merger parties seek the ACCC’s “clearance” for mergers. I will explain how our processes are out of step with international best practice and why they need to change.

Another is the legal test and the merger factors which guide the interpretation of that test. We propose several changes, to clarify the test, ensure that it is focussed on the competition that will be lost if the merger proceeds, and takes into account changes to the structure of markets that make them less competitive. 

Third, we consider that the merger law should recognise that acquisitions of rivals made by firms with substantial market power in a market more likely result in economic harm. 

Finally, we believe specific changes are needed to adequately deal with acquisitions by large digital platforms, where acquisitions of even nascent rivals can have long-lasting effects. These acquisitions are not captured by our current regime.

Let me again be very clear. We are starting a debate here, not presenting specific legislative changes at this stage.

I realise that there are likely to be many views about both the need for merger law reform and the best way to go about it. We are identifying shortcomings that we see in the current merger regime and identifying ways to address these shortcomings.

This is not the end of the discussion. It is the start. 

We expect a very lively debate, which must be open to all, and will hopefully not just involve large businesses, but will also include small business groups, farming organisations, consumer groups, academics and community groups, as well as competition law practitioners. 

1. Why changes to our merger laws are needed

A point that I will keep coming back to in this debate is that effective merger control is absolutely vital to preserve competition and the benefits this brings to the Australian economy.

The key challenge for merger control is to distinguish between acquisitions that substantially lessen competition and those that do not, and are benign. It is a forward-looking exercise that involves inherent uncertainty.

However, uncertainty should not make clearance the default, which is where we are today. This is a crucial point.

Some past acquisitions have contributed significantly to the market power and high levels of concentration in the Australian economy.

The effects of an acquisition which substantially lessens competition can be irreversible, and cost consumers and small businesses for many years. Reliance on enforcement action after the event, particularly under the misuse of market power provision, or seeking to unwind acquisitions under section 50 through forced divestiture once the anti-competitive effects become clearer are, at best, options of last resort.

We see four key reasons why our current merger control regime in Australia is not fit for purpose:

  1. the requirement that, to prevent an anti-competitive merger, the ACCC must go to court and prove that future anti-competitive effects of an acquisition are ‘likely’;
  2. there is insufficient focus on the structural conditions for competition;
  3. the merger control regime is skewed towards clearance;
  4. there is a gap in our law in relation to acquisitions by digital platforms.

It is important to note that only a small sub-set of mergers give rise to significant competition concerns. Around 300+ acquisitions are voluntarily notified to the ACCC each year, and only around 10% face a public review. Whatever merger regime is in place, we recognise that the vast majority of acquisitions are competitively benign and should proceed easily, without a significant regulatory burden.

Based on past experience, 1-2% of acquisitions considered by the ACCC are likely to be contentious and may ultimately be opposed. While small in number, the impact of being unable to prevent anti-competitive acquisitions proceeding can be very significant.

The ACCC must prove future anti-competitive effects are likely

A particular challenge with the current law is the requirement for the ACCC to prove the likely future state of competition with and without the merger to the civil standard of proof required by our courts.

Former Australian Federal Court judge, Ray Finkelstein AO QC, recently said:

"the view that undue concentration results in anti-competitive effects is the government’s policy that lies behind s 50. The insistence that there should be positive proof of anti-competitive effects thwarts the operation of the section. The reality is there will be many cases where it is simply impossible to obtain evidence to prove the merger’s anti-competitive effects and others where such evidence is non-existent.[9]

It can be very challenging for the ACCC to obtain evidence of likely future anti-competitive effects. The ACCC often finds that parties likely to be adversely affected by the merger, such as suppliers and customers, are extremely reluctant to provide evidence because of concerns about future retribution and confidentiality. Contrary to the views I have heard from some, this does not demonstrate they are unconcerned about the merger; such a view is commercially naïve.

Further, the Court often places significant weight on evidence from the companies’ executives about their plans for the future, despite the extent of self-interest involved. This can be difficult to challenge, particularly where parties are careful to ensure that company documents do not contain any reference to the forecast effect of the merger.

Our lack of success in merger cases has resulted in some problematic acquisitions going ahead. For example, we have seen the number of competitors in rail container freight go from two to one. The threat from the entry of a fourth mobile network operator has been extinguished as a result of the Vodafone/TPG merger, and AGL’s acquisition of Macquarie Generation saw higher power prices. 

This issue also has broader implications, because it constrains the way the ACCC decides whether to oppose acquisitions.

It has sometimes meant we have not opposed acquisitions which we considered would be likely to adversely affect the structural conditions for competition, because of the challenges of proving the future effect to the requisite level required by the law as interpreted by the courts. In some cases, there are signs of consumer or economic harm resulting from these acquisitions.

We have recently had a team conducting ex-post reviews of acquisitions, including some of those merger clearances we were uncomfortable with. The findings from these reviews are interesting, and also troubling in some cases. We will share the key findings of the reviews in due course.

At this stage, we can say that, in some of the markets reviewed, prices have risen significantly and the threat of new entry has not provided the competitive constraint claimed at the time of the acquisition by the merger parties.

Similarly, these challenges in proving the future effect have also pushed us on occasion to accept remedies to address competition concerns in relation to some acquisitions, rather than opposing them outright. Recent experience indicates that some remedies we have accepted have been a poor alternative to preventing the acquisition outright. We will continue to monitor these remedies carefully, and our ex post reviews will inform our approach to future remedies.

Insufficient focus on the structural conditions for competition

The approach adopted by the Courts of focusing on the evidence establishing the likely state of competition in the future with and without the merger is usually at the expense of looking at how the acquisition will change the structural conditions for competition.

It also takes attention away from critically considering how the acquisition will alter the parties’ commercial ability and incentives to engage in harmful behaviours.

This is an issue in all mergers, but more particularly where the acquirer already has significant market power.

This differs to the approach taken in other jurisdictions.

In the U.S., for example, the courts appear to be more willing to approach their decision by taking, as a starting point, the underlying orthodox economic and commercial thinking that acquisitions that increase concentration in concentrated markets have a greater likelihood of enhancing market power and lessening competition.

In Australia, there appears to be excess weight placed on the capacity of market forces to overcome problems caused by a lack of competition in concentrated markets. There seems to be undue optimism that new entry will rapidly occur if firms attempt to exercise market power, or that a small number of large players will compete rather than simply accommodate each other so that all can make more profit.

Our merger control regime is skewed towards clearance

Looking at merger control regimes around the world, the Australian regime is out of place next to the formal, mandatory and suspensory regimes in most jurisdictions, including the US, Europe and Canada.

By contrast, the Australian merger regime is voluntary and non-suspensory. Companies can also choose from a variety of options, including seeking informal clearance or merger authorisation from the ACCC, seeking a declaration from the Federal Court or just proceeding to complete without clearance.

The informal regime is the predominant option used by companies. It evolved over many years outside the legislative framework.

It started as a ‘service’ to the business community to allow firms to seek the TPC’s (and now the ACCC’s) view about whether an acquisition would be opposed and subject to section 50 litigation by the agency. In the absence of this ‘service’, merging firms would have to rely on the advice of their legal advisers and take the risk that the ACCC might take a different view and commence court action, including seeking an injunction to restrain completion of the acquisition.

While there is a high rate of voluntary notification to the ACCC, and the regime has become more formalised over the years, it is very different to the formal regimes operating in many other jurisdictions. Typically, these impose mandatory notification requirements on companies making acquisitions, and require upfront production of the substantial information necessary for the competition authority to conduct the review.

In contrast, companies planning acquisitions involving businesses in Australia decide what information to provide to the ACCC up-front and then we must seek additional information, either voluntarily or via our compulsory information gathering powers.

While many will wait for the ACCC’s decision before proceeding, we are seeing a concerning increase in the number of times legal advisers are threatening that their clients will complete transactions before we have finalised our review.

We have sometimes found ourselves in a position where we are forced to negotiate with the merger parties to obtain sufficient information and time to conduct our review.

This is unacceptable and invites poor decision making.

This is not to say that the informal regime is without benefits for both merger parties and the ACCC. The most significant is its flexibility. In addition, the pre-assessment process introduced in 2009/10 has been a game changer, by ensuring that non-contentious acquisitions are cleared expeditiously.

But when we consider the merger control system operating in Australia, including the informal process and the need to take enforcement action and prove future anti-competitive effects in Court, we believe it is skewed too far towards letting acquisitions through.

This position arises in part from our processes and enforcement model, but we can also see this in the drafting of the merger factors in our legislation. They focus on the characteristics of the market that may limit or offset any anti-competitive effects from the acquisition, and can also be seen as a checklist of reasons why an acquisition is not likely to substantially lessen competition.

Instead of asking the question of ‘why not allow this acquisition’, our merger control system should be requiring merger parties to convince us or an appeal or review body ‘why the acquisition should be allowed on competition grounds’.

We need a mindset change. Our economy would be better served by more companies deciding to compete rather than to acquire.

There is a clear gap in our merger law in relation to digital platforms

Our current merger law does not capture acquisitions by digital platforms where there is a relatively low probability of a lessening of competition but, if it occurs, the impact is likely to be very substantial and long-lasting. It also does not adequately capture acquisitions that may enable a platform to leverage its existing dominance or control of data into market power in related markets.

This gap in merger law in relation to digital platforms is a significant and growing concern for the ACCC and many other competition authorities globally. As noted by the recent Chair of the FTC Joe Simons: 

“…….. if a court were to decide that the requirements of the potential competition doctrine are satisfied only when entry is “more probable than not,” then the court would block a transaction when there is a 51 percent chance of a $1 million harm, but not a 49 percent chance of a $1 billion harm or a 20 percent chance of a $100 billion harm. That is not a principled outcome, and it does not do enough to protect consumers or deter anti-competitive conduct.”[10]

While this shortcoming is not limited to acquisitions in digital markets, it certainly has been amplified by the growth of digital platforms where a strategy of acquiring nascent rivals can, and likely is, being used to protect positions of very substantial and long-lasting market power.

The large digital platforms were clearly true innovators; and I am talking here about the big 4 - Google, Apple, Facebook and Amazon (GAFA). They provide products that consumers and business users value hugely. But they are also now “serial acquirers”. Strategic acquisition have helped these large platforms increase or entrench their market power. For example, between 2010 and 2020 Google, Amazon, Facebook, Apple and Microsoft acquired nearly 500 business – approximately 4 per month.[11]

We could debate at length which acquisitions by the digital platforms were “killer acquisitions”; that is acquisitions designed to prevent the emergence of a challenger, or were otherwise anti-competitive in existing or emerging markets.

Regardless, it is beyond debate that acquisitions have taken place that have contributed significantly to the substantial market power of the digital platforms. With the benefit of hindsight, they should not have been allowed to proceed.

We are not alone in saying this. There is broad recognition amongst regulators internationally that, given the critical role the large platforms perform in the economy and their growing eco-systems, acquisitions by such businesses requires a different level of scrutiny.

2. Reform proposals for debate

We have thought long and hard about possible reforms to ensure effective merger control in Australia.

There has understandably been much speculation and conjecture about these proposals, and so I am pleased to now be able to share these with you and begin the debate. I will cover these under the following three headings:

  1. A new formal merger review process
  2. Changes to the mergers test
  3. Reforms to deal with acquisitions by large digital platforms.

New formal merger regime

Currently there are three ways to obtain clearance for transactions that cannot be pre-assessed: informal merger review, merger authorisation or Federal Court declaration. This is not only complicated, but can lead to forum shopping, which is never appropriate. 

We are proposing to have a single new formal merger regime. 

In advocating for a formal regime, we recognise there are features of our informal system that we wish to retain and incorporate.

In identifying the key features of a formal regime, we have also looked to international regimes and propose to reflect international best practice.

We acknowledge that the move away from our current informal regime is a significant change, but we consider that it is overdue. Australia’s unique informal merger control regime is no longer best practice.

Specifically, we are proposing that all acquisitions above specified thresholds would be subject to mandatory notification to the ACCC before proceeding. Notified acquisitions would be prohibited from being completed unless clearance has been granted.

We appreciate that the level of the thresholds will be important to ensure that we see the acquisitions we need to, and so that the regime does not impose a significant burden on businesses across the board.

Crucially, therefore, we intend to retain certain benefits from our existing pre-assessment process. We propose an administratively simple and quick process to deal with acquisitions which are above the thresholds but which are unlikely to raise serious competition concerns. In these circumstances, the ACCC would have a simpler process for parties to obtain a “notification waiver”. This waiver would enable merger parties to proceed with the acquisition without the need for undergoing a Phase 1 review.

For acquisitions that fall below the thresholds, merger parties would continue to be able to request ACCC clearance based on the current pre-assessment process.

In both these ways, the ACCC’s proposals will aim to limit the regulatory burden for the vast majority of acquisitions where competition impacts are low or unlikely. 

It is to be expected that there will be some potentially problematic acquisitions that fall below the thresholds. We are therefore proposing that the ACCC have a ‘call in’ power for proposed acquisitions that are below the thresholds but where the ACCC considers there are potential competition issues which require a public review.

This ‘call in’ power would bring these transactions under the formal process and, importantly, discourage transactions being structured in ways to avoid notification.

Under this new single formal regime, the test the ACCC would apply would be framed to require the ACCC to be satisfied that the proposed acquisition is not likely to have the effect of substantially lessening of competition.

Merger parties would need to provide their best information up-front to support their notification. There would be clarity around timeframes for the ACCC’s review. The ACCC’s investigation of proposed acquisitions in the formal system would commence as a Phase 1 review, with those unable to be cleared at the end of Phase 1 moving to Phase 2.

The ACCC would publish detailed reasons for its decision to clear, or decline to clear, proposed acquisitions.

The ACCC’s merger decisions would be subject to limited merits review by the Australian Competition Tribunal (the Tribunal). We think the Tribunal, with its composition of a Federal Court judge and economic and business members, provides the most suitable body to review merger decisions. Enabling the Tribunal to review ACCC decisions rather than the Federal Court should also provide a quicker and less costly process.

Importantly, the Tribunal would only be able to have regard to the material which was before the ACCC when it made its decision, unless subsequent events have occurred.

Changes relating to the merger test

We are proposing four changes to the mergers test:

  • updating the merger factors;
  • defining “likely”;
  • including a deeming provision for acquisitions that entrench, materially increase or materially extend positions of substantial market power; and
  • adding a provision to allow agreements between the merger parties to be taken into account in the merger assessment of the likely effect on competition.

Merger factors

The merger factors in the CCA provide a non-exhaustive list of factors relevant to assessing the likely competitive effects of an acquisition. They were introduced in 1993 to provide guidance on the new substantial lessening of competition (SLC) test, which was replacing the previous “dominance” test.

While the factors are framed in general terms, the drafting of the factors generally indicates that they are reasons for finding that an acquisition does not substantially lessen competition.

In general, the factors do not provide guidance on what conditions are indicative of anti-competitive acquisitions.

We consider that the factors should be revised to focus on the structural conditions for competition that are changed by the acquisition to the detriment of competition. This would facilitate a more effective and appropriate approach to merger review.

We also propose some amendments that reflect the realities of how the modern economy operates. Specifically, we suggest that there should be new factors to address whether the acquisition may result in the loss of potential competitive rivalry and/or increase access to or control of data, technology or other significant assets. This change is based on the recommendations from the Digital Platform Inquiry Final Report.

The revised factors would be applied by the ACCC in the proposed formal process, and by the Tribunal on review.

Definition of ‘likely’

Merger analysis is forward looking, and thus by its nature it is not possible to have a high degree of certainty about the future competitive impact of a proposed acquisition. Clearly, to block a merger, the anticipated anti-competitive effect must be more than speculative or a mere possibility, but it should not need a high degree of certainty.

Including a definition of ‘likely’ in section 50 should clarify the level of probability of the substantial lessening of competition that needs to be established.

Our view is that ‘likely’ should be defined as ‘a possibility that is not remote’, making it consistent with the inclusive meaning of “likely” which already applies to the cartel provisions of the CCA.

This definition would make it clear that, for a breach of the merger law to be established, it is not necessary for the Court (or the Tribunal) to be persuaded on the balance of probabilities that there is a real commercial likelihood of a substantial lessening of competition. 

Acquisitions involving firms with substantial market power

To address the challenges previously discussed with proving likely future anti-competitive effects, we have put forward proposals to amend aspects of the existing merger test in section 50.  These are intended to go some way to addressing challenges with the effectiveness of the SLC test. However, we consider that these changes alone are unlikely to address the harms caused by some acquisitions by large firms.

Acquisitions of rivals by firms with substantial market power are, all else the same, more likely to have the effect of substantially lessening competition. Moreover, if they substantially lessen competition, the economic harm is likely to be more severe and long-lasting. We recognise that firms often attain substantial market power by competing effectively and growing their business which is to be encouraged. However, acquisitions by firms with substantial market power that cement or increase that market power can raise significant competition concerns.

Some transactions of this nature may have been captured under the old dominance test, where acquisitions that created or enhanced dominance were prohibited. However, this test was replaced with the SLC test because the dominance test failed to prevent a significant category of acquisitions that were likely to substantially lessen competition but where dominance could not be established.

Recognising the potential for these transactions to compromise the competitiveness of markets, our view is that, while the SLC test should remain the bedrock of the merger regime, certain acquisitions ought not to require specific proof of competitive effects but rather be deemed to SLC.   

We propose that a new deeming provision should apply specifically to acquisitions where one of the merger parties has substantial market power and, as a result of the acquisition, that position of substantial market power would be likely to be entrenched, materially increased or materially extended.

Informing our proposal is a concern that effects-based assessments of competition, when put to the test before a Court, are prone to take attention away from what is really going on in an acquisition where the acquirer already has significant market power and is seeking to expand its reach or cement its position.

Our experience has been that all too often the Courts are taken down an evidentiary rabbit warren in the name of identifying precisely how competition will play out in the future with and without the proposed transaction. Indeed, this is a natural tendency for judges whose role is to systematically establish facts to the requisite standard of proof.

This proposed new provision would, for certain matters, more squarely focus the assessment on preserving the structural conditions for competition in markets most at risk of the exercise of market power.

This provision would shift the focus to whether an acquisition is likely to entrench, materially increase or materially extend their market power. This aligns with accepted commercial and economic logic because such transactions lead to substantial competitive detriment.

We appreciate that this proposed change may raise concerns about this effectively putting a cap on large firms making any acquisitions. However, this is not the case; this proposal would not stop all acquisitions by firms with substantial market power. Rather, it would only apply to certain acquisitions by these firms as just discussed.

We should all want to prevent mergers that entrench, materially increase or materially extend market power.   

Consideration of other agreements in merger assessments

Merger parties may enter into other agreements that impact on competition. These agreements are considered separately due to the anti-overlap provision in section 45 of the CCA. This presented challenges in the Pacific National case, to the significant detriment of a competitive outcome.

We propose an amendment to ensure that the competitive effects of these agreements can be considered together with the merger as part of the SLC assessment. This would help to stop parties taking steps to change the counterfactual or take advantage of the anti-overlap provisions in order to get anti-competitive mergers cleared.

Reforms to deal with acquisitions by large digital platforms

The broader economy-wide proposals I have already explained take us some of the way towards addressing the issues I have identified with acquisitions by the large digital platforms. However, we are not convinced they will go far enough to enable us to scrutinise and, if necessary, block certain critical acquisitions by large digital platforms.

Therefore, alongside the reforms I have already outlined, the ACCC considers there should be a tailored test for acquisitions by certain digital platforms. Effective scrutiny of acquisitions by the large technology firms is critical to protect both business users and consumers, who are so reliant on these platforms, from the adverse effects associated with market power. 

The first issue is which firms will face this more tailored merger test. We feel it is important that this test applies to a clearly defined category of digital platforms, to provide certainty and ensure the extra regulatory intervention is proportionate.

There are also benefits in aligning the introduction of any new threshold with thresholds and criteria currently being considered overseas.

To this end, we are proposing a process to specify which digital firms should be subject to this test. This process would consider factors such as the size and scope of the digital firm’s services in Australia, whether it is a “gateway” firm that is able to control how other businesses interact with consumers and, of course, the firm’s market power.

The second issue is the nature of the test that should apply to acquisitions by these digital platforms. The ACCC has not yet reached a view on the best test to capture anti-competitive acquisitions by these platforms, while also not reducing incentives for innovation and development in the tech sector.

However, at this point, our view is that the probability of competitive harm that needs to be established should be lower than that which applies for acquisitions in the economy more broadly.

This reflects the very real risk that acquisitions by the large digital platforms may have significant competitive impacts which are often not easy to foresee and establish. In particular, we are concerned by the digital platforms buying out possible competitive threats before they have a chance to develop into full-blown competitors.

However, this is not the only possible element. As well as considering changes to the probability threshold that should apply to these firms, it may also be appropriate to consider other elements that will ensure adequate scrutiny of acquisitions of nascent competitive threats, and acquisitions which leverage existing dominance and/or the control of data into market power in adjacent markets.

Lower notification thresholds may also be necessary to ensure the full range of potentially anti-competitive acquisitions by such platforms can be scrutinised by the ACCC.

There is some way to go in determining how merger control should best be calibrated to deal with the challenges presented by acquisition strategies of large digital platforms. We are working closely with overseas agencies as we develop our thinking.

In the UK, for example, it is proposed that a bespoke test will apply to certain designated digital platforms, which are those being described as having “Strategic Market Status” in a particular activity.

Under the UK proposal, which extends far beyond bespoke merger control for acquisitions by digital platforms, the UK regulator (the CMA) will carry out an upfront assessment of whether a digital platform has Strategic Market Status in respect of a particular activity.

The Strategic Market Status assessment incorporates both traditional considerations of market power, which must be enduring before there can be designation, but also broader concepts such as whether a firm is an important access point to reach consumers, or whether the platform can use an activity to determine ‘the rules of the game’ for businesses in the wider market.

Under the UK proposal, a firm designated as having Strategic Market Status will be required to notify the CMA of all acquisitions and the threshold for intervention by the CMA will be assessed against a lower probability standard.

Looking beyond merger control, we consider there are broader issues in digital platform markets and we may need rules that apply to the conduct of specific companies in these markets. As my overseas counterparts and many law makers overseas recognise, a multi-pronged approach is needed to both prevent further entrenchment of market power in digital platform markets and to address the consequences for business users, consumers and the remaining competitors.  

In addition to the UK proposals, the European Commission has proposed significant law reform in its Digital Markets Act. We are looking closely at these proposals as well as the recent German amendments to their Competition Act and proposals in Japan and South Korea which all seek to address the consequences of entrenched market power in digital platform markets.    

The introduction of digital platform specific merger rules may therefore need to sit alongside wider sector specific rules to govern the conduct of digital platforms in order to address the competition and consumer concerns present in digital platform markets.

Today, therefore, I announce that the ACCC will be considering whether such rules are necessary, and the design of any such rules, in its Digital Platform Services Inquiry report due to be provided to the Treasurer in September 2022. Stakeholder consultation on these vital issues will commence in early 2022.    


Effective merger control is critical to ensure markets remain competitive by preventing the acquisition of existing or potential competitors that will result in a substantial lessening of competition. Therefore, we are raising for discussion a package of reforms that we consider will collectively work to address the issues outlined to you today and ensure Australia’s merger regime is fit for purpose.

To conclude, I will recap on the four significant areas of reform we are proposing.

First, a move away from the existing enforcement based merger regime to a new formal clearance based merger regime where merger parties must receive clearance from the ACCC or appeal body before proceeding. This would bring us in line with the approach to merger control regimes predominately applied around the world.

We recognise that this would be a significant change for everyone here, including the ACCC, but I believe that the informal regime is showing the strains of trying to be something like a formal system but with none of the bells and whistles that are needed to ensure that it meets its objectives and provides sufficient time and information for the ACCC to do its job of reaching a concluded view.

Concerns about this imposing unnecessary red tape on businesses are addressed by our intention to carry over a similar mechanism to the pre-assessment process so that non-contentious transactions can be considered expeditiously and without being subject to a full public review.

Secondly, the proposals relating to the merger test would see the current SLC test remain but with improvements to clarify and refocus the approach taken to merger decisions by the Court by defining “likely” and by revising the merger factors to focus on the structural elements of competition that are changed by the acquisition.

Thirdly, to supplement the SLC test and in recognition of the economic harm caused from having markets dominated by companies with an entrenched position of substantial market power, it is proposed that acquisitions by firms with substantial market power that entrench, materially increase or extend positions of substantial market power will be deemed to substantially lessen competition. This is intended to ensure that the focus is on the structural conditions for competition by removing the need to prove the effect of the acquisition by these large firms.

Even with these changes, however, there will still be mergers that raise significant concerns for us that are unlikely to be captured. But the proposals are intended to shift the dial.

And finally, given our extensive work in this sector and close engagement with other countries proposing similar new laws, I expect that there will be very few who would be surprised by our proposal to include a specific merger test for acquisitions by digital platforms to address the challenges we face from the increasing positions of dominance in the digital sector.

To conclude with a sporting analogy, as always, I wish to emphasise that the ball is not in our court on merger law reform. Although we contribute to policy and are fearless and independent in making recommendations on competition and consumer issues, merger reform policy falls to Treasury and then Government to potentially progress as they see fit. 

Today we have started the debate and we will continue to participate and encourage the debate. We also hope that all of you here today, and importantly many others who are not here, will be part of this debate as all voices need to be heard. 

This is a vital debate for the future of Australia and our economy. We depend on competition for the effective working of our economy.

We need merger reform to restore and maintain effective competition in Australia.

Thank you for your time today.



[1]      Note: in this speech, the word “merger” is used to encompass all acquisitions of the shares of a company or assets of a person or business.

[2] Hambur, J, Product Market Power and its Implication for the Australian Economy, Treasury Working Paper 2021-03, June 2021.

[3] International Monetary Fund, World Economic Outlook, Growth Slowdown, Precarious Recovery, April 2019.

[4] Hambur, J, Product Market Power and its Implication for the Australian Economy, Treasury Working Paper 2021-3, June 2021.

[5] International Monetary Fund, World Economic Outlook, Growth Slowdown, Precarious Recovery, April 2019, 55.

[6] Executive Order on Promoting Competition in the American Economy. July 09, 2021.

[7] Executive Order on Promoting Competition in the American Economy. July 09, 2021.

[8] Executive Order on Promoting Competition in the American Economy. July 09, 2021.

[9] Ray Finkelstein, What is wrong with mergers in the Federal Court (2020) 27 CCLJ 79.

[10] Joseph J Simons, ‘Prepared Remarks of Chairman Joseph J. Simons’, ABA Section of Antitrust Law Fall Forum 2020, 12 November 2020, p. 7.

[11] Cristina Caffarra, Gregory Crawford, Tommaso Valletti, ‘How tech rolls’ Potential competition and ‘reverse’ killer acquisitions, 11 May 2020.