Australia’s merger laws are no longer fit for purpose and tilted too much towards allowing potentially anti-competitive mergers to proceed, ACCC Chair Gina Cass-Gottlieb said today.
In a speech to the National Press Club in Canberra, Ms Cass-Gottlieb called for reforms to Australia’s merger laws to protect competition in Australia’s economy during a critical period of economic transition.
“I am concerned that consumers and the Australian economy are particularly exposed in the current environment of uncertainty and vulnerability from supply chain pressures, geopolitical issues and the climate change transition,” Ms Cass-Gottlieb said, adding that technological change and the power of digital platforms were adding to this complexity.
“Part of responding to these challenges is to encourage competitive, innovative and dynamic markets. Australia’s current merger regime is not well placed to deal with these issues.”
Australia’s current laws prohibit mergers that are likely to result in a substantial lessening of competition. However, the laws do not require parties to notify the ACCC of planned mergers, or to wait for ACCC clearance before they complete the merger.
This means that the ACCC must apply to the Federal Court to have the merger halted or unwound if parties do not abandon or revise transactions that the ACCC considers are anti-competitive.
“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,” Ms Cass-Gottlieb said.
“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.”
Businesses or companies proposing to merge can voluntarily seek the ACCC’s view either through an informal pre-assessment process or a voluntary formal authorisation process.
The ACCC is proposing a range of changes to Australia’s merger regime which would bring it into line with many OECD countries.
A formal clearance model would mean that merger parties would need to convince the ACCC that the proposed transaction is not likely to substantially lessen competition. The Australian Competition Tribunal would have the ability to review ACCC decisions.
A formal regime would also include a requirement that the ACCC be notified of mergers that meet specified materiality thresholds, a requirement that these transactions be suspended without ACCC clearance and a “call in” power for the ACCC to scrutinise transactions that don’t meet the notification threshold but still raise competition concerns. There would also be clear requirements for relevant information to be provided to the ACCC upfront.
Non-contentious transactions could be granted a notification waiver so they could be dealt with quickly.
“We are finding that businesses are 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,” Ms Cass-Gottlieb 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 anti-competitive mergers,” Ms Cass-Gottlieb said.
The ACCC has also proposed changes to the legal test of how mergers are assessed. For example, proposed additions to make it clear that the substantial lessening of competition test includes “entrenching, materially increasing or materially extending a position of substantial market power” and modernising of the existing factors considered as part of the assessment process, including whether the merger would result in a merged party gaining increased access to data and technology.
The full speech can be found on the ACCC website.
Background
In 27 August 2021, in a speech to the Law Council of Australia, then ACCC Chair Rod Sims started a debate about the need for merger law reform in the post-pandemic economic reform period.
Today’s speech outlines Ms Cass-Gottlieb’s and the ACCC’s views on required merger law reforms in Australia