ACCC & AER annual report 2016-17

Summary of performance for merger and authorisation review

Review arrangements between businesses, including mergers and authorisations, to maintain competition and/or the public interest

Our reporting on this strategy is divided into two sections:

  • our competition enforcement function
  • our merger and authorisation review function.

This part deals with our merger and authorisation review function. For reporting on our competition enforcement function, see ‘Summary of performance for enforcement actions to promote competitive markets’.

Role and functions

The ACCC reviews mergers and acquisitions to determine whether they are likely to substantially lessen competition, with the aim of ensuring that markets work well for consumers. Competition can be reduced when one firm buys another firm or its assets, potentially resulting in fewer competitors, increased prices, lower product quality, or less service, choice or innovation for consumers. However, not all mergers and acquisitions raise competition issues. Section 50 of the Competition and Consumer Act 2010 (the Act) only prohibits those that are likely to substantially lessen competition in any market in Australia.

Merger parties can seek ‘informal’ clearance from the ACCC, and we will provide our view on whether an acquisition is likely to substantially lessen competition. Alternatively, parties can apply to the ACCC for formal clearance or to the Australian Competition Tribunal (the Tribunal) for merger authorisation on public benefit grounds. Formal clearance or merger authorisation, if granted, provides statutory exemption from s. 50.

The ACCC has received no applications for formal merger clearance to date. There have been a total of five applications to the Tribunal for merger authorisation. Two of these were withdrawn, three proceeded to a final Tribunal decision.

The ACCC has a role to assist the Tribunal in assessing merger authorisation applications, including by making inquiries, calling and examining witnesses, making submissions, and preparing a report for the Tribunal. We also assist the Tribunal in reviewing our authorisation decisions on non-merger proposals.

Under the authorisation and notification review function, we can provide or allow legal protection to enable non-merger conduct that might restrict competition to go ahead when the public benefit outweighs the public detriment, including detriment that results from any lessening of competition. This recognises that in certain circumstances allowing conduct that might restrict competition in order to enhance efficiency and welfare may be in the public interest. We also assess the rules for certification trade marks to determine whether they are in the interests of consumers and competitive markets.

Our deliverables for the merger and authorisation review function under Strategy 1 are:

Deliverable 1.2

Assess mergers to prevent structural changes that substantially lessen competition

Deliverable 1.3

Make decisions on authorisation, notification and certification trade mark applications in the public interest

Priorities

Our priority is to assess and review mergers to prevent structural changes in markets that substantially lessen competition, with a particular focus on concentrated markets and proposed acquisitions arising through privatisation of public sector assets. Mergers are predominantly brought to our attention by merger parties who request an informal clearance. Alternatively, we may become aware of a merger proposal through the media, from complaints, or by referral from other regulatory bodies.

Our reviews of authorisations, notifications and certification trade marks are triggered by a formal application. Our priority is to assess and make decisions about applications for authorisation and notifications involving potentially anti-competitive conduct by determining whether such arrangements may result in a net public benefit and warrant exemption from the Act.

Powers

Section 50 of the Act prohibits mergers and acquisitions that substantially lessen competition in any market in Australia, or are likely to do so.

There is no legislation underpinning the informal clearance process; this process has developed over time so that merger parties can seek the ACCC’s view before they complete a merger. Appendix 6 has more details on informal clearance and pre-assessments.

As part of our role to review mergers and acquisitions under s. 50 of the Act, we have the power to bring court proceedings where we consider that an acquisition is likely to breach s. 50. We are also able to accept court enforceable undertakings offered by merger parties to address or ‘remedy’ competition concerns raised by an acquisition.

In response to an application for formal merger clearance, we may grant an applicant clearance that provides exemption from s. 50.

Part VII of the Act provides the ACCC with the power to grant authorisation or allow notifications involving non-merger conduct that may breach the competition provisions of the Act where it is in the overall public interest. An outline of our authorisation function is in appendix 6.

Under the Trade Marks Act 1995 (Cth), the ACCC is responsible for assessing the rules for certification trade marks to determine whether they are in the interests of consumers and competitive markets.

Performance indicators

Deliverable 1.2: Assess mergers to prevent structural changes that substantially lessen competition

This deliverable is about assessing proposed or completed mergers and acquisitions to determine whether they substantially lessen competition.

These performance indicators are from page 12 of the ACCC and AER Corporate Plan 2016–17. Additional performance indicators (those without a target) provide additional transparency on the volume of our work and on our timeliness.

Table 3.10: Deliverable 1.2 performance indicators

Performance indicators

Annual target

Result

Number of merger matters considered (externally driven)

N/A

288

Percentage of merger matters cleared without a public review (pre-assessed)

70%

88%

Number of merger matters involving Phase 1 only of public review (Phase 1 only of a public review means a statement of issues is not released) (externally driven)

N/A

15

Number of merger matters involving Phase 1 and Phase 2a of public review (externally driven)

N/A

16

Percentage of merger matters subject to Phase 1 only of public review that were finalised within 8 weeks (excluding time periods where information is outstanding)

50%

80%

Percentage of merger matters subject to Phase 2 of public review that were finalised within 20 weeks (excluding time periods where information is outstanding)

90%

94%

a Phase 2 involves release of a statement of issues and/or acceptance of a court enforceable undertaking to remedy competition concerns.

Deliverable 1.3: Make decisions on authorisation, notification and certification trade mark applications in the public interest

This deliverable is about assessing and making timely decisions on applications for authorisation, on notifications of exclusive dealing or collective bargaining, and on certification trade marks to maintain competition and the public interest.

These performance indicators are from page 12 of the ACCC and AER Corporate Plan 2016–17. Additional performance indicators (those without a target) provide additional transparency on the volume of our work and on our timeliness.

Table 3.11: Deliverable 1.3 performance indicators

Performance indicators

Annual target

Result

Number of authorisation applications assessed (externally driven)

N/A

29

Number of exclusive dealing notifications assessed (externally driven)

N/A

407

Number of collective bargaining notifications assessed (externally driven)

N/A

1

Number of Certification Trade Marks assessed (externally driven)

N/A

37

Percentage of authorisation applications assessed within statutory timeframe(s) (excluding time periods where information is outstanding)a

100%

100%

Percentage of notifications assessed within statutory timeframeb

100%

100%

a The ACCC is required to assess the validity of an authorisation application within five business days of lodgment and to issue a final determination about a new authorisation application within six months (unless extended).

b The ACCC is required to assess the validity of a notification within five business days of lodgment.