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Under what circumstances is a transaction caught by merger control legislation?
Section 50 of the Competition and Consumer Act 2010 (Cth) applies to the following:
- transactions that involve the acquisition of shares or assets by any person or corporation. ‘Acquisition’ refers to obtaining any legal or equitable interest in shares or assets (Section 4(4)). Therefore, it includes the lease, exchange, hire or hire purchase and any acquisition of a minority or partial interest in a corporation. However, it does not cover an acquisition by way of charge or licence; and
- transactions that have the effect of substantially lessening competition in any market – defined as a market in Australia. Therefore, the transaction must have an effect on a market in Australia. However, it is not a requirement that the shares or assets be located in Australia (eg, the acquisition of shares in a foreign company which competes in Australia through imports will be caught by Section 50 – TPC v Australian Meat Holdings, (1988) 83 ALR 299 and TPC v Australian Iron & Steel, (1990) 22 FCR 305).
Do thresholds apply to determine when a transaction is caught by merger control legislation?
There is no compulsory pre-notification requirement for mergers in Australia and hence no compulsory notification thresholds apply to transactions caught by the legislation. However, Australia has developed a practice of seeking informal clearance from the Australian Competition and Consumer Commission for mergers which may raise competition concerns.
In its informal merger guidelines (Merger Guidelines 2008), the commission recommends that certain mergers that may be subject to the Competition and Consumer Act 2010 (Cth) be voluntarily notified. The guidelines encourage parties to notify transactions where:
- the products of the merger parties are either substitutes or complements; and
- the merged firm will have a post-merger market share of greater than 20% in the relevant markets.
However, these notification thresholds are indicative only. Accordingly, the commission may still investigate mergers which do not meet the thresholds and have not been notified, as they may still raise competition concerns. Further, parties should obtain appropriate advice before notifying the commission. Notification is not always appropriate simply because the notification thresholds are met. As the thresholds are relatively low, each transaction needs to be considered on a case-by-case basis before notification is made.
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