After a lengthy ACCC advocacy campaign, Australia's new Competition Taskforce begins a consultation process on potentially wide reaching reforms to Australia's merger control regime.
- Treasury consults on merger reform aimed at addressing Australia's productivity woes.
- Reforms under consideration are potentially wide ranging and will impact on the effort, time and costs required to proceed with mergers.
- Certain industries may be subject to additional requirements.
The prospect of reforms to Australia's merger control regime has been an ongoing topic of conversation. At MinterEllison, we have explored in earlier publications long-awaited proposals for reforms to Australia's merger control regime and shared predictions on the future of merger control. More recently, we covered the ACCC's recent push for reforms, where the ACCC proposed wide reaching changes to Australia's merger control regime. After the ACCC's lengthy and public campaign, the recently formed Competition Taskforce has published a Consultation Paper seeking input on a range of reform options.
The Consultation Paper sets the scene for reforms to Australia's merger control regime by suggesting that slowing productivity can be linked to increased market concentration and, in turn, failures in our merger laws. The Taskforce is seeking to test whether the current regime is structured to filter anti-competitive mergers from those that do no harm.
Picking up the ACCC's concerns regarding the current merger control regime, the Taskforce is seeking feedback on a range of issues including, in particular, changes to merger control processes and the test that is applied by the ACCC.
Changes to the merger control process
The Consultation Paper outlines three alternative options to replace the current informal review process:
- A voluntary formal clearance regime, where businesses could choose to notify a merger and the ACCC could grant legal immunity from court action under the prohibition against anti-competitive mergers if it is satisfied that the merger would not be likely to substantially lessen competition (SLC).
- A mandatory and suspensory regime, where mergers above a particular threshold must be notified to the ACCC, with transactions suspended for a period while the ACCC completes its review. To prevent a merger, the ACCC would need to prove to the Federal Court that the merger would be likely to SLC.
- A mandatory formal clearance regime, where mergers above a particular threshold must be notified to the ACCC, supplemented by ACCC powers to 'call-in' transactions which do not meet that threshold. The ACCC would only grant clearance if it was satisfied that the merger was not likely to SLC.
In addition to the three merger clearance models, the Taskforce is seeking feedback about a range of administrative issues that will be critical to the success of any revised regime. These include:
- the thresholds that apply (the ACCC has suggested a target turnover threshold of $400 million or global transaction value of $35 million);
- the extent of upfront information requirements;
- timing of the suspensory regime and, significantly, how long the ACCC would have to complete its review;
- filing fees (noting the current merger authorisation fee of $25,000, the Consultation Paper also refers to the average cost to the ACCC of an informal public review prior to litigation being $300,000 – $350,000); and
- how any changes to the merger control processes could interact efficiently with Australia's FDI regime.
Changes to the merger control test
A key issue the Taskforce is consulting on is whether there is a need to alter the test the decision maker applies when reviewing proposed transactions. Currently, mergers that are likely to have the effect of SLC are prohibited. The ACCC has proposed that the test be altered so that mergers would only be cleared where the decision maker is satisfied that the merger is not likely to SLC. If adopted, this would involve a major change to the regime that would fundamentally alter the task for merger parties placing a positive burden on them to satisfy the ACCC that the merger will not have an SLC. This will have the effect of raising the evidentiary bar to obtaining merger clearance.
The consultation paper also notes three 'pick and mix' options to further reform the merger control test:
- modernising the list of factors that must be considered when assessing if a merger is likely to SLC;
- expanding the SLC test to include mergers that ‘entrench, materially increase or materially extend a position of substantial market power; and
- allow consideration of related agreements between merger parties – for example, non-compete agreements or agreements concerning supply of goods or services, post-merger.
Taskforce focus areas and next steps
The issues that the Taskforce is seeking to test range from benign to deeply controversial. At this stage, we anticipate that robust feedback will focus on a handful of key issues including the ACCC's proposal to 'flip' the level of satisfaction required, the notification thresholds under any mandatory regime, and the shape of appeal and review mechanisms.
The Taskforce's approach has been heavily influenced by the ACCC's long running advocacy campaign. However, the Taskforce appears mindful of the need for data and empirical evidence to support any case for reform. For example, it flags the lack of detailed evidence to support the ACCC's position that merger parties are choosing to not notify deals.
What remains to be seen is whether the Taskforce will seek its own 'Goldilocks solution' with, perhaps, recommendations to move to a mandatory suspensory regime and adjustments to the merger factors, while avoiding 'too hot' features of the ACCC's proposals including any change that would adjust the level of satisfaction required.
The release of the Competition Taskforce's Consultation Paper signals the starter gun being fired on what are likely to be substantial reforms to Australia's merger control regime. The Taskforce is accepting submissions from interested parties until 19 January 2024. Please get in touch if you would like further context about the Taskforce's work, potential reforms to Australia's merger control regime, and what this may mean for your acquisition strategy going forward.