The merger provisions of the Trade Practices Act are not limited to mergers and acquisitions that result in a change in control of another corporation, unlike many other jurisdictions. In particular, the Australian Competition and Consumer Commission has examined acquisitions of:
- partial or minority shareholdings that do not result in any change in control of the target corporation, and
- assets such as freehold or leasehold land for development as a supermarket and licences to sell takeaway packaged liquor.
In this article we discuss acquisitions of partial and minority shareholdings. We shall discuss acquisitions of assets in a subsequent article.
The TPA’s merger provisions prohibit any acquisition of shares of a corporation or of assets of a person that has or is likely to have the effect of substantially lessening competition in a market in Australia.
There is no compulsory pre-merger or pre-acquisition notification to the ACCC, but all acquisitions are liable to examination by the ACCC and regulatory intervention if the ACCC considers that the merger provision will be or has been contravened.
There is no transaction value or turnover threshold, unlike many other jurisdictions. The only filter is that the market affected must be a ‘substantial’ market in Australia or in a state or territory or region of Australia (and there are proposals to remove even this filter). There is also an exception for acquisitions of assets ‘in the ordinary course of business’ (eg a purchase of trading stock).
In practice, most mergers and acquisitions of shares or assets that may raise competition concerns are notified in advance to the ACCC under its informal merger clearance process. However, the ACCC will sometimes publicly monitor or investigate a rumoured merger or acquisition before it has been formally announced to the market, and it often examines mergers and acquisitions that have been completed without prior notification.
The ACCC’s Merger Guidelines (November 2008) give some guidance about the matters the ACCC will consider in relation to the acquisition of a partial or minority interest. They include the extent to which:
- the acquisition of an interest in a competitor would mute competition or lead to coordinated conduct
- the acquisition of an interest in an upstream or downstream entity would increase the acquirer’s incentive to foreclose or ‘squeeze’ rivals
- the acquisition would provide access to commercially sensitive information about competitors, and
- the acquisition would block potentially pro-competitive mergers and industry rationalisation.
The acquisition by electricity retailer AGL of a 35% interest in Victoria’s Loy Yang A power station in 2004 was the subject of Federal Court litigation after the ACCC declined to give informal merger clearance.
In 2005, the proposed acquisition by National Australia Bank of a 25% interest in the Cash Services Australia joint venture between Australian banks was informally cleared by the ACCC subject to Court enforceable undertakings to address concerns about, among other issues, the protection of sensitive competitor information.
The ACCC is currently reviewing two acquisitions of minority shareholdings:
- Queensland Sugar’s 9.75% interest in Tully Sugar, and
- Sumitomo’s proposed 20% interest in Nufarm.
The ACCC is conducting public inquiries in relation to the Queensland Sugar acquisition post completion (the acquisition was on 7 January 2010 and the ACCC commenced a public review on 12 February 2010). The ACCC’s market inquiries letter indicates that it is investigating the acquisition following media reports that the acquisition may be used to block a competitor of Queensland Sugar (Maryborough Sugar) from acquiring the target, Tully Sugar, which would have enabled the competitor to compete more effectively with Queensland Sugar.