Important lessons can be learnt by those currently doing, and intending to do, business in Australia by reflecting on the strategic approach taken by the Australian Competition and Consumer Commission (ACCC) since Mr Rod Sims commenced as Chairman in August 2011. During this time, Mr Sims has fairly consistently articulated the ACCC’s strategic direction in relation to what the ACCC will focus on during his term, particularly with regard to the ACCC’s compliance, enforcement, and merger priorities. The identification of these priorities indicates both their importance to the ACCC and also the care that businesses should take if intending to engage in activities which relate to the ACCC’s identified priority areas.

  1. Setting the Scene: Six Key Drivers of Success

In February 2013, Mr Sims identified the following six factors as being of key importance to the effectiveness of Australia’s competition and consumer law:2

  1. strong enforcement (because the more that other companies see the ACCC prosecuting companies for alleged breaches of the law, the more powerful the ACCC’s informal approaches become);
  2. getting the big, usually very public decisions correct (because these are important in themselves and also illustrate the approach the ACCC takes in relation to other matters);
  3. explaining what the ACCC is and is not doing;
  4. being proactive by actively looking out for the main problem areas and seeking to address these;
  5. being practical through grounding the ACCC’s decisions in “real world understanding;”; and
  6. recognising that Australia will always have monopolies requiring effective regulation.

Together, these factors reflect the strategic approach that the ACCC intends to take under Mr Sims’ leadership. In particular, items (1) – (3) on this list illustrate the ACCC’s awareness of the importance of communicating effectively with the business community and general public. Items (4) and (5) illustrate the ACCC’s awareness of the limited resources available to it and how it intends to make the most of these. Item (6) reflects the reality of the Australian business landscape.

For businesses currently operating in Australia, these factors provide valuable insight into what drives the ACCC’s operations and interactions with the business community and the general public. These factors are equally helpful for businesses contemplating commencing operations in Australia as they provide some context as to how competition law is dealt with in this jurisdiction and how this may differ from regulators in other countries.

  1. The ACCC’s Strategic Approach to Mergers

2.1 Australia Matters in the Global Context

The proactive and strategic approach that the ACCC is now taking is especially apparent in the context of merger review. An important consequence of this is that businesses cannot rely simply on publications and guidelines published by the ACCC, but must endeavour to keep abreast of developments and trends as they occur.

Particularly in the context of global merger notifications, it is important that Australia is not “forgotten,” especially in light of the voluntary merger notification regime3 (discussed further in § 2.2 below). This is because the ACCC has the ability to unwind transactions and seek court-enforced undertakings and pecuniary penalties if a transaction results in a breach of the test in section 50 of the Competition and Consumer Act 2010 (Cth) (CCA) – that is, if a transaction results in a corporation acquiring shares or assets with the effect or likely effect of substantially lessening competition in any market.

2.2 Priority Areas for the ACCC in Merger Review

One example of the way in which the ACCC’s strategic approach has affected businesses is in respect of the types of transactions that parties should notify to the ACCC (notwithstanding the absence of a legal requirement to notify transactions in Australia). Although it is not compulsory for transaction parties to notify the ACCC of a proposed transaction, the ACCC’s Merger Guidelines state that parties are encouraged to notify the ACCC well in advance of completing a transaction if certain notification thresholds are triggered. These thresholds are triggered if the products of the merger parties are either substitutes or complements, and the merged firm will have a post-merger market share of over 20 percent in the relevant market or markets.4

However, in practice, parties should notify the ACCC of a transaction not only if it triggers these thresholds, but also if the transaction relates to an industry or involves a party that the ACCC has identified as a priority. These priorities include the following:

  • acquisitions in concentrated markets, particularly where a merger is a so-called “3 to 2” transaction (that is, it reduces the number of key players in a market from three to two);5
  • acquisitions in the supermarket, liquor, and hardware sectors by the major supermarket chains; and
  • transactions in the telecommunications, energy, and banking sectors.

While these priorities have been identified in speeches delivered by Mr Sims, they do not comprise a fixed list. As more merger decisions and speeches are published by the ACCC, additional priority areas may be identified.

2.3 ACCC’s Strategic Approach to Timing Issues in Merger Review

Two quite different strategies have emerged in relation to how the ACCC has approached timing issues in the context of reviewing mergers. One strategy is an attempt to streamline merger clearance for non-contentious transactions (and is, in this sense, similar to the simplified procedure under the European Union Merger Regulation, though does not require a form to be completed). The other strategy involves seeking more detailed information to ensure that the ACCC’s decisions are made on the basis of rigorous analysis. Both have important implications for the commercial timetables underpinning transactions, as set out below.


Consistent with the ACCC’s focus on being more strategic, the ACCC has developed a more streamlined “pre-assessment” review process for non-contentious transactions, involving a review of a merger on the papers without public review. The ACCC has reported that 73 percent of the mergers considered by the ACCC in 2011/2012 were cleared through the pre-assessment process.6

The pre-assessment process has been in practice since 2010, although it is not reflected in the ACCC’s Merger Review Process Guidelines (Process Guidelines) (since this was published in June 2006).7 Relevantly, Mr Sims has indicated that the “Process Guidelines” are being revised by the ACCC to reflect process changes that have already become practice and to explore new processes.

Accordingly, if transaction parties consider that a transaction is non-contentious, it may be advantageous to seek advice as to whether the ACCC might consider it under the pre-assessment process and, if so, the information that the ACCC will be likely to require upfront in order for pre-assessment to occur.

The ACCC is Seeking More Detailed Information in Complex Transactions

In November 2011, the Full Federal Court dismissed the ACCC’s appeal from the trial judge’s decision in ACCC v Metcash.8 While the decision had particular relevance in relation to the relevant standard of proof to apply to the counterfactual, it has also had important consequences for the ACCC’s review of mergers, particularly in respect of transactions in which the ACCC considers it necessary to collect large amounts of data and information to enable a more rigorous analysis.

As recognised by Mr Sims a year after commencing as Chairman, the practical effect of the Metcash decision has been that the ACCC’s review periods are often significantly longer, particularly for detailed merger reviews:

. . . on many occasions, I have played down the impact of the Metcash decision on our merger assessment practices . . . on reflection, it has meant that we have sometimes felt an increased need to be vigilant to ensure that all our decisions are grounded in commercial realities. As a result, we may be taking longer to gather the necessary commercially relevant facts and evidence in some contentious cases.9

In order to seek more detailed information, the ACCC has not only been using voluntary information requests but has also been making use of its compulsory information gathering powers under section 155 of the CCA (these are discussed more generally in § 3.3 below). Since such notices are able to be issued by the ACCC at any time during a merger investigation, the ACCC has, on a number of occasions, issued these notices towards the end of merger investigations, including just prior to the anticipated decision date. One potential reason for issuing a section 155 notice at such a late stage may be to not only obtain further information relevant to the ACCC’s investigation, but also to give the ACCC more time to consider the transaction.

From the perspective of the commercial timetable, issuing section 155 notices is likely to result in significant delays and “clock stopping” while parties respond. Unlike other jurisdictions, the ACCC is not bound to a particular timeframe within which a merger review must be completed and the merger regime in Australia is non-suspensory. However, the ACCC’s “Process Guidelines” provide a guide as to how long the ACCC’s public review of a transaction should be expected to take.

These indicative timelines are set out below:

  • Phase one (defined in this article as either a transaction that does not proceed to a Statement of Issues, or the first phase of a transaction that does proceed to a Statement of Issues) should take two to eight weeks;10 and
  • Phase two (defined in this article as the second stage of a transaction that requires secondary market inquiries following the publication of a Statement of Issues) should take an additional four weeks, such that the total public review process is twelve weeks.11

However, there is quite a large difference between these indicative timelines and the length of time actually involved in phase one and phase two of a merger review. By way of illustration:

  • in 2012, there were thirteen transactions that involved the publication of a Statement of Issues. These took an average of eleven weeks to complete phase one and an average of twelve weeks to complete phase two (a total of twenty-three weeks in total on average);
  • in 2011, there were five transactions that involved the publication of a Statement of Issues. These took an average of ten weeks to complete phase one and an average of fifteen weeks to complete phase two (a total of twenty-five weeks in total on average); and
  • in 2010, there were eleven transactions that involved the publication of a Statement of Issues. These took an average of eight weeks to complete phase one and an average of nine weeks to complete phase two (a total of seventeen weeks in total on average).

The analysis above has been conducted not on the number of review days (being the total business days less public holidays and time during which the review was suspended), but on the number of actual calendar days that have elapsed between the date the review commenced to the decision date. From a commercial perspective, it is more relevant to the deal timetable for transaction parties to consider the total number of calendar days rather than the ACCC’s “review days.”

In addition to the above, it is relevant to note that the average time taken for the ACCC to complete a public merger review has risen approximately 45 percent in 2012 compared to 2011 (from sixty-five to ninety-four calendar days), and has more than doubled since 2009 (from forty-six to ninety-four calendar days).12 However, these lengthier timeframes may be due to the fact that non-contentious transactions are dealt with under the pre-assessment process (so are not reflected in the data above, which are based on the ACCC’s register of publicly reviewed transactions).

On balance, these lengthy timeframes mean that transaction parties should consider carefully the impact of an Australian merger filing in the context of transactions that occur in, or have an effect in, Australia. Notwithstanding the voluntary, non-suspensory nature of the Australian merger regime, Australian merger notifications should be carefully considered and factored into the commercial timetable given the ACCC’s increasing interest in seeking more detailed information in respect of a transaction and the remedies available to the ACCC if a transaction breaches the test in section 50 of the CCA.

  1. The ACCC’s Strategic Approach to Compliance and Enforcement

The ACCC’s strategic approach to compliance and enforcement is reflected in the priorities identified in the ACCC Compliance and Enforcement Policy (February 2013).13 This document states that the ACCC assesses certain forms of conduct as a priority because they are “so detrimental to consumer welfare and the competitive process.”14 These types of conduct comprise cartel conduct, anti-competitive agreements, and misuse of market power, discussed further below.

To the extent that businesses operating in Australia are concerned that they may be engaging in conduct that the ACCC has identified as priority areas, it is important that they seek appropriate legal advice in relation to their position under the CCA.

3.1 Cartel Conduct

The most recent instance of the ACCC commencing cartel conduct proceedings comprises the civil proceedings that the ACCC commenced on 13 December 2012 against Yazaki Corporation, a Japanese company, and its Australian subsidiary, Australian Arrow Pty Ltd. The ACCC alleged that these companies engaged in cartel conduct, market sharing, and price fixing in relation to the supply of wire harnesses (electrical systems facilitating the distribution of power and the sending of electrical signals to various components of a motor vehicle) to Toyota Motor Corporation and its related entities in Australia. The ACCC is seeking pecuniary penalties, declarations, injunctions, and costs against these companies.15

These proceedings follow in the footsteps of similar enforcement action in the US and Japan against Yazaki and other alleged cartelists involving the supply of wire harnesses and other automotive components to a number of automobile manufacturers. In effect, these proceedings are yet another example of how the ACCC is capable of drawing on the international network of competition regulators. Although a formal waiver must be sought in order for one competition regulator to obtain access to specific information held by a competition regulator in another jurisdiction, knowledge of cartel enforcement activity in a given industry in one jurisdiction may lead to cartel enforcement activity in respect of the same industry in another jurisdiction.

To date, no criminal proceedings have been initiated for cartel conduct in Australia, although criminal sanctions have been available to the ACCC since July 2009 (with penalties for individuals including up to ten years in prison, fines of up to AUD 340,000, or both per criminal cartel offence). Mr Sims has stated that the ACCC is a “patient regulator” and will not “rush criminal investigations or be tempted to prosecute matters better suited to civil allegations” but instead will “pursue the right matter with vigour.”16

It is apparent that the ACCC is well aware of the strategic benefit of keeping its powder dry in this regard and to encourage awareness within the business community of the cartel immunity policy. One such example of this has been through the production of a short educational film entitled “The Marker”, aimed at increasing awareness of the effects of cartel involvement on both individuals and businesses.17

3.2 Misuse of Market Power and Anti-Competitive Agreements

In relation to misuse of market power, the ACCC brought court proceedings against Visa Inc on 4 February 201318 alleging that it misused its market power for two purposes: firstly, to prevent the expansion of Dynamic Currency Conversion to new merchant outlets in Australia; and secondly, to prevent businesses in Australia from supplying such services on automatic teller machines in competition with Visa’s own currency conversion service.19

The ACCC has also alleged that Visa engaged in exclusive dealing by supplying access to its payment network to Australian banks and, in turn, retailers, on condition that they did not acquire Dynamic Currency Conversion services from Dynamic Currency Conversion suppliers.20

Historically, misuse of market power proceedings have been brought infrequently by the ACCC and Mr Sims has stated that he considers the Visa proceedings to be “the first of its kind in the world.”21 That the ACCC is bringing such proceedings which involve not only misuse of market power allegations but also an allegation of an anti-competitive agreement (through exclusive dealing) suggests that the ACCC is applying a strategic approach to the types of cases that it prosecutes. In effect, the ACCC is seeking to deliver on two of the key factors identified in § 1 above: strong enforcement, coupled with a desire to get this big, very public decision to bring proceedings against Visa, “correct.”

3.3 The Relevance of Section 155 Notices

A key element of the ACCC’s toolkit in relation to compliance with, and enforcement of, the CCA is its compulsory information gathering powers under section 155. The ACCC may issue a section 155 notice if it has reason to believe that a person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes or may constitute a breach of the CCA. These notices are used not only in the context of mergers, as discussed previously, but also in the context of compliance and enforcement more generally, including in investigations into cartel conduct, misuse of market power, and anti-competitive agreements.

Given that the issue of “strong enforcement” has been identified by Mr Sims as one of the key factors in the effectiveness of Australia’s competition and consumer law, it might be expected that the use of section 155 notices would have increased over time, and in particular during the period of time that Mr Sims has been Chairman. However, somewhat surprisingly, the number of section 155 notices issued by the ACCC has decreased, as illustrated by the chart below.22 This chart shows that over the last three financial years, the number of section 155 notices has decreased from 300 in 2009-2010, 268 in 2010-2011, and most recently 175 in 2011-2012. This is a dramatic decrease from the high of 487 section 155 notices in 2004-2005.

Figure 1: Section 155 notices issued by the ACCC (by financial year)

Click here to view Figure 1.

One explanation for this downward trend may be that the ACCC does not feel the need to issue as many section 155 notices because its prosecution of companies for alleged breaches of the law may have resulted in the ACCC’s informal approaches (eg seeking the voluntary production of information) being more effective. In any case, it will be of interest to see whether this downward trend continues in future.

  1. Conclusion: Some Strategic Next Steps

In light of the strategic approach being undertaken by the ACCC in respect of both mergers and its compliance and enforcement work, those currently undertaking or intending to undertake transactions in Australia would be well-placed to ensure that they continue to stay up-to-date in relation to the areas that the ACCC identifies as its focus or priority areas.

Specifically in relation to mergers, transaction parties may find it helpful to take care when considering the impact of the ACCC’s approach to merger review on the commercial transaction timetable. One potential suggestion is for transaction parties to also adopt a strategic approach in the provision of information, in the sense that they may anticipate the ACCC’s requests for information by “frontloading” the provision of information to the ACCC in complex transactions to allow the ACCC to more quickly and more thoroughly consider the transaction. Alternatively, transaction parties may wish to consider whether their transaction is a non-contentious transaction and if so, whether the ACCC may be able to consider it under the pre-assessment process. If so, parties may wish to consider what information the ACCC will be likely to require in order for this to occur.

In relation to the ACCC’s compliance and enforcement priorities, businesses that are concerned about their activities in the context of cartel conduct should seek legal advice and should also be aware of the ACCC’s immunity policy. Given the potential for cartel conduct to breach not only the civil but also criminal provisions of the CCA, it is critical that businesses are aware of the potential repercussions that may flow not only to the company but also to individuals involved in the relevant conduct. In this sense, potentially the best way to deal with the ACCC’s strategic and proactive approach may be for companies to identify instances of non-compliance and, if possible, to seek immunity, if available; and then to seek to ensure that, in future, the company’s activities do comply with the CCA.