ACCC regulatory approval for mergers
Notwithstanding that there is no legal requirement for merger parties to notify the ACCC of a proposed merger, parties are encouraged to have the proposed merger considered on competition grounds.
Proceeding without clearance means merger parties may be at risk of the ACCC taking legal action which may result in a court order to unwind the transaction.
The three options for regulatory approval are:
- the ACCC assesses the merger on an informal basis;
- the ACCC assesses an application for formal clearance of a merger; and
- the Australian Competition Tribunal assesses an application for authorisation of a merger.
Informal merger review
While an informal merger review will not provide the merger parties with protection from legal action, it may give the parties insight into whether the merger proposal is likely to breach section 50 of the Competition and Consumer Act 2010 (Cth) (“Act”) (ie the prohibition on mergers that would have the effect, or be likely to have the effect, of substantially lessening competition in any market).
During an informal merger review, the merger parties provide the ACCC with submissions outlining the nature and extent of the proposed merger.
There is no application form or fee payable for an informal merger review.
The ACCC may initiate an informal merger review and may conduct the review either privately or publicly. A public review may be necessary where the proposed merger raises competition concerns or where the ACCC requires information from the market to assist its decision making.
A recent example of an informal merger review was the proposed merger of beer suppliers SABMiller plc (“SABMiller”) and Anheuser-Busch InBev (“Ab InBev”). The review commenced on 18 January 2016 and concluded on 5 May 2016. The ACCC found that the proposed acquisition was unlikely to result in substantial lessening of competition in the Australian beer market. With or without the acquisition, there would be two main suppliers of beer operating within the Australian market and Ab InBev/SABMiller would continue to face competition from other suppliers including Lion, Coopers, Asahi and Coca-Cola Amatil. Although Ab InBev previously engaged Lion as its main distributor, Ab InBev had served notices to terminate the distribution agreements, therefore resolving the ACCC’s competition concerns.
ACCC Chairman Rod Sims commented that “the ACCC considers that the proposed acquisition is unlikely to result in higher beer prices for consumers”.
In assessing the likely effect on competition of proposed acquisitions, the ACCC will take into account the merger factors listed in section 50(3) of the Act including, among other things, the potential for entry and expansion, market concentration and the level of imports.
Formal merger clearance
Unlike informal merger reviews, a formal merger clearance offers legal protection from section 50 of the Act.
Only the acquiring merger party can apply for a formal merger clearance and the application must be in the appropriate form.
A formal merger clearance will only be granted where the merger would not have the effect, or be likely to have the effect, of substantially lessening competition. It cannot be granted for mergers that have already taken place. The applicant must give an undertaking under section 87B that the merger will not be completed while the application is being considered by the ACCC.
The fee for a formal merger clearance is currently $25,000. Given the substantial fee and binding nature of the outcome, the merger parties are encouraged to participate in informal discussions with the ACCC prior to considering a formal merger clearance application.
Similar to a formal merger clearance, a merger authorisation provides legal protection from section 50 of the Act.
The Australian Competition Tribunal may grant authorisation where it is satisfied that the proposed merger is likely to result in such a benefit to the public that the merger should be allowed to occur.