2019 was a busy year for the Australian Competition and Consumer Commission (ACCC), including in the area of merger reviews. 2020 promises to be just as exciting.
The ACCC’s most recent annual report shows that in 2018-19 the ACCC considered 331 merger matters, with 92 per cent of these finalised by pre-assessment under its informal merger clearance process. This means that for 305 of these mergers, the ACCC determined that the transaction did not require detailed review as there was a low risk of the merger substantially lessening competition. The remaining transactions that the ACCC considered under its informal merger clearance process were subject to a public review process (or, in one case, a confidential review), with not all of these resulting in clearances.
A high profile example of where the ACCC opposed a transaction in 2019 was in the case of the proposed $15 billion TPG Telecom-Vodafone Hutchinson Australia merger. The transaction was first announced by the parties in the second half of 2018, with the ACCC releasing its decision to oppose the merger in May 2019. The ACCC’s decision was made largely on the basis of an expectation that (notwithstanding public statements to the contrary) TPG would roll out its own mobile network. The ACCC Chair noted that this roll out was “likely the last chance we have for stronger competition in the supply of mobile services”. TPG and Vodafone disagreed with the analysis, and took their case to the Federal Court. A decision of the Court is likely in February 2020.
2019 also showed that the merger authorisation process, which is an alternative option for parties to the ACCC’s informal clearance process, remains very unpopular. Since the time of the introduction of the current process to the Competition and Consumer Act 2010 (Cth) (CCA) in late 2017, only one authorisation has been sought from the ACCC, which was granted with conditions. This was the authorisation granted in July 2019 for A.P. Eagers Limited to acquire the remaining shares in Automotive Holdings Group Limited that it did not previously hold. 2019 also saw the ACCC suffer a significant set-back in this area, which arose in relation to the proposed Pacific National acquisition of Aurizon’s Acacia Ridge Terminal. The ACCC commenced proceedings in 2018 in relation to the acquisition on the basis that it would substantially lessen competition in the relevant market by raising the barriers to entry for potential new rail operators. The Federal Court dismissed the proceedings on the basis that it accepted an access undertaking offered by Pacific National on the final day of the hearing. The ACCC, which had rejected a similar undertaking offered by Pacific National during the merger review process, does not, as a general rule, favour behavioural undertakings to address competition concerns in merger cases. It has appealed this decision as it has questioned the Federal Court’s ability to accept such an undertaking.
January 2020 has brought with it the usual predictions made every January for a boom in Australian merger activity in the year ahead. One sector where there may be significant activity is the Australian media sector. Following on from the Australian Government’s relaxation of Australia’s cross media ownership laws in 2017, the Nine Entertainment and Fairfax Media merger occurred in 2018 but other media merger activity has been slow. The controversial Seven West and Prime Media merger was blocked by self-interested shareholders but not opposed by the ACCC in late 2019 and the ACCC will start the year looking at the proposed sale of Pacific Magazines to Bauer Media, which would combine Australia’s two largest magazine publishers. The ACCC has already indicated this deal causes concern, notwithstanding that the merger appears largely to be driven by a dramatic decline in magazine revenue as consumers turn to online sources for relevant content.
In addition to the court rulings in the two cases mentioned above, which may impact the manner in which the ACCC exercises its merger control powers, 2020 is likely to see changes to the merger test in the CCA which will impact the ACCC’s approach. The ACCC’s world leading Digital Platforms Inquiry recommended that the CCA is amended to include the following as factors in analysing the competition effects of a proposed merger:
- the likelihood that an acquisition would result in the removal from the market of a potential competitor
- the nature and significance of assets, including data and technology, being acquired directly or indirectly in the transaction.
Although the ACCC may already take these factors into consideration in any merger analysis, its view is that if these factors are expressly included in the CCA this will provide clear guidance as to their importance. The government has agreed with this view and, in its response to the Digital Platforms Inquiry, agreed to undertake consultation on these changes.
Whatever happens during 2020, merger parties will need to carefully navigate with the ACCC in seeking clearances.For a full understanding of Australia’s merger review laws, click here to read our chapter in the Mondaq Comparative Guide to Merger Control.