Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
As there is no mandatory requirement under the Competition and Consumer Act 2010 (CCA) for the parties to a proposed transaction to notify the Australian Competition and Consumer Commission (ACCC), there are no sanctions for not filing. However, if a transaction proceeds without notification and the ACCC successfully establishes that it has the likely effect of substantially lessening competition in any market then penalties and remedies for a contravention of the merger provisions will apply.
In terms of deadlines for filing, there is no deadline as filing is voluntary. However, if a decision is made to file then the timetable will depend on which of the available clearance options is chosen:
- Informal clearance: there is no set deadline for filing, however the ACCC encourages parties to approach the ACCC as early as possible when a merger is contemplated and before a merger is completed, to ensure that the ACCC has sufficient time to consider whether a review is necessary and, if so, to conduct the review. Parties will often approach the ACCC on a confidential basis prior to the public announcement of a transaction.
- Merger authorisation: there is no set deadline other than the parties must lodge a filing prior to completion of the transaction. As the parties will be required to provide an undertaking that the transaction will not complete until after the ACCC’s decision, any filing should occur well in advance of completion to allow for the statutory time periods.
Which parties are responsible for filing and are filing fees required?
The acquirer is usually responsible for notifying a transaction to the ACCC under the informal clearance process, and is the party required to file under the merger authorisation process. There are no fees for informal clearances by the ACCC. The filing fee for a merger authorisation is currently A$25,000. Fees are generally payable in respect of filings required to be made to Foreign Investment Review Board (FIRB) under the Foreign Acquisitions and Takeovers Act 1975 (FATA).
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
In relation to the informal clearance process, there is no set time frame for an ACCC decision. There are also different ‘stages’ of the informal clearance process which influence its duration. In general, an initial assessment of a merger will be conducted to determine whether a public review will be required. Where the ACCC is satisfied, based on that initial assessment of the information provided that there is a low risk of a merger substantially lessening competition, the ACCC may decide that it is not necessary to conduct a public review – these mergers are described as being ‘pre-assessed’. Pre-assessment can be conducted for both confidential and non-confidential mergers. A significant proportion of the mergers notified to the ACCC are able to be pre-assessed expeditiously within two to four weeks. In some cases, the ACCC may conduct targeted confidential market inquiries as part of the pre-assessment process, with the consent of the applicant, which may add an additional two to four weeks. If the ACCC decides that a public review is necessary to assess a merger in the public domain, the review will typically take a further six to 12 weeks. Complex mergers that result in the publication of a statement of issues are likely to take an additional six to 12 weeks after the statement of issues is published, but this can vary depending on factors such as the responsiveness of the merger parties to information requests and whether remedies are proposed.
Seeking informal clearance does not require the transaction to be suspended prior to clearance, but in some cases where the ACCC identifies competition concerns, the ACCC will request the acquirer provide it with a written undertaking not to complete the acquisition during the informal merger review process, or alternatively to provide a minimum period of notice before completing the transaction. If an undertaking is not provided, the ACCC may seek a court injunction to stop the transaction completing until it has completed its review.
In relation to the merger authorisation process, the ACCC must reach a determination on an application for authorisation of a merger within 90 days of receiving a valid application. This period may be extended with the consent of the applicant. If no decision is made within this period, the ACCC is taken to have refused to grant the authorisation. An application for authorisation must include an undertaking that the applicant will not complete the acquisition while the application is being considered by the ACCC.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
If authorisation is chosen as the method for seeking merger clearance, then it is not possible to close before clearance as this would be in violation of the undertaking given to the ACCC. A breach of the undertaking not to complete the transaction could result in a range of court orders, including an order directing the person to comply with the terms of the undertaking or any other order that the court considers appropriate.
Where informal clearance is sought from the ACCC, it is usual to wait until the ACCC has concluded its review before completing the merger. There are no sanctions for closing a transaction before informal clearance is obtained; however, the ACCC is able to seek an injunction to prevent this from occurring. Alternatively, the ACCC might let the transaction proceed and instead seek remedies including pecuniary penalties, divestiture of the shares or assets acquired, or an order that the transaction is void and that monies should be refunded to the vendor. The ACCC has rarely sought these remedies in relation to mergers. More commonly, if the ACCC is concerned that the transaction raises serious competition issues, it will seek an undertaking from the parties not to complete the transaction until completion of the ACCC’s review. Often this undertaking will be provided if the transaction is one in which there are complex competition issues, given the potential for the ACCC to obtain an injunction if the undertaking is refused.
If a filing has been made to FIRB under the FATA, it is a criminal offence to close without FIRB approval. FIRB routinely seeks the ACCC’s input before issuing a no objection notification.
The ACCC is also increasingly scrutinising the pre-completion integration between merger parties. In July 2018, the ACCC instituted proceedings against Cryosite Limited (Cryosite), in relation to the proposed sale of its assets to Cell Care Australia Pty Ltd (Cell Care). The ACCC alleged that Cryosite and Cell Care engaged in cartel conduct, which amounted to a form of ‘gun jumping’. The ACCC considered that the parties, in the period between signing and completion, made agreements as to how to market their services and how customers would be allocated between them in the pre-completion period. The parties had not sought informal merger clearance from the ACCC. Cryosite ultimately admitted it had engaged in cartel conduct and agreed to pay a penalty of A$1.05 million in civil penalties.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
As there is no mandatory requirement under the CCA for the parties to a proposed transaction to notify the ACCC, there are no sanctions for closing prior to clearance. However, if the ACCC subsequently establishes that the transaction has the effect or likely effect of substantially lessening competition in any market then the court can impose penalties and other remedies for a contravention of the merger provisions.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
The ACCC strongly recommends that merger parties obtain clearance for a merger that may potentially raise competition concerns, including a foreign-to-foreign merger, prior to closing.
In exceptional circumstances, the ACCC may accept the following:
- if it is possible, a carve-out of the acquisition of shares or assets that relate to Australia out of the global transaction, so that completion in relation to the Australian aspects does not occur until after the rest of the transaction; or
- if a carve-out is not possible, provision of an undertaking to the ACCC that the Australian assets will be preserved as separate and independently viable businesses via a ‘hold-separate’ arrangement while the parties await informal clearance from the ACCC. If the ACCC is prepared to agree to such a remedy, it is likely to require that an ACCC-approved independent manager manage the business, the subject of the hold-separate arrangement, while it completes its merger review. This option only exists for informal clearance as authorisation cannot be granted for acquisitions that have been completed.
Are there any special merger control rules applicable to public takeover bids?
Chapter 6 of the Corporations Act 2001 (Cth) governs takeovers of listed Australian companies or other Australian companies with more than 50 members. The CCA does not contain any specific provisions dealing with public takeover bids. The ACCC’s usual processes apply.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
Under the informal clearance system, the ACCC’s Informal Merger Review Process Guidelines recommend that the party lodge an initial written submission that includes:
- information about the parties to the transaction, including any relevant related bodies corporate, trading names and ownership details;
- details of the proposed transaction, including the underlying commercial rationale;
- details of the Australian business operations, interests and assets of the acquirer and target;
- where the target and acquirer supply goods or services in the same market or have a customer–supplier relationship with one another, market shares of the suppliers for each market, the extent of imports, and evidence of future new entry or expansion; and
- for mergers that the ACCC considers require public review, a list of key customer and supplier names and contact details.
The Informal Merger Review Process Guidelines and the Merger Guidelines contain an outline of the information that the ACCC may require to reach a view on how competition will be affected by the proposed transaction. The level of information required will depend on the complexity of the merger and potential competition issues raised. In an informal merger review, the parties do not need to provide a complete information package at the outset of the merger application. In simple transactions, a notification may comprise a brief courtesy letter setting out the information described above. In other transactions, a detailed submission will be required and the ACCC may request additional information throughout the review, depending on the issues raised.
Merger authorisation applications to the ACCC must be in the prescribed form approved by the ACCC (available on its website). The application must be accompanied by particulars of the proposed acquisition, the prescribed fee, an undertaking not to complete the acquisition until the ACCC has completed its review and a declaration that the application is true, correct and complete. The application should also be accompanied by a comprehensive submission, containing an analysis of any other anticompetitive effects or other detriments resulting from the acquisition and specifying any public benefits. Applications for merger authorisation that do not substantially comply with the requirements of the approved form may be invalid.
There are serious consequences for providing false or misleading information to the ACCC when applying for informal clearance or authorisation. Section 92 of the CCA prohibits a person from giving information to the ACCC in connection with an application for merger authorisation if the person knows or is reckless or otherwise negligent as to whether the information given is false or misleading. Breaches of this provision may attract pecuniary penalties. Knowingly giving the ACCC false or misleading information, or omitting any matter or thing without which the information is misleading, may also give rise to criminal penalties.
The ACCC may also revisit its informal clearance decisions if it determines that information provided to it was false or misleading. Similarly, the ACCC may take steps to revoke merger authorisation granted on the basis of false or misleading information. The ACCC may also seek orders from the Federal Court to stop the proposed acquisition from proceeding, or divesture if the acquisition has already been completed.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
The steps for clearance and the phases depend on which of the two clearance options is chosen.
Where a party seeks informal clearance:
- For each merger, the ACCC will make an initial assessment based on the information available to determine whether a public review will be required. Where the ACCC is satisfied, based on the information provided and other information the ACCC has before it, that there is a low risk of a merger substantially lessening competition, the ACCC may decide that it is not necessary to conduct a public review of that merger. These mergers are described as being pre-assessed. The notifying parties will be informed that the ACCC does not intend to conduct a public review.
- For mergers that the ACCC decides require a public review, it will commence a public review of the transaction once a notified transaction is publicly announced or if details of the transaction become public prior to any announcement. The ACCC will publish the merger proposal on its website, together with an indicative timeline. During the period of initial market inquiries, the ACCC will liaise with interested third parties, and will generally provide the merger parties with written details of the relevant issues or concerns arising from the consultation. If the ACCC decides that no competition concerns have been identified at the end of its initial public review, the ACCC will notify the parties by way of a letter that it does not propose to oppose the merger. This decision will be posted on the ACCC’s website.
- If the ACCC comes to a preliminary view that a proposed merger raises competition concerns that require further investigation, the ACCC will generally release a statement of issues that is published on its website, and a secondary timeline will be established. The parties will usually provide further information to address concerns raised in the statement of issues, or may in some cases discuss potential remedies. Following consultation on a statement of issues, the ACCC will generally provide the merger parties with written details of the relevant issues or concerns arising from the consultation. Once a final decision is made, the ACCC will notify the parties of its decision in writing and post the decision on its website. A public competition assessment or media release may be issued for certain decisions.
Where a party seeks merger authorisation, it must lodge an application with the ACCC in the prescribed form approved by the ACCC. Before lodgement of the application, the ACCC encourages applicants to contact it for informal discussions and guidance. The ACCC recommends that applicants provide a draft application before the pre-lodgement meeting so that the ACCC can provide specific guidance about the issues the applicants should address in their application.
The application must be accompanied by a lodgement fee of A$25,000, an undertaking that the parties will not complete the merger before a decision is reached, a declaration that the application is true, correct and complete, and an electronic copy of any relevant information or other documents (eg, transaction documents). The ACCC will then follow the statutory timetable for clearance.
Once an application is received, the ACCC will publish it on its merger authorisation public register and conduct market inquiries. The ACCC will consult a range of parties likely to be affected by the proposed acquisition and invite interested parties to comment or lodge submissions about the proposed acquisition. The applicant will then be invited to provide a response to the issues raised in submissions lodged by interested parties. Once a final decision has been made, the ACCC will send a copy of its final determination to the applicant and place a copy on the public register.
What is the statutory timetable for clearance? Can it be speeded up?
The timetable for clearance depends on which of the two clearance options are chosen.
Where informal clearance of the merger is sought, there is no statutory timetable for clearance, and the speed of the ACCC’s response will vary depending on the circumstances. An initial assessment is conducted for both public and confidential mergers, during which the ACCC decides whether the proposed transaction can be ‘pre-assessed’, that is, cleared without a public review. A significant proportion of the mergers notified to the ACCC are able to be pre-assessed expeditiously, often within two to four weeks. If a merger cannot be pre-assessed as a result of the initial assessment, the ACCC will advise the parties that it needs to conduct a public review and begin discussions with the parties about the process.
Phase I of a public review consists of three parts, which vary in duration:
- initial market inquiries, which take approximately two to five weeks from commencement of the public review;
- assessment of the information provided during market inquiries, which will be completed approximately two to four weeks after the close of market inquiries; and
- an announcement by the ACCC of its findings, upon completion of the assessment of information. This will take the form of a final decision (either opposing or not opposing the transaction) or a statement of issues.
Phase I of the public review will generally be completed within six to 12 weeks (excluding time periods where information is outstanding).
Publication of a statement of issues indicates the commencement of Phase II of a public review. The ACCC will issue a statement of issues where it considers that competition concerns may arise if the transaction proceeds. A statement of issues is a public document issued by the ACCC that outlines the basis upon which the ACCC has come to a preliminary view that the transaction may raise competition concerns that require further investigation. Publication of a statement of issues is likely to extend the timeline by six to 12 weeks (excluding time periods where information is outstanding), but this will vary on a case-by-case basis. This allows the ACCC to conduct additional consultation with the merger parties and other relevant parties (generally taking two to three weeks) followed by an additional period of assessment (approximately four to 10 weeks), after which it will release its final decision to oppose, not oppose, or not oppose subject to the acceptance of remedies.
While the ACCC will attempt to meet shorter deadlines, particularly where genuine commercial considerations can be demonstrated, it will not do so if this compromises its ability to make appropriate market inquiries. The ACCC publishes an indicative and non-binding timeline for each public informal clearance review at the beginning of the public review process, which outlines the dates it expects each of the above stages to be completed. The timeline may be suspended or revised if the ACCC requests additional information from the merger parties or other parties, or if remedies are proposed that require additional public consultation.
Parties are usually requested to respond to information requests within one to two weeks. The ACCC may require a period of time to properly consider the information provided, especially where it is voluminous. Where a remedy is proposed and is in suitable form, the ACCC may publicly consult on its content. The duration of public consultation depends on the complexity of the issues and the remedies proposed (eg, divestment).
In the case of applications for merger authorisation, the ACCC must make a decision in respect of an application within 90 days of the application being validly lodged (this may be extended). If the ACCC has not made a decision within 90 days (or any extended period), the application is taken to have been refused.