On 26 November 2009, Senator Xenophon introduced into Parliament the Trade Practices Amendment (Material Lessening of Competition – Richmond Amendment) Bill 2009 (Cth) (Bill), which proposes two key changes to section 50 of the TPA.
Currently, section 50(1) of the TPA prohibits acquisitions of shares or assets that would have the effect of substantially lessen competition in a market. The two key changes are:
- replacing the word ‘substantially’ in section 50(1) with the word ‘materially’, and
- inserting a new subsection into section 50 to prevent a corporation with a ‘substantial share of a market’ from acquiring shares or assets if the acquisition would have the effect of ‘lessening competition in a market’.
The first amendment aims to lower the threshold for blocking a merger or acquisition. The second aims to address the problem of ‘creeping acquisitions’, a term used to refer to a number of small acquisitions that do not raise competition concerns when considered individually, but may do so when considered collectively.
The Bill has been referred to the Senate Economics Legislation Committee (Committee) for inquiry and report by 18 March 2010. While there has been some support for the Bill, a number of interested parties who provided submissions to the Committee are opposed to the Bill. Arguments against the amendments include:
- in the context of section 50, ‘substantially’ and ‘materially’ are likely to have the same or similar meanings, and
- an analysis of market share does not, in isolation, provide a good indication of relevant competitive dynamics.
Some interested parties also submitted that the current test for assessing mergers is sufficiently flexible to allow the ACCC and the courts to properly assess both large and small scale acquisitions. This is not the view of the Rudd Government, who announced on 22 January 2010 that it intends to amend the TPA to deal with creeping acquisitions by allowing the ACCC to block mergers that would substantially lessen competition in any local, regional or national market. The government will also ensure that the ACCC can examine the acquisition of ‘greenfield’ sites, and not just existing businesses.