With the long-awaited exposure draft of legislation implementing key recommendations from the Harper Panel released this week, we look back on ACCC’s year on the merger review front.
As Chairman Rod Sims himself summarised, the ACCC had “another year packed with many significant and challenging transactions”.
The Commission was vocal about privatisations (and governments blatantly structuring sales to maximise proceeds at the expense of competition). It scrutinised minority stakes and cross-ownerships (e.g. the Asciano consortia) and focused on vertical integration of supply chains. It also faced challenged, and struggled in the Federal Court and at the Australian Competition Tribunal to establish facts and show an effect on competition (think Sea Swift).
In FY2015/16, the ACCC:
- considered 319 mergers
- pre-assessed 287 mergers (90%)
- conducted 32 public reviews (10%)
- issued 12 Statements of Issues
- cleared 17 mergers outright, and a further 6 mergers cleared with undertakings
- had 6 mergers withdrawn or made no decision (some after “red light” SOIs), and
- opposed 2 mergers.
Although less mergers were considered this year, 90% were pre-assessed, up from 75% last year. This illustrates the ACCC’s shift towards pre-assessing mergers wherever possible and reducing the number of public reviews, and the longer timelines that tend to go with them.
Taking the long view
At the recent Law Council workshop, chairman Mr Rod Sims sought to put some perspective around the ACCC’s mergers record in Court and at the Tribunal with some observations spanning the past 4 decades. He noted that, since 1974:
- only 11 mergers have been decided by the Tribunal or a Federal court; and
- of those, the ACCC host lost the last 4 contested hearings (in the last 13 years).
However, Mr Sims maintained that the ACCC process has still had an impact as, in the past decade:
- the ACCC opposed (or cleared with remedies) nearly 100 mergers; and
- more than 100 mergers were withdrawn, some due to the ACCC’s concerns.
An end to Tribunal authorisations
Only three applications for merger authorisations to the Tribunal have ever been made (and only in the last three years), despite the procedure being available since 2007.
The most recent, and successful, application was made by Sea Swift in April 2016. In the face of continued opposition from the ACCC, the Tribunal granted authorisation on 1 July 2016 subject to behavioural commitments from Sea Swift.
Importantly, however, if passed the exposure draft legislation would remove the option of applying directly to the Tribunal for merger authorisation (read our alert here). Instead, the Tribunal’s powers will be transferred to the ACCC as the decision maker of first instance for merger authorisations.
One step closer
The draft legislation implements the Harper Panel’s recommendation to streamline the merger review process by combining the formal clearance and authorisation processes. The Exposure Draft does however differ from the Harper recommendations in two key respects:
- While the Tribunal can review an authorisation application made to the ACCC, its review will not be a full rehearing of the issues. Rather, it will be limited to considering the information that was available to the ACCC or other information the Tribunal thinks it needs to clarify information provided by the ACCC. In contrast, the Harper Panel’s recommendation was that the Tribunal would have the discretion to allow a party to adduce further evidence, in addition to what was before the ACCC.
- The application for authorisation must be in a form “approved by” the ACCC, rather than set out in regulations, leaving the form and content of the application within the ACCC’s control. It remains to be seen how “prescriptive” the ACCC may be and therefore how attractive the new process is to potential applicants for merger review.