ACCC seeks overhaul of Australia's merger regime: what you need to know

Australia's merger review regime  

Notification is not mandatory in Australia and merger parties are not prevented from completing the transaction until they have received merger clearance. To stop a merger that the ACCC considers to be anti-competitive, the ACCC must take enforcement action in the Federal Court. This voluntary, non-suspensory model can result in the ACCC having insufficient information and time to conduct its review. 

• A new formal merger review regime to replace all existing channels for seeking merger clearance (ie ACCC informal clearance, ACCC authorisation and seeking a declaration from the Federal Court that the merger does not substantially lessen competition).
• Merger review would be mandatory for transactions above certain thresholds, with the ACCC having a 'call in' power to review acquisitions below the thresholds where necessary.
• A simpler 'notification waiver' process would be available for acquisitions that are above the thresholds but unlikely to raise serious competition concerns, effectively enabling merger parties to proceed with the acquisition without the need for a Phase 1 review.
• To approve a merger, the ACCC must be satisfied that the proposed acquisition is not likely to have the effect of substantially lessening competition.
• Parties would be prohibited from completing the merger until clearance was granted.
• Parties would need to submit all information upfront to the ACCC.
• Limited merits review to the Australian Competition Tribunal would be available based on the evidence before the ACCC. 

Merger factors

The current merger factors in section 50(3) of the Competition and Consumer Act 2010 (Cth) place undue weight on market characteristics which may limit or offset anti-competitive effects, rather than on factors indicative of anti-competitive effects, such as  how the acquisition will change the structural conditions for competition.

• Revise the mandatory merger factors to be considered when assessing a transaction to focus on the structural conditions for competition that are changed by the acquisition.
• As recommended in the ACCC's Digital Platform Inquiry Final Report, incorporate additional merger factors which consider (i) the likelihood that the acquisition will remove a potential competitor and (ii) the nature and significance of assets being acquired, including data and technology.

Standard of proof

To successfully challenge a merger, the ACCC must go to court and prove on the balance of probabilities that there is a real commercial likelihood of a substantial lessening of competition. The ACCC faces evidentiary difficulties proving future anti-competitive effects, including because suppliers and customers may be reluctant to provide evidence and because of the weight courts place on the evidence of the merger parties themselves. 

• By amending the definition of 'likely' in s50, lower the standard of proof so that a merger will breach competition laws where there is a 'possibility that is not remote' that the transaction would substantially lessen competition. 

Firms with market power

The ACCC perceives market concentration and market power to be increasing in Australia. Acquisitions by firms with substantial market power are more likely to have the effect of substantially lessening competition. Accordingly, acquisitions that entrench market power ought not to require specific proof of anti-competitive effects.

• Where one of the merger parties has substantial market power, an acquisition will be deemed to substantially lessen competition where it entrenches, materially increases or materially extends that market power.

Digital platforms

Current merger laws do not prohibit acquisitions by digital platforms where there is a low likelihood of a substantial lessening of competition, but where, if it does occur, the impacts are substantial and long lasting.

Large digital platforms perform a critical role in the economy. Acquisitions by these platforms therefore require a different level of scrutiny.

• Specified digital platforms would be subject to a tailored merger test.
• The ACCC has yet to reach a view on which test should apply, but at a minimum, the probability of competitive harm that needs to be established would be lower than that which applies for acquisitions in the economy more generally.
• Other specific rules for digital platforms may also be required to govern their conduct and address competition and consumer concerns present in digital platform markets 

Other agreements in merger assessments

Merger parties may enter into other agreements that impact on competition. Due to the anti-overlap provisions, the effects of these agreements are considered separately to the effects of the merger.

• The competitive effects of agreements entered into by merger parties can be considered together with the merger as part of the substantial lessening of competition assessment.