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Key issues in designing a mandatory merger regime for a modern economy

What has been proposed for Australia so far?

Sims' 2021 proposal on merger reforms

No precise model for a mandatory filing regime has yet been proposed in Australia. The story so far is as follows.

In 2021, former Chair Rod Sims raised the ACCC's concerns that Australia's current merger laws are not 'fit for purpose' and that the current merger review regime is 'skewed towards clearance'. Sims indicated that he was initiating debate and called for a mandatory regime with limited appeal rights, among other changes.

The key elements of Sims' proposal were to:

  • make merger clearances mandatory: ie replace Australia's current voluntary 'informal' merger review process with a mandatory formal clearance process;
  • make it easier for the ACCC to oppose mergers by:
    • requiring merger parties to 'satisfy' it that the proposed acquisition is not likely to have the effect of substantially lessening competition;
    • lowering the standard of proof for finding that a merger is likely to substantially lessen competition; and
    • deeming mergers that entrench, materially increase or materially extend a party's substantial market power illegal;
  • curtail the role of the court and limit parties' ability to challenge the ACCC's decision to a 'limited merits review'; and
  • establish a specific regime to apply to big tech, with separate jurisdictional thresholds and a lower legal threshold for opposing mergers.
Read more about these proposals in our previous Insights

Echoing a need for reform

Since these proposals were put forward, the new ACCC Chair, Gina Cass-Gottlieb, has continued to echo Sims' sentiments about the need for reform, reiterating on a number of occasions that the regime is not 'fit for purpose' and 'presents real challenges', and calling specifically for a mandatory and suspensory filing regime in Australia.1 Cass-Gottlieb highlighted the challenges the ACCC faces in reviewing multi-jurisdictional transactions, noting that 'in global transactions because Australia is one of a small number of regimes that does not have mandatory notifications, in some instances [the ACCC is] not notified at all', or [the ACCC] can hear partially or hear late and that really disadvantages Australia in order to determine if a transaction has an impact in Australia'.2

ACCC Commissioner Stephen Ridgeway cited similar concerns as a keynote panellist at Mergermarket’s annual M&A Forum in Sydney on 16 March 2023, noting that merger filings made to the ACCC are often not as fulsome as those filed by parties in other jurisdictions. In that forum, Ridgeway provided a significant update on the proposed reforms, explaining that the ACCC continues to be of the view that the current regime is not fit for purpose and is out of kilter with mandatory regimes overseas, and that change is needed. However, some of the ACCC's previous proposals may feature less in its reform plans.

Reflecting on Sims' 2021 proposals, Ridgeway noted his personal views that:

  • the ACCC remains keen to replace Australia's informal regime with a mandatory and suspensory regime;
  • there will not likely be any changes to the 'substantial lessening of competition' test as initially proposed. Ridgeway noted that the courts have provided some clarity around this, with 'likely' now generally understood to mean 'real chance';
  • it was less likely (but a real chance remained) that 'deeming provisions' around acquisitions by firms with market power would be introduced. Ridgeway flagged that issues with this proposal had been raised during public consultations;
  • a specific regime applying to big tech was still necessary, with this industry needing 'special rules'; and
  • there is still support for proposals to limit the ACCC's merger decisions to review by the Competition Tribunal (as opposed to the courts), noting that court processes consume its time and finite resources. This is a very significant reform, which would remove an important check and balance, as we outlined previously.

Looking forward

Some of these changes would be welcome. Nonetheless, discussions about the introduction or design of a mandatory and suspensory regime for Australia are by no means settled, with Ridgeway noting that it ultimately falls to Treasury and government to progress the reforms. The ACCC does not have any insight into the Federal Government's thinking or proposed timelines, but has flagged that a lot of the detail still needs to be worked through before reform could be introduced.  

One of the most significant aspects of the reform proposals is the introduction of a mandatory merger filing regime.

We now take a look at overseas regimes to understand the main elements of a mandatory regime:

  1. At what level of interest could the regime apply?
  2. What thresholds could apply?
  3. How long could a review take and what process options would be made available, particularly for transactions raising no significant competition issues?

Footnotes

  1.  Law Council Competition and Consumer Law Workshop opening address (9 September 2022); https://www.afr.com/policy/economy/the-courts-seem-naive-rod-sims-reignites-accc-merger-laws-debate-20230202-p5chil

  2. https://www.afr.com/policy/economy/the-courts-seem-naive-rod-sims-reignites-accc-merger-laws-debate-20230202-p5chil; see also https://globalcompetitionreview.com/article/qa-gina-cass-gottlieb?utm_source=EU%2Braids%2BRed%2BBull&utm_medium=email&utm_campaign=GCR%2BAlerts