Recalibration of the ACCC's approach to merger reform

Notification is not mandatory in Australia and merger parties are not prevented from completing the transaction until they have received merger clearance.

To prevent a merger that the ACCC considers to be anti-competitive, it must apply to the Federal Court.

Mandatory filing for transactions that meet thresholds: Merger review would be mandatory for transactions above certain thresholds.

Suspensory: For transactions that meet the filing thresholds, parties would be prohibited from completing the merger until clearance was granted.

Residual call-in power: The ACCC would have a 'call-in' power to review acquisitions below the thresholds, where necessary.

Simplified process option for acquisitions unlikely to raise serious competition concerns.

Limited merits review to the Australian Competition Tribunal would be available based on the evidence before the ACCC. 

The proposed regime will include the core structural elements outlined in 2021 (see column to the left), plus additional elements raised by Ms Cass-Gottlieb in April 2023, informed by stakeholder feedback and recent experience with formal merger authorisations. These additional elements are set out in this column.

The ACCC will look to international merger regimes when formulating recommendations for thresholds. There could be a combination based on:

• transaction value: the size of the proposed transaction; and/or
• size of parties: the size of the business being acquired globally and/or within Australia.

To obtain comfort that transactions do not raise concerns, parties can choose three alternatives: informal review, formal authorisation or seeking a declaration from the Federal Court. Each has its own idiosyncrasies.

Informal review has no document requirements, with the detail required determined by the significance of the issues and iteratively based on engagement with the ACCC.

Formal authorisation is a public process with high levels of transparency, and the filing must be in accordance with the ACCC's form and accompanied by certain prescribed documents.

Seeking a declaration from the Federal Court is a comparatively more document-intensive process.

Mandatory merger review process: A new mandatory formal merger review regime for mergers that fall above certain thresholds or that are 'called-in' by the ACCC.

Increased document requirements: Parties would need to submit all information upfront to the ACCC.

Simplified process option: A simpler 'notification waiver' process would be available for acquisitions that are above the notification 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.

Pre-assessment process to remain: For acquisitions below the notification threshold, merger parties can continue to seek ACCC clearance under the existing informal pre-assessment process.

Mandatory merger review process: The Chair also proposes a new mandatory formal merger regime, with reviews possible by application to the Tribunal.

Federal Court declarations still possible: The regime would also retain parties' ability to apply to the Federal Court for declarations.

Simplified process option: The Chair clarified that non-contentious acquisitions that are above the notification thresholds could qualify for a notification waiver. If granted, merger parties would not need to file a full application and the matter would be dealt with more quickly. This would work in a similar way to the ACCC's current pre-assessment process. The Chair did not provide further detail on Rod Sims' previous position that the current informal pre-assessment process would be available for clearance of acquisitions below the notification thresholds.

The review period may vary depending on the complexity of the transaction, with simple applications having a shorter review period than more complex ones.

Structural changes in market relevant: 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.

'Killer' acquisitions and data: As recommended in the ACCC's Digital Platform Inquiry Final Report, incorporate additional merger factors that consider (i) the likelihood the acquisition will remove a potential competitor and (ii) the nature and significance of assets being acquired, including data and technology.

Additional merger factors: In addition to revising the mandatory merger factors as proposed in 2021, factors would be added, including:

• the loss of actual or potential competitive rivalry;
• increased access to, or control of, data, technology or other significant assets;
• whether the acquisition is part of a series of relevant acquisitions; and
• whether the acquisition entrenches or extends a position of substantial market power.

Section 50 of the CCA prohibits mergers that have the effect, or are likely to have the effect, of substantially lessening competition. Who bears the onus of proof depends on the which process is followed.

Declaration: The party making the application in the Federal Court bears the onus of proving that the transaction does not substantially lessen competition.

Injunction: The ACCC makes the application in the Federal Court and bears the onus.

Onus of proof on merger parties: To approve a merger, the ACCC must be satisfied that the proposed acquisition is not likely to have the effect of substantially lessening competition.

Keep current standard of proof: In contrast to the 2021 proposals, there are not likely to be any changes to the 'substantial lessening of competition' test as initially proposed. Commissioner Stephen Ridgeway recently noted that the courts have provided some clarity, with 'likely' now generally understood to mean 'real chance'.

Informal review and clearance: no substantial lessening of competition.

Formal authorisation: either no substantial lessening of competition or public benefits outweighing public detriments.

Declaration applications to the Federal Court: The court will make a declaration if it finds that the transaction does not substantially lessen competition in any market.

Substantial lessening of competition test only. No public benefits test was suggested.

Substantial lessening of competition test to remain.

Public benefits: Merger parties would have the option of applying for clearance on public benefits grounds, but only as a 'second stage option' if the applicants are not able to first satisfy the ACCC or Tribunal that a transaction can be cleared on competition grounds. It is not clear how this 'second stage' would work in practice.

Parties may apply to the Federal Court for a declaration or seek judicial review of ACCC or Tribunal decisions.

Parties may also apply to the Tribunal for a limited merits review of ACCC formal authorisation decisions.

Parties may apply to the Tribunal for a limited merits review of ACCC decisions.

Application to the Federal Court would be available in relation to mergers that fall outside the mandatory merger regime.

Separate test for firms with substantial market power: The ACCC Chair clarified that changes to the regime would deal with firms with substantial market power in two ways:

• legislation would confirm that the 'substantial lessening of competition test' includes 'entrenching, materially increasing or materially extending a position of substantial market power'; and
• the extent to which an acquisition entrenches or extends a firm's substantial market power would also be one of the merger factors considered by the ACCC in applying the 'substantial lessening of competition' test.

The ACCC considered acquisitions by firms with substantial market power are more likely to have the effect of substantially lessening competition, and acquisitions that entrench market power ought not to require specific proof of anti-competitive effects.

Separate test for specified digital platforms: Specified digital platforms would be subject to a tailored merger test.

The ACCC did not reach a view on which test should apply but considered that, at a minimum, the probability of competitive harm that needs to be established would be lower than that applying to acquisitions in the economy more generally.

The Chair did not specify if the ACCC would continue to propose a separate merger test for specified digital platforms. However, she stated that Australia's current laws cannot adequately address competition and consumer issues raised by digital platforms, and the ACCC has recommended a range of reforms, including mandatory codes of conduct for designated influential digital platforms. In addition, the new proposed merger factors appear to be aimed at addressing ACCC concerns regarding digital platforms.