The future of mergers in Australia: Treasury's proposed new framework

The Exposure Draft introduces various changes and information-gathering requirements in relation to notification and the broader merger approval system.

Who has the obligation to notify?

There is an obligation on the principal party (being the person/s who acquire the shares / assets) to make a notification to the ACCC. The Exposure Draft recognises, however, that a notification can also be made jointly by all parties to the transaction.

Multiple acquisitions

Treasury recognises that a commercial transaction may involve multiple acquisitions by different parties. A single merger notification may therefore cover multiple acquisitions if:

• those acquisitions together constituted a single acquisition;
• each party to those acquisitions was a party to that single acquisition; and
• each principal party to those acquisitions was a principal party to that single acquisition.

Material changes of fact

Parties will also have an ongoing obligation to notify the ACCC of any material changes of fact in the notification until such time as the ACCC makes its determination. Depending on the extent of the impact of that material change on the ACCC's investigation, it will have the ability to effectively 're-start the clock' and deem that the date it became aware of the material change in fact is the effective notification date. An example of a material change of fact that was provided was the exit of a major competitor from the market.

Information requirements

Treasury has not yet prescribed what information and documents will need to be included in a notification for it to be deemed 'complete' and for the ACCC's clock to start ticking in terms of its review timeline. However, the Exposure Draft makes it clear that the ACCC will determine that there has been no 'effective notification' if the filing is incomplete, misleading or false in any material respect. The ACCC may only make a determination that there has been no effective notification within a reasonable period and if it has not made a determination in respect of the notification.

Filing fee

Treasury has not yet prescribed what filing fee will need to paid by merging parties (although in April, it was noted fees are expected to be between $50,000-$100,000), but it is clear the ACCC will not start assessing a proposed acquisition until such time as the fee has been paid by the merging parties. Interestingly, if the ACCC elects to move to a Phase 2 investigation, a further fee will need to be paid by parties, and the ACCC will not make a determination until that fee has been paid. To the extent that the ACCC then determines that a public benefit assessment should be carried out, parties may be subject to the payment of a third fee.

The Exposure Draft introduces the new concept of a 'stayed' acquisition. A stayed acquisition cannot be put into effect, otherwise it will be void. An acquisition will be stayed in the following circumstances if the:

• acquisition is required to be notified but has not been;
• acquisition has been notified but has not been finally considered by the ACCC, including where the notification is the subject of an ongoing Tribunal review;
• ACCC has determined that the notified acquisition must not be put into effect and has not subsequently determined that the acquisition is of substantial public benefit; or
• notification of the acquisition becomes 'stale', ie 12 months has lapsed since the ACCC's determination that the acquisition may be put into effect or that the acquisition would be of substantial public benefit.

The new concept of a 'stale' notification means that parties will need to put the acquisition into effect within 12 months of the ACCC's determination. This proposed time limit intends to recognise that market conditions can materially change within a year of any assessment or determination by the ACCC on substantial public benefits or substantial lessening of competition.

Putting an acquisition into effect includes 'purportedly' putting the acquisition into effect. This concept aims to capture circumstances where an acquisition is put into effect otherwise than in accordance with the ACCC's determination, or where the time period has otherwise lapsed. This purported acquisition will be void.

The interpretation provision of 'lessening of competition' in the CCA is proposed to be expanded beyond the clarification that 'lessening of competition' includes 'preventing or hindering competition' to clarify that 'substantial lessening of competition' in a market includes creating, strengthening or entrenching a substantial degree of power in any market.

For acquisitions that the ACCC reasonably suspects will be likely to substantially lessen competition, the ACCC may determine that a further in-depth 'Phase 2' review should be undertaken, during which it will issue a notice of competition concerns to the parties outlining the Commission’s preliminary assessment.

At the end of Phase 2, the Commission must determine that an acquisition may be put into effect, with or without conditions, unless it reasonably believes the acquisition would be likely to substantially lessen competition. Timeframes from the decisions are below.

The Exposure Draft and explanatory materials do not define or clarify what is meant by 'reasonably suspects' or 'reasonably believes' or the differences in the burdens of the thresholds.

The ACCC will be allowed to consider the cumulative effect of all acquisitions put into effect by the merging parties within three calendar years of the date the merger filing was lodged, whether those acquisitions were individually notifiable or not. The notifiable acquisition (ie the acquisition the ACCC is assessing) will be taken to have the effect, or be likely to have the effect, of substantially lessening competition in any market if the cumulative effect of the current acquisition and any acquisitions in the preceding three years by the merging parties in the same industry would be, or be likely to be, to substantially lessen competition in any market.

The Exposure Draft establishes set periods by which the ACCC must make a determination regarding notified acquisitions, being:

• 'Phase 1 determination period': up to 30 business days after the acquisition has been notified and no less than 15 business days for 'fast-track' determinations when no issues are identified.
• 'Phase 2 determination period': if a determination is not made during Phase 1 and the ACCC reasonably suspects the notified acquisition would, if put into effect, have the effect, or be likely to have the effect, of substantially lessening competition in any market, it has up to a further 90 business days to complete its review.

While the mandatory regime will create additional regulatory hurdles, these timelines are intended to give businesses certainty about when they will receive a decision from the ACCC. The Government has said this is an important safeguard in the context of the ACCC's new powers to 'stay' acquisitions. However, the Exposure Legislation allows the ACCC to extend the determination period in a number of circumstances, including:

• extending the Phase 2 determination period by the number of days on which the ACCC has not given notice of competition concerns or by the extension granted to the parties for making submissions following notice of competition concerns; and
• changing the notification date to the date the ACCC becomes aware of a change in fact, if the ACCC reasonably considers that change is material to its determination and is then only required to make the determination 'within a reasonable period after the ACCC becomes aware of the change in fact'.

In practice, these timeframes may not provide businesses with the degree of predictability intended.

If the ACCC does not make a determination within the determination period, it is deemed to have made a determination that the acquisition may be put into effect.

As foreshadowed in April, a public benefit assessment of an acquisition which may otherwise be anti-competitive will only take place after the ACCC's competition assessment.

There are also some changes to the current public benefit test. The proposed test introduces the concept of a 'substantial' outweighing of any detriment to the public, which is not in the current test. The ACCC still needs to be 'satisfied' that, were the acquisition put into effect, it would meet the relevant test, but it must be satisfied 'on reasonable grounds'. The ACCC will continue to have broad discretion to consider what constitutes a public benefit. However, in making its determination, the ACCC must consider the object of the CCA and 'all relevant matters, including the interests of consumers' and it may consider the contract, arrangement or understanding (or proposed contract) pursuant to which the acquisition is to take place and any related restriction.

Parties may apply for a determination that the acquisition would be of substantial public benefit within 21 days of the ACCC's determination. The application must be complete and a fee may also apply. The ACCC has 50 business days from the application date to make a determination (although it must not do so before 15 business days), otherwise it is deemed to not have made the determination. However, within 20 business days or as soon as practicably thereafter, it must provide a 'substantial public benefit assessment' setting out its preliminary views, otherwise the 50-day period will be extended. Parties will be given the opportunity to make submissions in relation to the ACCC's preliminary views.

Preliminary ACCC views

As noted above, the ACCC is required to provide its preliminary views during Phase 2, and any substantial public benefit assessment within specific timeframes. This is intended to provide parties the opportunity to make submissions prior to the ACCC's final determination.

Public register

The Exposure Draft establishes a register of notified acquisitions that must be made available by the ACCC and which must contain certain information, ie the ACCC's determination as to whether the acquisition may be put into effect (including any specified conditions), the ACCC's determination regarding substantial public benefit, the ACCC's reasons for making any such determination, and any decision that a notification will be subject to Phase 2 review.

The public register is intended to facilitate transparency and predictability and ensure that information and documents are publicly released and accessible both to parties to acquisitions and the community more broadly. Further regulations will set out what other information or documents are to be included. It will be important that there is sufficient transparency balanced with the need for third-party confidentiality to be maintained.

The Exposure Draft provides for limited merits review by the Competition Tribunal to affirm, set aside or vary the determination of the ACCC. A notifying party or anyone with sufficient interest in the acquisition must, within 14 days of the ACCC's determination, apply to the Tribunal to be eligible for review. The Exposure Draft also introduces 'fast-track' review where an application is made within seven days after the determination (and with the consent of the applicant and the notifying party).

For standard reviews, the amendments provide that:

• the ACCC must give such information, make such reports and provide such other assistance to the Tribunal as required by it;
• the Tribunal may have regard to any information given, documents produced or evidence given to the Commission in connection with the making of the decision by the Commission to which the review relates;
• the applicant may be required by regulations to give the Tribunal additional information or documents in relation to the applicant before the application will be considered;
• the Tribunal may allow new information, documents or evidence that it is satisfied was not in existence at the time the ACCC made its determination; and
• the Tribunal may consult, in such a manner as it sees fit, any consumer associations or consumer interest groups.

For fast-track reviews, the explanatory materials explain that these are appropriate where a specific element of the determination is being challenged. In these circumstances, the Tribunal:

• must not have regard to any information, documents or evidence other than information that was referred to in the ACCC's reasons for making the determination to which the review relates, or additional information or documents specified in regulations; and
• not make a finding of fact that is inconsistent with a finding of fact made by the ACCC in making the determination.

Therefore, if parties seeking merits review dispute a finding of fact in the ACCC's determination or require the Tribunal to consider new material that has been brought into existence since the ACCC's decision, fast-track reviews will not be suitable.

The Tribunal must make its decision within the following periods:

• for fast-track review, 60 days after the review period starts;
• where the Tribunal allows new information, documents or evidence under subsection 100N(5), 180 days after the review period starts;
• for all other reviews, 90 days after it starts,

(Initial Period).

However, where the Tribunal determines that the review cannot be dealt with in the Initial Period due to special circumstances or the matter's complexity, the review of an acquisition can be extended by a further period of up to 90 days.  

Judicial review of Tribunal decisions will be available in the Federal Court.

The Exposure Draft sets out the following enforcement mechanisms and remedies available under the proposed new system:

Orders

• The Federal Court may order the parties to notify the ACCC of an acquisition.
• The Federal Court may make an order that the voiding of a stayed acquisition is not to apply. The Federal Court must have regard to the seriousness of putting into effect the stayed acquisition and may have regard to other criteria linked with contravention of the suspensory rule, including whether the failure to notify was inadvertent, done in good faith or could not have been foreseen by the parties.
• The Federal Court may make an order to give effect to the voiding of a stayed acquisition.

Injunctions

• The Federal Court may grant an injunction to prevent acquisitions from proceeding where the ACCC made a determination that a notified acquisition may be put into effect on the basis of false or misleading information given by the party.
• The Federal Court may grant an injunction in relation to potential breaches of the notification obligations.

Divestiture orders

• The Federal Court may order the disposal of anything required, or declare the acquisition void if the acquisition has been put into effect on the basis of materially false or misleading information provided to the ACCC, or in breach of conditions in the ACCC's determination.

Penalties

• The existing pecuniary penalties regime also applies to the new acquisition and notification obligations, including the prohibition against giving false or misleading information to the ACCC in relation to matters under the new system.

The enforcement framework appears to give the ACCC strong measures to prevent anti-competitive acquisitions whilst ensuring a degree of flexibility.

The Exposure Draft seeks to give additional powers to the ACCC to enhance its ability to carry out its investigative functions.

Information gathering

The Exposure Draft gives the ACCC non-compulsory powers to request information through inviting interested persons to make written submissions and consulting with persons considered reasonable and appropriate to consult with for the purposes of making a determination. The ACCC may also request additional information relevant to the determination from a party to a notified acquisition and request particular information relevant to the determination from any other person.

False or misleading information in response to section 155 notices

Section 155 notices will continue to be used by the ACCC to gather relevant information and evidence, including regarding the acquisition determination. The new system introduces a civil penalty for contravention of the prohibition to knowingly furnish information or give evidence in response to a section 155 notice that is false or misleading.

The current merger prohibition (section 50) and merger authorisation process will be phased out.

From 1 July 2025, the current merger authorisation process will be closed off to new applications.

Businesses can continue to voluntarily engage with the ACCC via its informal clearance process until 31 December 2025. While not clear on the face of the Exposure Draft, the explanatory materials note existing prohibitions will continue to apply to acquisitions that were entered into before 1 January 2026, even if they have not yet been completed as at that date. This seems to mean the ACCC can take enforcement action under section 50 even after the new regime commences for transactions entered into before 31 December 2025. However, this will need to be clarified in the draft Bill.

On and from 1 December 2025, parties can also voluntarily notify under the new regime before the mandatory notification requirements commence on 1 January 2026. Section 50 will be amended so that it does not apply to a 'notified acquisition'. The ACCC can undertake initial assessments but cannot make a final determination until after 1 January 2026.

On and from 1 January 2026, businesses will no longer be able to voluntarily engage with the ACCC via its informal clearance process.

Treasury did not provide any further insight at this stage into exactly what the notification thresholds will be. Treasury only intends to consult on this issue later this year.

What we do know, however, is that the relevant thresholds are intended to be set out in regulations (and not the Act) to provide flexibility for the Minister to vary them over time.

The Minister will also have the ability to designate specific thresholds or classes of acquisitions in industries deemed 'high-risk'. Designations will be automatically repealed after five years. 

The new regime also allows for parties to voluntarily notify the ACCC of their proposed acquisition (even if it does not meet the prescribed thresholds). This gives parties an avenue to secure formal comfort that the ACCC does not object to the acquisition prior to closing.