In Touch: What's happening in Australian competition and consumer law - October 2024

The latest in competition and consumer law – October 2024 11 min read

Full throttle: Australia's merger system moves towards a mandatory regime

On 10 October 2024, the Federal Government introduced the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (the Bill) to Parliament. Subject to passage, the legislation will overhaul the existing merger clearance rules, establishing a single mandatory and suspensory administrative merger regime effective from 1 January 2026, for any deals that close on or after that date.

Key aspects of the Bill include:

• Acquisitions of shares or assets meeting certain thresholds must be notified to the ACCC and cannot proceed without clearance, or the transaction is void. The announced monetary thresholds consist of two limbs, where acquisitions will be notifiable where the target has 'a material connection to Australia' and are either:
  • 'large mergers': the combined Australian turnover of the merger parties is at least $200 million and either the Australian turnover is at least $50 million for at least two of the merger parties or the global transaction value is at least $250 million; or
  • 'very large acquirers': the acquirer group's Australian turnover is at least $500 million and the Australian turnover is at least $10 million for at least two of the merger parties.

Additionally, to address serial acquisitions, a three-year cumulative turnover threshold will operate to capture businesses with combined Australian turnover exceeding $200 million (or $500 million for very large businesses), and where acquisitions in the same or substitutable goods or services total at least $50 million ($10 million for very large businesses) over three years.

The Bill empowers the Minister to make targeted determinations that could require certain classes of mergers, or mergers within a 'high-risk' industry, to be notified. For example, the Treasurer has already announced that notification will be required if a target is a non-listed body corporate (ie a private company), at least one merger party has Australian turnover of at least $200 million and the acquisition results in the acquirer holding more than 20% voting power.

• Transactions that do not result in control or a change in control will be exempt from mandatory notification. Additionally, acquisitions of shares in the capital of a listed company, listed scheme or a large unlisted company will not require notification unless they result in the acquirer's voting power exceeding 20% or moving from above 20% to below 100%.
• The Bill introduces a confidential review process for surprise hostile takeovers and certain voluntary transfers under the Financial Sector (Transfer and Restructure) Act 1999 (Cth).
• The ACCC will assess mergers against a new and expanded substantial lessening of competition test applicable to mergers, considering whether it will lead to an effect or likely effect of creating, strengthening or entrenching a substantial degree of market power. The existing public benefits test will remain unchanged, allowing the ACCC to clear an otherwise anti-competitive acquisition if satisfied that it would result in public benefits that outweigh any detriments.
• Transitional arrangements will begin from 1 July 2025, when merger parties can begin to voluntarily notify under the new regime, and the current mergers authorisation regime will close. Parties can elect to continue to engage with the ACCC's informal mergers clearance process until 31 December 2025. Mergers already cleared by the ACCC do not need to be notified under the new regime if completion occurs after 1 January 2026.

The provisions of the Bill have been referred to the Senate Economics Legislation Committee.

For more, see our Insight.

Bells and whistles: further proposals to strengthen Australian Consumer Law protections

The Federal Government has signalled its commitment to advancing major consumer law reforms, with three key announcements:

• On 16 October 2024, the Government announced plans to introduce new civil prohibitions and penalties for breaches of the consumer guarantees and supplier indemnification provisions of the Australian Consumer Law (the ACL). It is considering the introduction of measures such as a prohibition on the refusal of suppliers to provide consumer remedies and on the refusal of manufacturers to indemnify suppliers for such remedies. The announcement was accompanied by a Consultation Paper seeking stakeholder feedback by Thursday, 14 November 2024 on how the proposed prohibitions and penalties should be designed.
• On the same day, the Prime Minister's Office announced it will legislate a ban on unfair trading practices, following a previous Treasury consultation. This is expected to include a general prohibition on unfair trading practices, along with specific prohibitions on practices such as drip pricing, subscription traps and misleading online practices that create a false sense of urgency. The Government has foreshadowed a final reform proposal in the first half of 2025.
• Treasury has opened a consultation, with the publication of a Discussion Paper, which examines whether the ACL remains fit for purpose to protect consumers from the potential harms of the use of AI. Measures such as AI-specific prohibitions, consumer guarantees, safety standards and unfair contract terms prescriptions are currently being considered by Treasury. The deadline for submissions to this consultation is Tuesday, 12 November 2024.

See our Insight for further explanation of these reforms.

Searching for answers: ACCC Digital Platform Services Inquiry update

Since our previous In Touch, the ACCC has released its eighth interim Digital Platform Services Inquiry (DPSI) report, in May 2024. This report focused on the collection, storage, supply, processing and analysis of consumers' data by 'data firms': ie those that deal with customers' data, often without any direct relationship with the consumers the data is collected from. The ACCC suggested that data collection often occurred without customers' genuine awareness, or data was used in ways that customers did not expect.

In response to these concerns, the ACCC:

• recommended privacy law reforms, and additional resources for the Office of the Australian Information Commissioner, plus the creation of a federal data broker registry; and
• reiterated its previous recommendation to introduce an unfair trading practices prohibition in the ACL. For further details on this proposal, see our Insight.

The ninth interim report, focusing on general search services, was also due to the Treasurer on 30 September 2024 and is expected to be made public shortly. Issues to be considered include:

• the current state of competition in general search services;
• factors influencing the current state of competition in general search services (including international legislative reform; pre-installation and default search engine agreements; and the expansion of existing general search providers via emerging technologies, including generative AI); and
• trends in search quality over time.

These issues mirror those previously considered by the ACCC in its third interim report, which made several recommendations, including some search sector-specific regulations. For further details on these previous recommendations, see our Insight.

The DPSI will conclude with the tenth report, which is due to the Government in March 2025. The ACCC has signalled that the report will focus on:

• recent international and regulatory developments (including in the EU, Germany, India, Japan, South Korea and the UK);
• major developments and key trends in certain markets; and
• potential and emerging competition and consumer issues.

Safe as houses: Stockland and Supalai-Lendlease acquisition approved

On 26 September 2024, the ACCC announced that it would not oppose Stockland and Supalai's proposed acquisition of 12 Lendlease residential masterplanned and community projects. It approved the transaction on the basis that Stockland agreed to a court-enforceable undertaking requiring it to divest its Forest Reach masterplanned community project in the Illawarra region of New South Wales to address the ACCC's concerns.

The regulator assessed that Stockland was sufficiently constrained in other geographic areas in the supply of residential masterplanned community housing.

It concluded that Stockland's divestiture sufficiently addresses the competition issues that might occur in the Illawarra region as a result of the acquisition, and was satisfied that the proposed acquisition is unlikely to have the effect of substantially lessening competition or causing serious competition concerns in the supply of residential masterplanned community housing in other geographic areas.

The ACCC will release a Public Competition Assessment for this acquisition in due course.

Prescription pending: ACCC consults on Sigma and Chemist Warehouse merger

The ACCC is considering the proposed ‘reverse acquisition’ of Sigma Healthcare by Chemist Warehouse, which would result in an $8.8 billion merged entity.

On 13 June 2024, it published five ‘amber light' issues in its Statement of Issues:

• Increased barriers to entry: The merged entity would have end-to-end control of the pharmaceutical supply chain, consolidating Chemist Warehouse's existing significant vertical integration – this structural change makes entry at each level of the supply chain more difficult.
• Reduced competitive constraint: The competition Chemist Warehouse and Sigma retail stores impose on each other would be reduced and Sigma's differentiated pharmacy brand may be weakened.
• Increased foreclosure risk in the pharmacy retail sector: The combination of Sigma’s significant wholesale business with Chemist Warehouse’s significant downstream retail business may enable foreclosure of pharmacies in the Sigma network or supplied by Sigma.
• Increased foreclosure risk in the pharmacy wholesale sector: The risk of foreclosing rival pharmacy product suppliers that compete with Chemist Warehouse and Sigma’s owned-label and private label products.
• Increased risk of unilateral anti-competitive behaviour: Chemist Warehouse's ability to access and use commercially sensitive data of pharmacies supplied by Sigma could be used to target and undermine rival pharmacies.

On 1 October 2024, the ACCC commenced market consultation on Sigma’s proposed section 87B undertaking. It is submitted that:

• For a period of three years, Sigma must not prevent or hinder franchisees from terminating their agreements with it.
• For at least five years, Sigma must remain a participating pharmaceutical wholesaler under the Federal Government’s Community Service Obligation arrangements, adhering to service standards and compliance requirements for wholesaling of prescription medicines.
• For a period of three years, Sigma confidential data and information must be protected, including that it must only be collected and used for limited reasons (eg as reasonably necessary for the provision of services). This information must also be ring-fenced from Sigma personnel who have an ownership interest in a Chemist Warehouse franchise, or have any involvement in the day-to-day management of Sigma’s relationship with Chemist Warehouse franchisees.

The ACCC is currently receiving submissions from interested parties on this merger, and intends to announce its findings on 7 November 2024.

Heads up: the ACCC releases its 2023–2024 Annual Report

On 23 October 2024, the ACCC and the AER released their 2023–2024 Annual Report. The Annual Report outlines the key metrics, areas of focus and performance for each regulator over the 2023–24 financial year.

Key statistics for the ACCC include:

• Enforcement: There was $624.45 million in total penalties and fines awarded by the court; the ACCC commenced nine court cases, 10 court cases were concluded and nine court cases remain on foot.
• Mergers and exemptions: The ACCC assessed 307 mergers, with 285 finalised by preassessment and 22 subject to public review. It commenced investigations into eight completed acquisitions and assessed 26 non-merger authorisations.

The ACCC and AER received $352.8 million in government funding, which was a $55 million (or 18%) increase from 2022–23.

The ACCC Chair reflected on a number of topics, including the regulator's significant enforcement and compliance outcomes, the announcement of strengthened merger laws and the ACCC's commitment to the transition to a more sustainable economy. The AER Chair reflected on the agency's promotion of reforms and measures that protect consumers, monitoring of wholesale and retail energy markets, and regulation of monopoly infrastructure.

The ACCC has rated its performance as strong.

Wined and dined: Accolade's acquisition of Pernod Ricard not opposed

On 25 October 2024, the ACCC announced it will not oppose the acquisition of Pernod Ricard Winemakers' BrandCo division by Australian Wine HoldCo Limited, through its subsidiary Accolade.

Pernod Ricard Winemakers’ BrandCo division owns and manages wine brands including Jacob’s Creek, St Hugo, Stoneleigh, Church Road and Campo Viejo, while Accolade owns brands such as Hardys, Grant Burge, Berri Estates, Petaluma and St Hallett.

The ACCC consulted with a range of grape growers, winemakers, retailers and industry bodies during the investigation, and found the acquisition was unlikely to substantially lessen competition in wine processing and packaging services, and similarly in the wholesale supply of wine. Several businesses will continue to offer competing processing services and wine products after the acquisition.

The investigation indicated that the transaction is also unlikely to substantially lessen competition in grape acquisition markets where Accolade and Pernod Ricard currently overlap.

The ACCC concluded that Accolade, following the acquisition, is unlikely to engage in conduct that could disadvantage rival winemakers’ access to processing or packaging services, and that even if it did, it would be unlikely to substantially lessen competition in the wholesale supply of wine.