Merger reform legislation passes without amendments 7 min read
The Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (the Bill) has passed both houses of Parliament with no amendments and is awaiting Royal Assent.
This means a mandatory and suspensory administrative merger regime will formally come into effect for transactions completing on or after 1 January 2026, replacing Australia's existing merger review framework. From this date, all acquisitions where the 'control' and 'monetary' thresholds are met must be notified to the Australian Competition and Consumer Commission (ACCC) and cannot complete without ACCC clearance. New merger authorisation and informal clearance applications can no longer be made after 30 June 2025 and 31 December 2025, respectively.
As the new regime will apply to transactions completing on or after 1 January 2026, even if signed before that date, businesses should carefully plan their timelines to avoid having to restart the process under the new regime partway through a transaction. Merging parties may voluntarily notify acquisitions under the new regime from 1 July 2025.
There is still a significant amount of detail about the new regime to be determined. Over the next six months, there will be considerable information released and consultation conducted by the Government and ACCC.
In this Insight, we outline the practical steps you can take now to prepare your business and avoid disruption. You can read our previous Insight for a detailed overview of the legal framework and key elements of the new merger regime, or download our practical summary here.
Key takeaways
- To prepare for the new merger regime, businesses should assess transaction timelines, review record-keeping processes, gather required information, and consider the cumulative impact of recent acquisitions, as the ACCC may face resourcing constraints and stricter filing requirements during the transition.
- The new mandatory and suspensory merger regime will capture a broader range of transactions, introduce stricter notification requirements, apply an expanded competition test, and enforce statutory deadlines for ACCC determinations, with limited opportunities for Tribunal review.
- Significant details about the new merger regime remain unclear, with the Government and ACCC expected to release and consult on key aspects, including threshold requirements, exemptions, and procedural guidelines, over the next six months.
Practical steps you can take now to prepare
While a large portion of the detail is yet to be released, there are a number of steps businesses can take now to prepare for the implementation of the new regime based on current information:
Businesses that are transacting within the next 12 months, should consider whether to apply for informal clearance under the current regime or notify the ACCC under the new regime after 1 July 2025, so as to avoid having to restart the process under the new regime (ie if the Commission has not cleared the transaction by 31 December 2025). This decision may depend on a number of factors, including the complexity of the transaction, whether it will involve multi-jurisdictional filings and the expected timeline for completion. The ACCC will encourage pre-lodgement discussions and may face resourcing constraints during the transition, so businesses should plan for longer timelines for review to avoid butting up against long-stop dates.
Production of key decision documents is likely to become a formal requirement of filing. Documents involving the board, investment committees and third-party advisers may be caught. Businesses should consider reviewing their processes for finalising and storing these documents so they are easily accessible.
Businesses that are transacting within the next 12 months should start gathering information required to determine whether acquisitions are likely to be caught under the new merger regime (ie turnover information). Businesses may also wish to start gathering information that will assist in filing a notification under the new merger regime, including, for example, how to describe their business and the markets they operate in and understanding what data is available about the products and/or services they supply and/or acquire.
Businesses should consider the cumulative competitive effect of recent transactions (ie within the last three years), especially as the ACCC will have the ability to take into account acquisitions made by merging parties within the three years prior to notification—even where the acquisitions were not individually notified. Businesses should also ensure they are maintaining information on target sales generated at the time of acquisition and in subsequent years to assess whether future transactions might be notifiable as a result of the cumulative threshold.
Key aspects of the new regime: a reminder
The mandatory and suspensory regime will capture more transactions and has some key factors that differ from the current regime. We have summarised some of the key aspects below, but you can read our previous Insight for further detail.
- A broad range of acquisitions will be caught under the new regime. The regime will apply to acquisitions of shares in the capital of a body corporate or corporation; any assets of a person or corporation; or any other acquisition the Minister, following consultation and by legislative instrument, determines should be notifiable or exempt. The new regime also applies to partnerships, unit trusts and interests in managed investment schemes.
- Acquisitions are notifiable if the target has a material connection to Australia (ie it is 'carrying on a business in Australia' OR plans to carry on a business in Australia) AND at least one of the monetary thresholds is met. Acquisitions will also have to be notified where the cumulative turnover over a three-year period from acquisitions in the same or substitutable goods or services meet the thresholds.
- Acquisitions that do not result in controlor a change in control are not required to be notified. 'Control' is the capacity to determine the outcome of decisions regarding the target's financial and operating policies. This closely aligns with the Corporations Act, however it is subject to several modifications when considering whether the 'control exemption' applies. Acquisitions of shares in listed entities and other bodies corporate under Chapter 6 of the Corporations Act are also not required to be notified if the acquisition does not result in a person's voting power in that entity increasing to more than 20% or between 20% and 100%. Acquisitions of assets in the ordinary course of business are also exempt from notification, however this exemption does not extend to acquisitions of land and patents.
- The ACCC will assess the acquisition against the new and expanded 'substantial lessening of competition test' (SLC test) of whether an acquisition, in all the circumstances, will lead to an effect, or likely effect, of creating, strengthening or entrenching a substantial degree of power in the market. The ACCC can 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 prior acquisitions were individually notifiable or not. This updated SLC test will only apply to mergers.
- The new mandatory regime includes statutory deadlines for the ACCC to make a determination with up to 30 business days for Phase 1 and an additional 90 business days for Phase 2. If the ACCC does not make a determination within the set timeframe and no applicable extension periods apply, the acquisition is automatically deemed approved. However, the statutory deadlines can be extended under certain circumstances and do not account for pre-notification discussions with the ACCC, which could extend much further.
- The merging parties (and third parties in certain circumstances) can apply for the Competition Tribunal to conduct a limited merits review of the ACCC's determination. In its review of an ACCC determination, the Tribunal cannot generally have regard to material that was not before the ACCC when making its determination. The Tribunal is empowered, however, to seek certain further information, documents and evidence. The Tribunal must make its decision between 45 and 90 days after the ACCC's determination, and may extend this period twice in certain circumstances: once for up to 60 days, and the other for up to 90 days.
What's next?
There is still a significant amount of detail about the new regime that is unclear. Over the next six months, there will be considerable detail released and consultation conducted by the Government and ACCC. In particular:
- The Government is expected to release consultation covering subordinate legislation, including threshold and designation requirements, shortly after the legislation passes. While the subordinate legislation has not yet been released, the Treasurer has indicated an intention to use the designation power to require notifications of interests greater than 20% in private companies (if one of the companies has turnover of more than $200 million). The Treasurer also announced the Government intends to introduce an exemption for land acquisitions involving residential property development and certain commercial property acquisitions, unless they are captured by additional targeted notification requirements.
- The ACCC is expected to consult on process guidelines covering the merger review process, pre-notification, and procedural safeguards in early 2025, in advance of the new regime coming into effect. This consultation will include what information is required when lodging a notification, which may include certain types of documents (such as board-level documents or investment committee documents that relate to the transaction).
If you would like to discuss the new regime, the impact it may have on your business and further steps you can take in the meantime to prepare for it, please get in touch with us.