Draft assessment guidelines open for consultation 5 min read
The ACCC has released its draft merger assessment guidelines (Draft Guidelines) for consultation, offering a preview of how it plans to assess mergers under the new mandatory regime (which comes into effect on 1 January 2026).
In this Insight, we highlight key aspects of the ACCC's renewed approach and what the proposed changes would mean for your business.
Key takeaways
- Businesses that may be seen as already having a substantial degree of market power can expect close scrutiny of any transactions where the target has overlapping goods or services, even if the market share increment is low. According to the ACCC, even mergers that lead to a small change in market power can potentially substantially lessen competition.
- The ACCC has set out its proposed framework for assessing mergers that may eliminate potential competition, involve multi-sided platforms or form part of a set of serial acquisitions. We expect these will be key areas of focus under the new regime for all sectors, but will particularly impact transactions in the tech, financial services and supermarket sectors.
- Merger parties will need to demonstrate that any claimed pro-competitive efficiencies are specifically related to the merger and are likely to be realised.
- The Draft Guidelines represent a significant update to the ACCC's guidelines published in November 2008, with more detailed guidance on the approach to the new and more novel competition issues with which the ACCC has grappled in recent years. The Draft Guidelines indicate a level of convergence with those issued by US agencies in 2023.
What you need to know
Creating, strengthening or entrenching market power
Under the new regime, the ACCC will consider whether a merger is likely to create, strengthen or entrench a substantial degree of market power in determining whether it substantially lessens competition.
The ACCC's position is that a merger can substantially lessen competition even if it leads to only a small change in market power.
Mergers that eliminate potential competition, including killer acquisitions
The ACCC plans to look closely at mergers that eliminate potential competition, eg mergers in which an incumbent acquires a nascent rival or potential entrant.
The ACCC has expressly called out killer acquisitions, where an acquirer acquires a target (a potential competitor) to neutralise the competitive threat before the target develops into a true rival. Alternatively, a business may decide to acquire an existing player instead of entering a certain market itself, thereby removing competition that would have been introduced by the acquirer's own entry.
The ACCC considers that in markets characterised by network effects (where users derive more value from a product if more users use the same product), potential competitors that threaten to displace the incumbent's market position may exert the greatest competitive constraint.
The ACCC is on the lookout for acquirers undertaking multiple acquisitions of nascent rivals over time and says this could strengthen or entrench the acquirer's market power.
It considers that the loss of potential competition will be more relevant in markets where significant and long-term investments are necessary, eg digital platforms or pharmaceutical companies.
Mergers involving multi-sided platforms
In relation to multi-sided platforms (platforms that supply services to two or more distinct but related customer groups, eg social media platforms and shopping centres), the ACCC observes that such platforms tend to be characterised by network effects. The ACCC is concerned that these effects may be so strong and self-reinforcing that they create a 'tipping effect', where one platform becomes supreme and smaller platforms only exert a weak constraint.
The ACCC has indicated that in assessing mergers relating to multi-sided platforms, it will consider factors such as whether one or both sides of the platform are impacted, the incentives of the platform operator and the strength of network effects. It also proposes to consider the risk of amplifying a party's market power, eg where interoperability or multi-homing is necessary to compete.
Cumulative effects of serial acquisitions
The ACCC is setting its sights on serial acquisitions. Under the new regime, the ACCC will be able to take into account prior acquisitions that, when viewed together (in the same or related markets and in the preceding three years), would be likely to substantially lessen competition.
The ACCC foreshadows that it may consider information and evidence about the acquirer's previous and future business plans, incentives behind the acquisitions and the likely impact of both the notified transaction and the series of acquisitions on the merged entity's market position.
Efficiencies
The ACCC proposes to take a discerning approach to arguments about efficiencies.
It says a merger that removes or weakens competitive constraints will, in many cases, substantially lessen competition even if the merger results in a more efficient firm with a lower cost structure.
It has stressed that it will only consider merger-related efficiencies to be relevant where there is clear and compelling information or evidence that the efficiencies incentivise the merged firm to compete more vigorously against rivals.
The ACCC will seek to verify that any claimed efficiencies arise specifically from the merger and will consider the parties' alternative options to achieving these efficiencies in testing this.
Merger parties will need to demonstrate that the efficiencies are likely to materialise and that they improve the incentives to compete, eg through internal documents and external experts' studies.
Comparisons with guidelines from overseas regimes
The approach the ACCC has taken is similar to the approach taken by the UK Competition and Markets Authority as reflected in its 2021 Merger Assessment Guidelines and the approach taken by US agencies as set out in the 2023 Joint Merger Guidelines issued by the US Department of Justice and Federal Trade Commission (US Merger Guidelines), although there are some subtle differences. Comparing the Draft Guidelines and US Merger Guidelines:
- The Draft Guidelines do not create a presumption of illegality, unlike the US Merger Guidelines. However, both reflect the agencies' respective positions that a small increase in existing market power may be sufficient to substantially lessen competition in an already consolidated market.
- Both focus on eliminating potential competition and 'killer acquisitions'.
- The Draft Guidelines expressly deal with serial acquisitions, whereas the US Merger Guidelines frames this issue within a broader context of industry trends and consolidation.
- Both approach mergers involving multi-sided platforms in a similar way. The US Merger Guidelines outline an approach to examining 'competition between platforms, on a platform or to displace a platform'.
- The Draft Guidelines include a framework to ensure claimed merger efficiencies are 'merger specific' and 'verifiable'. This is largely consistent with the approach agencies have traditionally taken to closely scrutinise claims of efficiencies.
Next steps
The ACCC's public consultation on the Draft Guidelines is open until 17 April 2025. If you would like to discuss the Draft Guidelines, the impact they may have on your business and the steps you can take to prepare for the new merger regime, please get in touch with us.
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.