Landmark reforms to Australia’s merger laws are on the way
On 10 April 2024 the Commonwealth Treasurer, Dr Jim Chalmers, unveiled reforms to Australia’s merger and acquisition clearance rules. From 2026, companies will need to notify and receive clearance from the Australian Competition and Consumer Commission (‘ACCC‘) for mergers and acquisitions over a certain threshold – to be decided by further consultation.
The recent acquisition by ANZ of Suncorp’s banking arm has ensured that the effectiveness of the current merger practices remain a trending issue. ANZ is revelling in a massive legal win after the ACCC’s rejection of its proposed $4.9 billion acquisition of Suncorp’s banking division was overturned on appeal.
The announcement of the reforms is in response to calls from the ACCC for greater competition, better protection of consumers and streamlining the approval process. In Australia, section 50 of the Competition and Consumer Act 2010 (Cth) prohibits the acquisition of shares or assets that would have the effect, or likely effect, of substantially lessening competition in a market. Unlike some jurisdictions in other countries, there is no mandatory threshold for notifying the ACCC about such transactions in Australia.
The new agenda proposes a complete overhaul. A shift away from the current court-enforcement model will remove the Federal Court’s role as ultimate arbiter, leaving the ACCC as the primary decision-maker. Consequently, the ACCC will take on a substantially more involved role. The ACCC will have the responsibility of conducting rigorous and evidence-based merger reviews, publishing new detailed guidelines, and providing detailed reasons for all its decisions.
The proposed reforms are set to apply from 1 January 2026 and notably include:
- ACCC will have power to block transactions: The applicable test has been clarified and considers whether a transaction has the effect, or likely effect to substantially lessen competition. The ACCC will be able to block that transaction in those circumstances. Additionally, mergers that create, strengthen or entrench a position of substantial market power may also be prevented.
- Mandatory notifications and clearance: Merger clearance from the ACCC will become mandatory and suspensory for mergers above a certain threshold. The thresholds will be subject to further consultation but will involve both monetary, such as revenue and profitability, and market share based tests.
- Analysis of cumulative effect of transactions in the last three years: Mergers from the previous three years will be aggregated to assess whether they exceed the thresholds. Serial acquisitions and those that increase market power and market concentration will also be considered.
- Public benefit review available: If a deal is blocked by the ACCC parties can apply for a review on the basis that the merger would result, or be likely to result, in a substantial benefit to the public. This benefit will need to outweigh the anti-competitive detriment of the merger. However, the proposed reforms have indicated a strict approach in the Tribunal’s decisions, meaning there will be limited opportunities for appeals and merit reviews. As a result, parties cannot introduce new evidence into their original application, except in very limited circumstances.
- Strict timelines and review phases: The proposal provides indicative timeframes including a 30-working day ‘Phase I’ review period. There will be the availability to fast rack straightforward cases to 15 working days. Any concerns raised during the first phase will proceed to a ‘Phase II’ review period. The parties will need to provide further information at this stage – more consultation on this point will occur this year.
- Increased public transparency: All mergers considered by the ACCC will be listed on a public register. The register will provide information regarding each merger, including the parties involved, a short overview of the transaction and its associated timeline.
- Filing fees for complex cases: Those matters that enter a ‘Phase II’ review will be subjected to filing fees between $50,000-$100,000 with an exemption for small businesses.
- Harsh penalties: Merger parties will face substantial penalties for failing to notify the ACCC of a notifiable merger or for proceeding to complete a merger ahead of the ACCC’s decision. Any merger, contract or connected arrangement to the merger put into effect outside the ACCC’s determination will be void. The ACCC will retain its powers to seek penalties in the Federal Court, including pecuniary penalties, divestiture of the shares or assets acquired, or an order that the transaction is void and that monies should be refunded to the vendor.
The Commonwealth Government will develop the reforms in consultation with stakeholders over the next 12 months. If you have recently or are considering, engaging in a merger that may affect competition in an Australian market, it is important that you understand the merger process and how to engage with the ACCC appropriately.
For expert advice and insight into mergers and acquisitions laws and the proposed clearance reforms, contact DSA Law – Lawyers & Consultants on (03) 8595 9580.