Australia's merger laws need to change to protect fair competition, says regulator
The Australian Competition and Consumer Commission (ACCC) has called for reforms to Australia's merger laws to protect fair competition.
By AnsaradaThu Apr 27 2023Mergers and acquisitions, Due diligence and dealmaking, Advisors, Industry news and trends
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Update: Changes to Australian M&A laws will come into effect on January 1, 2026. Read more here: Australian M&A Law Shaken Up in 1-in-50 Year
In a statement made on 12 April 2023, Australian Competition and Consumer Commission (ACCC) Chair Gina Cass-Gottlieb said that Australia’s current merger laws are not effective, and give too much power to potentially anti-competitive mergers.
The problem with Australia's current merger laws is that they do not require parties to notify the ACCC of planned mergers, or to wait for ACCC clearance before completing the merger. This means that the ACCC must apply to the Federal Court to have the merger stopped or undone if they believe it is anti-competitive.
“As we know, concentrated markets are generally not good for consumers – or indeed for economic growth and productivity. Companies operating in concentrated markets tend to charge higher price markups over costs for their goods and services, and often have less incentive to innovate in ways that benefit consumers,” said Cass-Gottlieb.
To address this issue, the ACCC has proposed a range of changes to Australia's merger regime. These include a formal clearance model that would require merger parties to convince the ACCC that their proposed transaction will not significantly reduce competition. The ACCC would also be notified of mergers that meet specific thresholds and have the power to scrutinize transactions that do not meet the notification threshold but still raise competition concerns.
According to Cass-Gottlieb, these changes are necessary because businesses have been pushing the boundaries of the informal merger review process, giving incomplete or incorrect information. Additionally, global transactions prioritize mandatory clearance regimes over Australia's voluntary informal regime, limiting the ACCC's ability to assess mergers.
The proposed changes to the legal test for mergers would include "entrenching, materially increasing, or materially extending a position of substantial market power." The factors considered as part of the assessment process would also be modernized, including whether the merger would result in a merged party gaining increased access to data and technology.
Protecting fair competition is crucial to Australia's economy. The proposed changes would help the ACCC scrutinize mergers and prevent potentially anti-competitive mergers, especially in markets where there are already large incumbents with market power or where it is difficult for new rivals to enter.
Examples of deals that illustrate the problem include the recent mergers of major Australian companies such as TPG and Vodafone, as well as the proposed merger of Nine and Fairfax Media, both of which have raised concerns about reduced competition in the telecommunications and media industries.
The ACCC's proposed changes are intended to help ensure that businesses do not abuse their market power and that new rivals can enter the market, which will benefit consumers and promote innovation.
In a statement made on 12 April 2023, Australian Competition and Consumer Commission (ACCC) Chair Gina Cass-Gottlieb said that Australia’s current merger laws are not effective, and give too much power to potentially anti-competitive mergers.
The problem with Australia's current merger laws is that they do not require parties to notify the ACCC of planned mergers, or to wait for ACCC clearance before completing the merger. This means that the ACCC must apply to the Federal Court to have the merger stopped or undone if they believe it is anti-competitive.
“As we know, concentrated markets are generally not good for consumers – or indeed for economic growth and productivity. Companies operating in concentrated markets tend to charge higher price markups over costs for their goods and services, and often have less incentive to innovate in ways that benefit consumers,” said Cass-Gottlieb.
To address this issue, the ACCC has proposed a range of changes to Australia's merger regime. These include a formal clearance model that would require merger parties to convince the ACCC that their proposed transaction will not significantly reduce competition. The ACCC would also be notified of mergers that meet specific thresholds and have the power to scrutinize transactions that do not meet the notification threshold but still raise competition concerns.
According to Cass-Gottlieb, these changes are necessary because businesses have been pushing the boundaries of the informal merger review process, giving incomplete or incorrect information. Additionally, global transactions prioritize mandatory clearance regimes over Australia's voluntary informal regime, limiting the ACCC's ability to assess mergers.
The proposed changes to the legal test for mergers would include "entrenching, materially increasing, or materially extending a position of substantial market power." The factors considered as part of the assessment process would also be modernized, including whether the merger would result in a merged party gaining increased access to data and technology.
Protecting fair competition is crucial to Australia's economy. The proposed changes would help the ACCC scrutinize mergers and prevent potentially anti-competitive mergers, especially in markets where there are already large incumbents with market power or where it is difficult for new rivals to enter.
Examples of deals that illustrate the problem include the recent mergers of major Australian companies such as TPG and Vodafone, as well as the proposed merger of Nine and Fairfax Media, both of which have raised concerns about reduced competition in the telecommunications and media industries.
The ACCC's proposed changes are intended to help ensure that businesses do not abuse their market power and that new rivals can enter the market, which will benefit consumers and promote innovation.
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