04 September 2024
5 min read
#Mergers and Acquisitions, #Corporate & Commercial Law
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The Australian government unveiled a significant overhaul of its merger control regime, marking a shift from the current voluntary ‘informal’ notification system to a mandatory framework that will have far-reaching implications for businesses operating in the country. These changes are outlined in the government’s report, ‘Merger Reform: A Faster, Stronger, and Simpler System for a More Competitive Economy,’ and are set to be implemented on 1 January 2026 (subject to passage of legislation). See our previous update on these reforms here.
Under the current Australian merger control system, businesses are not legally required to notify the Australian Competition and Consumer Commission (ACCC) of proposed mergers or acquisitions. Instead, the system operates on a voluntary basis, where parties to a transaction may choose to seek informal clearance from the ACCC to mitigate the risk of post-merger investigations or potential legal challenges. This informal regime has no specific thresholds but rather guidance from the ACCC on the level post merger market share (i.e. greater than 20 per cent) where parties are encouraged to notify the ACCC well in advance of completing a merger. While flexible, the current regime has been criticized for its lack of clarity and predictability, particularly in dealing with mergers involving substantial market power or nascent competitors.
The proposed merger reforms represent a fundamental shift in how mergers will be regulated in Australia. The new system introduces mandatory notification requirements, which will obligate merger parties to notify the ACCC if their transaction meets at least one of the monetary or market concentration threshold limits and there is a material connection to Australia (i.e. located in Australia, supply goods and/or services in Australia). Importantly, these thresholds are currently under consultation, with the final details expected to be confirmed by late 2024. The government’s consultation ‘Reforming mergers and acquisitions – notification thresholds’ is open until 20 September 2024.
We summarise the key elements of the proposed thresholds below.
Monetary thresholds
Market concentration thresholds
These thresholds are designed to capture a broad range of transactions that could potentially harm competition, particularly those involving large, dominant acquirers or transactions that significantly alter market dynamics.
In addition to the specified thresholds, the reforms introduce provisions for high-risk acquisitions. These are transactions that, while not meeting the monetary or market concentration thresholds, are nonetheless deemed by the Minister to pose significant competition risks. Under the new system, the Minister has the authority to designate certain transactions as high-risk, requiring notification and ACCC approval. This provision is intended to address concerns about acquisitions that might otherwise slip through the regulatory cracks, particularly those involving innovative or rapidly growing businesses that could challenge established market players.
One of the most significant changes under the new regime is the role of the ACCC as the primary decision-maker for notified mergers. Under the new regime, once a transaction is notified, the ACCC will have 30 business days to review the merger and decide whether to approve it, impose conditions, or block it. During this period, the transaction cannot proceed without the ACCC’s approval, a stark departure from the current system where mergers can proceed unless the ACCC intervenes post-completion.
The ACCC’s enhanced role is expected to bring greater scrutiny to mergers, particularly those involving large market players or sectors with high barriers to entry. This shift underscores the government’s commitment to protecting competition and preventing the consolidation of market power that could harm consumers or stifle innovation.
As the consultation process continues, businesses and industry stakeholders have until 20 September 2024 to provide feedback on the proposed thresholds and the broader merger reform package. This consultation is crucial for fine-tuning the thresholds to ensure they are effective in capturing potentially harmful mergers while avoiding unnecessary regulatory burden on transactions that pose little or no risk to competition.
Industry feedback will also be vital in shaping the ACCC’s approach to implementing the new regime. The ACCC is expected to issue detailed guidance on how it will assess mergers under the new thresholds, including how it will define relevant markets and calculate market shares. This guidance will be essential for businesses navigating the new system, particularly those involved in complex or multi-jurisdictional transactions.
The proposed merger notification thresholds and the broader reforms represent a major shift in Australia’s approach to merger control. By introducing mandatory notification requirements and enhancing the ACCC’s role as the primary decision-maker, the government aims to create a more robust and transparent system that better protects competition and serves the interests of consumers.
However, these changes also bring new challenges for businesses, particularly those involved in large or strategically significant transactions. As the implementation date of 1 January 2026 approaches, businesses will need to carefully assess how the new regime applies to their operations and ensure they are prepared to navigate the more stringent regulatory environment.
Ultimately, these reforms signal a new era of merger control in Australia, one that balances the need for competitive markets with the realities of a dynamic and increasingly globalised economy.
If you have any questions about this article, please get in touch with a member of our national M&A team below.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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