16 October 2024
8 min read
#Mergers and Acquisitions, #Competition & Consumer Law
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Following a lengthy public consultation process, the highly anticipated Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (Bill) was tabled in the Australian Parliament on 10 October 2024.
Marking a shift from the current voluntary ‘informal’ notification system, the existing framework will be replaced with a mandatory and suspensory administrative system for mergers and acquisitions that meet certain notification thresholds, with the Australian Competition and Consumer Commission (ACCC) as the first instance administrative decision-maker.
This means that a transaction which falls within the new regime must be notified to the ACCC and cannot be completed without the regulator making a determination that the transaction can proceed.
Subject to the passage of the Bill, the new laws will come into effect from 1 January 2026 but voluntary notification will be available to merger parties from 1 July 2025.
We have prepared a quick summary of the key reforms that businesses contemplating a merger or acquisition, as well as those affected by a merger such as suppliers, supply chain customers and rivals, will need to know.
Relevant acquisitions
The new provisions will apply to acquisitions by persons, partnerships, units trusts and corporations of shares, assets, control of a business, units in unit trusts and interests in managed investment schemes.
However, the acquisitions provisions will not apply to internal restructures or reorganisations, acquisitions which do not result in control, and those that are unlikely to impact Australian markets. Some land acquisitions involving residential development and certain commercial property acquisitions will also be exempt from notification, unless they are captured by additional targeted notification requirements set by the Treasurer (see further below).
Notification thresholds
The Bill introduces mandatory notification obligations requiring merger parties to notify the ACCC if their transaction meets at least one of the notification thresholds (or the class determinations set by the Minister) and there is a material connection to Australia (i.e. the parties are located in the country, or supply goods and/or services in Australia).
Only mergers above certain monetary thresholds will need to be notified to the ACCC and be approved before proceeding, with these monetary thresholds to be set in regulations following the passage of the Bill.
The government has announced three key notification monetary thresholds:
These thresholds will be subject to ongoing review, with the legislation providing the Treasurer flexibility to adjust the thresholds as required or to respond to ACCC’s concerns about high-risk mergers by way of targeted thresholds.
The government has indicated some transactions that it intends to capture through these provisions including the ACCC being notified of every merger in the supermarket sector and purchases of an interest above 20 per cent in an unlisted or private company, if one of the companies involved in the deal has a turnover of more than $200 million.
Expanded substantial lessening competition test
The ACCC will assess notified acquisitions by applying a modified ‘substantial lessening of competition’ test. This test does not affect the meaning of ‘substantial lessening of competition’ used elsewhere in the Competition and Consumer Act 2010 (Cth) (CCA).
It provides that the acquisition may have the effect of substantially lessening competition in a market if it would or would be likely to have the effect of creating, strengthening or entrenching a substantial degree of power in the market.
Waiver notification process
The merger reforms provide for a new notification waiver process to remove the obligation for businesses to notify in appropriate cases, for example, in acquisitions that have minimal competitive overlap or no vertical integration.
Upon application, the ACCC will determine if an acquisition is not required to be notified based on the likelihood that the acquisition would meet notification thresholds and whether it would substantially lessen competition.
The requirements for a notification waiver application are to be determined by the Treasurer in a legislative instrument.
Confidential review processes
To balance the commercial realities of commercially sensitive acquisitions, the new regime contemplates a confidential review process for certain acquisitions including for surprise hostile takeover bids involving the acquisition of shares in a body corporate.
Time frames
To ensure prompt reviews by the ACCC, the regime includes legislated time frames that the ACCC and merger parties must comply with.
The new regime will consist of a 30 business day initial phase one and a 90 business day phase two for further, in-depth review.
However, a determination can be fast tracked and made as quickly as 15 business days after notification within phase one where the ACCC considers no competition concerns arise, allowing the regulator to focus its resources and attention on the more complex and contentious mergers.
The ACCC will also have 50 business days from the effective application date to make a public benefit determination, unless that period is extended.
These time frames are subject to the ACCC being able to “stop the clock” and allow for extensions. It remains unclear when a merger will be said to be complete and therefore when these timeframes commence.
Fees
Under the new reforms, all merger and acquisition notifications must be accompanied by the prescribed fee and the notification will not be made until the fee is paid.
These fees will be set out in legislative instruments, but will be based on cost recovery principles and the government has indicated that it expects this to be around $50,000–100,000 for most mergers and acquisitions.
Penalties
If a party fails to notify a deal that meets the thresholds, the transaction will be declared void and the existing (and significant) CCA penalties will apply (being $50 million, three times the value of the benefit or 30 per cent of a corporation’s annual turnover over the period the breach occurred, whichever is greater, for body corporates and $2.5 million for persons).
Rights of review
The new regime adopts a limited merits review process to the Australian Competition Tribunal of determinations made by the ACCC under the new regime. This enables the Tribunal to stand in the shoes of the original decision maker, and make its own findings of fact and reach its own decision based on the information presented before the ACCC. However, the Bill does allow for new information to be provided in limited circumstances.
The Tribunal will be given the power to affirm, vary or set aside the determinations of the ACCC.
Time frames are provided for when an application is to be made and during which the Tribunal must make a determination on the review.
Transparency
The ACCC will maintain a public register listing all mergers notified to it (save for hostile takeovers) and set out its findings on material facts and the reasons for all merger decisions. It will also provide details of the theory of harm and the matters for further review with its written notice on the investigation when progressing the acquisition from phase one to phase two.
This is a significant change from the current regime. It will provide practitioners and businesses with good insight into the ACCC’s decision making process and assist those required to notify under the new regime.
Transitional arrangements
If the Bill passes through Parliament, the new laws will come into effect from 1 January 2026 with voluntary notification available to merger parties from 1 July 2025.
Merger parties can continue to apply to the ACCC for merger authorisation until 30 June 2025, and may continue using the informal regime until 31 December 2025.
Where informal clearance has been granted between 1 July 2025 and 31 December 2025 and the acquisition is put into effect within 12 months of receiving clearance, merger parties will not be required to notify under the new regime. However, there may be some mergers with ongoing informal reviews as of 1 January 2026 that will require notification under the new regime.
Next steps
If the Bill is passed, these new reforms will represent a major and fundamental change in Australia’s approach to merger control under the competition law.
While the Bill is still before Parliament, the ACCC has published a Statement of Goals for Merger Reform Implementation outlining the goals and objectives in delivering the Australian Government’s merger reforms. The regulator has also signalled an intention to consult and publish new guidelines for businesses, the community and interested stakeholders.
The government will consult on further detail regarding the notification thresholds and notification waiver process through the development of subordinate legislation later this year and into 2025.
In the meantime, as the 1 January 2026 implementation date approaches, businesses will need to consider the relevant transition arrangements and ensure they are prepared to navigate and operate in this new era of merger control in Australia.
Our team can assist you in understanding the new merger regime, applying for merger authorisation during the transition period and providing advice that may address emerging issues. We also provide training to ensure your teams are aware of the latest changes to Australia’s merger regime and potential risks. If you have any questions, please get in touch with our 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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