On 24 July 2024, the Commonwealth Government released an exposure draft of the Treasury Laws Amendment Bill 2024: Acquisitions. This legislation will amend the Competition and Consumer Act (CCA) to replace Australia’s voluntary merger clearance process with a process by which any merger that meets certain thresholds of value, turnover or market shares must be notified to the ACCC. The merger then cannot proceed unless the ACCC allows it.
The draft legislation runs to over 80 pages, so there is much to digest. However, we have highlighted some key points below.
What acquisitions will need to be notified?
The new regime is proposed to come into effect from 1 January 2026.
The notification thresholds haven’t been released yet. These will be set by regulation and will be the subject of a separate consultation later this year. The Minister can also set stricter notification obligations for particular high-risk industries or acquisitions.
Any acquisition of more than 20% of a company will be presumed to give the acquirer control of the target company and therefore be subject to the mandatory notification regime, unless the acquirer can establish that the acquisition won’t give it control.
Acquisitions that fall below the notification thresholds will not be exempt from merger laws. Such mergers will still be prohibited if they are likely to substantially lessen competition. Parties to such mergers will be able to voluntarily apply for merger clearance.
Changes to the merger test
The ACCC will be able to block a merger if it ‘reasonably believes’ the merger will be likely to substantially lessen competition. This will make it difficult to challenge ACCC determinations in court, as any court challenge will need to show that the ACCC’s decision was not just wrong, but unreasonable.
Creeping acquisitions – ACCC can combine all mergers over a 3 year period
A notified merger can be blocked if the effect of that merger, together with every other acquisition the purchaser has made in the past three years and every acquisition the vendor has made in the past three years, in combination are likely to have the effect of substantially lessening competition in any market.
This means that, when notifying a merger under the new regime, the parties will also have to disclose every other transaction they have made over the past three years – even if those transactions wouldn’t individually meet the notification criteria. For companies that have made a lot of acquisitions, the first merger under the new regime may therefore be a large undertaking, as every transaction of the past three years will need to be notified to, and considered by, the ACCC. It remains to be seen how the ACCC will manage this workload.
New section 4G(2) clarifies that “substantially lessening competition” includes substantially lessen competition by creating, strengthening or entrenching a substantial degree of power in any market. This amendment will also affect other competition law provisions in the CCA that refer to substantial lessening of competition, such as the exclusive dealing and misuse of market power provisions.
If the ACCC clears a merger, the parties will have 12 months from the date of clearance to put the merger into effect, otherwise it will become ‘stale’. If a merger becomes stale, it cannot be put into effect unless the parties re-notify the ACCC and repeat the clearance process.
Review process
Once the ACCC is notified of a merger, it can make a determination at any time between 15 and 30 business days after the notification date (the ‘Phase 1’ review period) either that the merger can proceed, or that it will need to go to a ‘Phase 2’ review.
By day 55 of the ACCC’s review, it must give the parties a Notice of Competition Concerns, setting out any competition concerns it has. The parties then have just 15 business days to respond. The last day for parties to propose any remedies to address ACCC concerns is day 80 of the review process, and the final date for the parties to provide information to the ACCC is day 110 of the process.
The ACCC’s Phase 2 determination period is 90 business days, starting immediately after the end of the Phase 1 determination period, subject to any extensions. By the end of this period, the ACCC can either clear the merger, clear it subject to conditions, or block it.
If the ACCC blocks a merger or imposes conditions, the parties will have 21 days to apply to the ACCC for a determination that the merger creates a substantial public benefit. The ACCC then has 50 business days to make a ‘substantial public benefit determination’ finding that the merger creates public benefits that outweigh any competitive detriment. If the ACCC does not make such a determination, the merger is blocked.
The parties to a merger that is blocked by the ACCC have 14 days after the ACCC determination to appeal the determination to the Australian Competition Tribunal. This will be a limited merits review based only on the evidence that was before the ACCC. Parties can only apply to the Tribunal to admit new evidence if they can show that the evidence didn’t exist at the time of the ACCC determination.
There will be an option of fast-track or standard procedure for Tribunal review.
These timeframes are summarised in the diagram below, prepared by Treasury:
These changes are significant and represent a complete change to Australia’s merger regime. Parties that wish to make a submission in response to the exposure draft legislation have until 13 August 2024 to do so.
This article was written by Richard Westmoreland, Partner.
