Faster, stronger and simpler? Ambitious changes to Australia's merger control regime announced by Treasury

10 Apr 2024
5.5 minutes

According to Treasurer Jim Chalmers, Australian merger control will be "faster and stronger and simpler" from 1 January 2026 when fundamental changes to introduce a mandatory, suspensory administrative regime are due to come into effect. Announcing the change this morning, he confirmed that all deals falling above certain (yet to be defined) thresholds will require notification to and approval from the ACCC prior to completion.

The agenda is clearly ambitious and promises a lot. The 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. As a result the ACCC will be required to take on a substantially more involved role, with responsibility for conducting rigorous data and evidence-based merger reviews, publishing new detailed guidance, and providing detailed reasons for all of its decisions (which it does not currently do). It will also be subject to new performance standards for its merger assessments. ACCC Chair Gina-Cass Gottlieb confirmed that the ACCC will be upskilling and putting into place additional resources and funding to manage the changed regime. Nevertheless, it remains to be seen whether the ACCC can take on this significantly expanded role while simultaneously producing "faster" decisions.

The announcement follows a three year long campaign by the ACCC for a shift to a mandatory, administrative model, with the Treasurer supporting the ACCC's view that the existing voluntary system "isn't properly equipped to detect and act against anti-competitive mergers", noting that the changes "will bring our merger settings into the twenty first century", as Australia is currently one of only three OECD countries that doesn't require compulsory notification. The changes will more closely align Australia's regime with international administrative regimes, including in the EU and UK.

Full details on Treasury's proposals are set out in its Report released today.

What are the key changes to merger clearance?

  • A single mandatory and suspensory regime: Mergers over a specified threshold will require notification to the ACCC, and transactions cannot complete until clearance has been granted. The thresholds will be subject to further consultation but will involve both monetary (revenue/ transaction value/ profitability) and market share-based tests.
  • ACCC as primary decision-maker: The ACCC will be the primary decision-maker with limited merits review by the Competition Tribunal. Under the current court-enforcement model it is the Federal Court, not the ACCC, that has the ultimate power to block or allow contested transactions to proceed. Removing this key check and balance will give the ACCC substantially more discretion in its decision-making.
  • Power to block transactions that entrench market power: The legal test (that the transaction is likely to substantially lessen competition (SLC test) has been clarified. The ACCC will be able to block mergers that have the effect or likely effect of substantially lessening competition, including those that create, strengthen or entrench a position of substantial market power. This change confirms the ACCC's power to block acquisitions of nascent businesses by large firms.
  • Cumulative effect of transactions in the last three years will be relevant: To respond to concerns about serial/creeping acquisitions, all mergers of the parties within the previous three years will be aggregated for the purpose of assessing whether the thresholds have been met and whether the SLC test has been breached.
  • Strict timelines and deemed clearance if decision not made in required timeframe: The proposal provides indicative timeframes – a 30 working day "Phase I" review period (with a 15 working day "fast-track" available for straightforward cases) and a further 90 working day "Phase II" review period if the ACCC raises concerns at Phase I. These timeframes will be subject to "stopping the clock" and the parties providing complete information to the ACCC, and will be the subject of further consultation this year.
  • Subsequent "public benefits" review available: If a deal is blocked at Phase II, parties can apply for approval from the ACCC on the basis that the merger would result, or be likely to result, in a substantial benefit to the public which outweighs the anti-competitive detriment of the merger. The indicative timeframe for this review is 50 working days.
  • Filing fees for complex cases: Cases that are subject to a Phase II review, and/or further review by the Competition Tribunal, will now be subject to filing fees between AUD 50,000 and 100,000 (with an exemption for small business).
  • Penalties: Failure to notify or completion without approval will attract substantial penalties and merger arrangements that are purported to be put into effect without ACCC approval will be void. Additional penalties will apply for providing false or misleading information. Penalties are subject to further consultation.

The ACCC has welcomed the changes. While Treasury has adopted several of the proposals promoted by the ACCC, there are some notable exclusions:

  • no call-in power: The proposals do not provide a "call-in" power to allow the ACCC to review transactions that fall below the specified thresholds. If the thresholds are well-defined, merging parties will be able to take greater comfort that the ACCC will not intervene in deals that fall below the thresholds.
  • no presumptive ban on mergers. Despite petitioning for a reversal of the onus of proof (requiring parties to prove that their transactions would not substantially lessen competition) it will be up to the ACCC to confirm that a transaction will breach the SLC test.

Comparing the merger proposals to the current regime

Is ACCC notification voluntary or mandatory?

Current informal clearance regime: Voluntary.

New regime: Mandatory.

Is approval required to complete?

Current informal clearance regime: No, non-suspensory.

New regime: Yes, suspensory.

Is there a notification threshold?

Current informal clearance regime: No.

New regime: Yes, subject to further consultation.

Who is the ultimate decision-maker?

Current informal clearance regime: Federal Court. For the very small number of matters that go through the formal merger authorisation process rather than the ACCC's informal clearance regime, the ACCC is the primary decision-maker, subject to review by the Competition Tribunal.

New regime: ACCC (subject to limited merits review by the Competition Tribunal).

What is the substantive legal test for blocking a transaction?

Current informal clearance regime: The acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market. The authorisation test is different. The ACCC will only grant merger authorisation where it is satisfied that the proposed merger either isn't likely to substantially lessen competition; or is likely to result in a net public benefit, where the benefit outweighs any detriment that results.

New regime: The acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market, including if it creates, strengthens or entrenches substantial market power.

Mergers prohibited at Phase II can subsequently be approved by the ACCC if the transaction will result in a substantial benefit to the public which outweighs the anticompetitive detriment of the merger.

Are there statutory timelines for the ACCC's review?

Current informal clearance regime: No. There is a 90-day statutory review period for authorisation which can be extended if the applicant agrees in writing.

New regime: Yes (subject to further consultation). Deemed approval if the ACCC does not make a decision in the timeframe.

30 working day Phase I review (15 working days for fast-track cases that don't raise concerns).

90 working day Phase II review 50 working day public benefits review.

90 calendar day limit for Tribunal merits review of ACCC decision (which could be extended by a further 90 days). Fast-track option available.

Next steps for merger reform and open questions

If approved by Parliament, the changes are expected to come into effect on 1 January 2026, with the Government to review the new system three years after commencement. Several key details about the regime are not yet settled, including:

  • monetary and market share thresholds: the type of thresholds that are adopted and – crucially – the level at which they will be set. Treasury has indicated that there will be both monetary and market share-based tests. Treasury's Report suggests that "the vast majority" of mergers will fall below the notification thresholds and the overall volume of ACCC notifications will be similar to current volumes, but this remains to be seen. The ACCC previously made an ambitious proposal of an acquirer or target turnover threshold of $400 million or global transaction value threshold of $35 million, which would capture a substantial proportion of deals.
  • minority acquisitions: the extent to which minority acquisitions will require notification. Treasury's report suggests that minority acquisitions which provide "de facto control" or "the ability to materially influence the acquired business" will be caught, but it is not confirmed whether the notification thresholds will include a control test.
  • timeframes: how strict the "faster" timeframes will be. Treasury has indicated that there will be an ability to "stop the clock". In addition, the Phase I review period will only commence once the ACCC receives a "complete notification". If the ACCC has significant discretion in determining whether a notification is complete, this may delay the start of the review period.
  • information requirements: what information parties will be required to provide up front. The ACCC has been highly critical of the deficiencies of information provided by merger parties under the existing voluntary regime and Treasury has indicated that there will be clear upfront information requirements, including standard notification forms which will be consulted on.
  • transition: transitional arrangements for deals that have already been announced and/or notified to the ACCC as at 1 January 2026.
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