The Chair of the Australian Competition and Consumer Commission (ACCC), Gina Cass-Gottlieb, has, for the first time as Chair, confirmed that the ACCC continues to advocate for significant reforms to Australia's merger control regime first proposed by former Chair Rod Sims in 2021.
Specifically, the ACCC will press for a move to a mandatory, suspensory model for mergers above certain thresholds, and changes to the substantive merger clearance test. The proposals would shift Australia's merger law closer to that which applies in the European Union and other jurisdictions.
Merger law reforms
The Chair's speech highlighted three key focus areas for the ACCC, building on the recent announcement of the ACCC's compliance and enforcement priorities for 2022/23.
Drawing upon her experience at the ACCC in the first 12 months of her term, Ms Cass-Gottlieb's reasons for advocating merger law reforms include:
- Australia's current merger regime is not well-placed to deal with issues faced by consumers and the Australian economy in the current environment of uncertainty and vulnerability from supply chain pressures, geopolitical issues and the climate change transition, as well as technological advances driving rapid structural changes to markets.
- Businesses are pushing the boundaries of the informal regime, with merger parties increasingly giving the ACCC late, incomplete, or incorrect information and an increasing number threatening to complete their transaction before the ACCC has finalised its review, leading to a situation where the ACCC finds itself negotiating with the merger parties to obtain sufficient information and time to conduct its review.
- In global transactions, the ACCC often finds that merger filings in other regimes that require mandatory clearances are prioritised over the Australian voluntary informal regime, which has hamstrung the ACCC’s ability to assess mergers and prevent potentially anti-competitive mergers.
The Chair confirmed that while ACCC continues to advocate for reforms to Australia's merger laws, it has "adjusted some of the elements" of the reforms previously proposed.
The ACCC proposes changes to:
- Merger clearance processes, by moving towards a formal clearance model, where merger parties must demonstrate to the satisfaction of the ACCC that their transaction is not likely to substantially lessen competition before they can proceed.
The move to a formal model would include a mandatory requirement for the ACCC to be notified of mergers above specified thresholds, a requirement for transactions to be suspended from completion without ACCC clearance, and upfront information requirements. This would bring Australia into line with most other OECD jurisdictions.
The ACCC acknowledges that determining the thresholds will require careful consideration and suggests, as with international merger regimes, these could be based on the size of the proposed transaction, the size of the business being acquired globally and/or within Australia, or a combination of these factors.
The ACCC also proposes that for situations where a transaction does not meet the notification threshold, but nonetheless raises competition concerns, the ACCC should be able to "call in" the transaction and assess it in the formal system.
The ACCC also proposes changes to the role of the Federal Court. It considers that the Australian Competition Tribunal is the appropriate review body for ACCC decisions in the formal regime (as currently applies for merger authorisation decisions). The Federal Court would continue to consider applications for declaration and judicial review. The role of the Federal Court in considering merger enforcement matters would also continue for transactions that do not trigger the notification thresholds.
- Merger clearance test, whereby the ACCC (or Competition Tribunal on review) would not clear a merger unless it is positively satisfied that no substantial lessening of competition is likely. This proposal would recalibrate the decision-making process compared to the status quo under the informal process, where the ACCC is required to seek relief in the Federal Court where it alleges a substantial lessening of competition is likely.
In a change from the proposal previously canvassed by the ACCC, Ms Cass-Gottlieb explained that, following consultation with stakeholders, where applicants are not able to satisfy the ACCC or the Tribunal that a transaction can be cleared on competition grounds, merger parties would have the option to make a subsequent application for clearance on public benefits grounds.
The ACCC also proposed changes to the law that would:
- add to the "merger factors" required to be taken into account in section 50 of the Competition and Consumer Act 2010 (Cth):
- the loss of actual or potential competitive rivalry;
- increased access to, or control of data, technology or other significant assets;
- whether the acquisition is part of a series of relevant acquisitions; and
- whether the acquisition entrenches or extends a position of substantial market power; and
- include words in the legislation to make clear that the substantial lessening of competition test includes “entrenching, materially increasing or materially extending a position of substantial market power”. This would be similar to how the European Commission’s merger test is framed.
Competition and consumer protection concerns in digital markets, and sustainability beyond greenwashing
Following the release of the ACCC's proposal for sector-specific industry codes for digital platform services, the Chair confirmed that the ACCC will continue to advocate for an economy-wide unfair trade practices prohibition, which it believes "will assist consumers and small businesses exposed to manipulative practices designed to get them to agree to unfair or unfavourable contact terms".
Ms Cass-Gottlieb has recently raised subscription-based services with cumbersome unsubscribe features (particularly after a free trial period) as an example of an "unfair" practice which, in the ACCC's view, would not be captured by the existing consumer protection law. In the Q&A following her address, the Chair also mentioned the electricity sector and energy markets as other possible focus areas for such an unfair trading law.
In relation to sustainability and greenwashing, the Chair confirmed that the ACCC has a number of enforcement investigations underway that relate to false and misleading representations in relation to environmental and sustainability claims by businesses.
Ms Cass-Gottlieb also said in her speech that the ACCC will be closely monitoring for "illegal collusion as the green transition unfolds", in the context of collaboration and cooperation between businesses on environmental issues. In response to questions after her address, the Chair singled out as examples the sharing of information between businesses on the costs of energy transition (which could act as a signal for common increases in price), or the allocation of territories or markets for the introduction of new products or infrastructure, as practices which could give rise to anticompetitive conduct – which will be on the ACCC's radar.
The ACCC has established an internal taskforce to consider issues related to sustainability across all the ACCC’s functions, and to help ensure competition and consumer protection issues are "front of mind in sustainability-related policy and business decision making".