The Australian Federal Government has proposed a raft of changes to merger laws in Australia with the goal of boosting competition and productivity within the economy.
The focus appears to be on speeding up merger approval decisions by reducing the approval period to within 30 working days when no competition concerns are raised by the regulator, while also emphasising a simpler, more transparent processes that prioritise maintaining competition within sectors.
Market concentration increasing
Treasurer Dr Jim Chalmers announced the reforms at the 10th annual Bannerman Competition Lecture in Sydney last week, saying Australia’s economic competitiveness has been falling since the 2000s.
In 2004, Australia was ranked first as most resilient economy and third for legal and regulatory frameworks designed to encourage competition.
By 2024, an analysis by the Institute of Public Affairs found we had dropped to 20th place in terms of resilience and 19th by competitive regulatory framework.
“Growth in total market concentration – measured by the market share of the top four businesses in industry sectors – has nearly doubled, from 1.7% in 2010 to almost 3% in 2020, according to the e61 Institute,” the Treasurer said.
“Around one-third of industries, including mining, utilities and retail trade, saw increased concentration of more than 5%, more than offsetting the quarter of industries which saw a decrease.
“And the rate of entry of new companies is falling, as the average age of businesses rise.
“Over recent decades, the mark‑ups that businesses apply to goods and services have increased by more than 2%.
“Reforms that address the decline in competition can deliver big economic benefits.
“It’s clear, Australia’s approach to mergers is no longer fit for purpose. Australia is one of only three OECD countries that doesn’t require compulsory notification of mergers.”
Changes to merger legislation
The Federal Government has a simple vision for its merger reform legislation – faster, stronger, simpler, targeted and transparent.
What that means in real terms is a little more complicated than a five-word slogan.
In pursuing 'faster' mergers, the government is specifically aiming to speed up the approval of mergers that have raised no competition concerns, which must be rubber-stamped within 30 working days.
The government also intends to introduce higher levels of certainty into the merger assessment process by including a single expert decision‑making process on all mergers.
Mergers above a certain threshold in terms of monetary and market shares will be required to notify the ACCC and await approval while the new laws will specify exactly which factors the ACCC must consider during a merger application.
The reforms include an acknowledgement that serial mergers and acquisitions can pose a threat in certain industries – the ACCC will be able to consider the cumulative effect of mergers by the acquirer or target within the previous three years.
The reform will also simplify the process, eliminating the three separate paths to approval and creating a single, streamlined application pathway.
At the same time, mergers will no longer fall separately under the Foreign Acquisitions and Takeovers Act of 1975, reducing duplication of regulation.
Fairer, more transparent
In a bid to better target the ACCC’s attention and increase transparency, the reforms will require the ACCC to review mergers that pose a risk to competition, consumers and the economy while transactions in the national interest will be fast‑tracked.
The new policy will introduce a public register of all mergers and acquisitions, and ACCC decisions will be subject to the Australian Competition Tribunal, ensuring reviews are conducted by legal and economic experts.
“We welcome the Treasurer’s announcement today that the government will move to strengthen Australia’s merger laws, which will benefit Australian consumers and businesses of all sizes, as well as the wider economy,” ACCC chair Cass-Gottlieb said.
“Higher prices, less choice and less innovation can result from weakened competition. Stronger merger laws are critical to ensure anti-competitive mergers do not proceed.”
“These proposed changes are significant and will reinforce public confidence in Australia’s competition laws.”