The Albanese Government has embarked on a comprehensive review of merger rules and processes with the goal of enhancing competitive markets and economic dynamism.
The primary objective is to ensure that these regulations support better outcomes for the Australian people.
As part of this initiative, the government has unveiled a consultation paper aimed at evaluating potential reforms in the nation's competition policy settings.
The government says it is committed to maintaining a healthy balance between facilitating beneficial mergers and addressing those that may pose a threat to healthy competition.
This consultation paper scrutinises the existing merger rules and processes to determine if they are indeed fit for their intended purpose.
The overarching goal is to enable mergers that contribute positively to the economy while safeguarding against those that could prove anti-competitive in nature and providing tangible benefits for the economy and consumers.
This includes promoting increased productivity, exerting downward pressure on prices and expanding choices for Australians grappling with the rising cost of living.
ACCC calls for reform
The issue of rising economic concentration has gained prominence not only in Australia but globally.
There is growing evidence to suggest that current merger rules may be excessively permissive, allowing mergers that fail to deliver benefits to consumers, workers and the broader economy.
The Australian Competition and Consumer Commission (ACCC) has echoed concerns about the country's existing merger regime, further underscoring the need for a comprehensive review.
The government's consultation paper outlines a range of potential changes, encompassing notifications of mergers, the criteria for determining the likelihood of substantially lessening competition and the entities responsible for making these determinations.
It also includes insights from international jurisdictions such as the United States, Canada, the United Kingdom and New Zealand.
Interested parties have until January 19, 2023, to submit their feedback on the consultation paper.
In addition to written submissions, the Competition Taskforce will actively engage with industry stakeholders, consumer advocates and experts to ensure a diverse range of perspectives are considered.
An expert advisory panel, featuring distinguished individuals such as David Gonski, Kerry Schott (ETR:1SXP), John Asker, Sharon Henrick, John Fingleton, Danielle Wood and Rod Sims, will play a pivotal role in assisting the Taskforce in formulating recommendations for the government.
Options for merger reform
The consultation paper also explores potential options for merger reform, with three key proposals outlined:
Voluntary Formal Clearance Regime - Under this model, businesses would have the option to voluntarily notify mergers.
The ACCC could then grant legal immunity from court action under the prohibition against anti-competitive mergers if it determines that the merger is unlikely to substantially lessen competition.
Mandatory and Suspensory Regime - This proposal suggests the introduction of a mandatory regime where mergers above a certain threshold must be compulsorily notified. Transactions would be temporarily suspended while the ACCC conducts its assessment.
To proceed, the ACCC would need to demonstrate to the court that the merger is likely to substantially lessen competition.
Mandatory Formal Clearance Regime - (ACCC's proposal) In this model, a compulsory notification requirement would apply to mergers above a specific threshold. Additionally, the ACCC would have the authority to 'call-in' transactions below the threshold if there are competition concerns.
Clearance would only be granted if the ACCC is satisfied that the merger would not substantially lessen competition, providing formal immunity from court action under section 50 of the Competition and Consumer Act 2010.
The first two options rely on judicial enforcement and litigation to prevent anti-competitive mergers, whereas the third option primarily adopts an administrative approach, requiring ACCC approval before transactions can proceed.
Many mergers reviewed by the ACCC each year are already subject to mandatory notification and suspensory framework due to their involvement with foreign investment, aligning with Australian foreign investment approval processes.
As policymakers consider these options, they must ensure effective coordination between foreign investment and competition approval regimes.