Introduction

On 24 July 2024, the Treasury released the exposure draft of the Treasury Laws Amendment Bill 2024: Acquisitions (Exposure Draft).¹ This proposed legislation introduces significant reforms to Australia’s merger rules and processes. The new framework includes a formal merger authorisation regime, which was initially announced on 10 April 2024 and covered in our previous alert. Under this new regime, the Australian Competition and Consumer Commission (Commission) will play the central role, as entities involved in mergers will be required to submit applications for review to the Commission, which will then make a determination. This determination is required before any notifiable merger may proceed.

It is important to see these reforms in the context of the rise of the ‘digital economy’. The economics of markets within that particular economy are very different, and prone to the rise of large players which ‘tip’ into a position of market power due to the economic effects that occur. These players may be hard to dislodge. The Commission, and other global regulators, have been investigating, regulating and litigating these issues, particularly in the ad-tech (online advertising) sector which display these effects. This is covered in our previous alert. This helps explain the new definition of ‘substantially lessening competition’ so as to include the concept of ‘creating, strengthening or entrenching a substantial degree of market power’. 

Key dates

The current regime

Currently, Australia does not have a compulsory notification system for mergers. The existing informal merger notification process relies on the goodwill of parties and enforcement through the Competition and Consumer Act 2010 (Commonwealth) (Act). The act prohibits the direct or indirect acquisition of shares in a body corporate or assets of a person if the acquisition would have the effect or likely effect of substantially lessening competition in a market (SLC Test),² considering factors listed in section 50(3).

Under Part VII of the Act,³ the Commission can authorise an acquisition if it determines that the conduct would not substantially lessen competition, or that the public benefits of the acquisition would outweigh any potential detriments to the public by reason of the conduct. The Commission may also consider any section 87B undertakings given by parties involved.⁴

The new regime

The new merger regime will become effective on 1 January 2026. This framework introduces a compulsory notification requirement and significantly shifts the power of governance by delegating significant powers to the Commission. It operates a ‘suspensory administrative system’; effectively shifting the onus of proof to merger parties.

Key components of the new regime include:

(a) Compulsory notification: Parties must notify the Commission of certain acquisitions and any material changes in facts related to these acquisitions.

(b) Mandatory notification thresholds: Specific criteria for notifiable acquisitions will be established through regulations or Ministerial determination. The criteria will go beyond typical financial turnover or value metrics and will include factors, without limitation, such as:

(i) Acquisition value;

(ii) Parties or classes of parties involved;

(iii) Assets or classes of assets;

(iv) Businesses or classes of businesses (distinguished with a ‘market’ below);

(v) Turnover;

(vi) Markets or classes of markets; and

(vii) Other acquisitions or classes of acquisitions.

Thus notification can be made specific to and target specific businesses.

(c) Cumulative effect of acquisitions: The Commission will consider all acquisitions by the acquirer within the previous three years. This need not be acquisitions in any particular market. In recent years there has been a particular concern about acquisitions by private equity firms acting in several different sectors and then ‘rolling up’ those acquisitions to obtain greater market position.

(d) Determinations: The Commission is the body that will make a determination that a notified acquisition may either:

(i) Be put into effect; or

(ii) Be put into effect with conditions; or

(iii) Must not be put into effect.

In making a determination, the Commission must consider:

(i) The Act’s objective of increasing the welfare of Australians by promoting competition and consumer protection; and

(ii) All relevant matters, including consumer interests.⁵

There are a number of matters which can be taken into account. These include many of the usual criteria for assessing the competitive effect of mergers, including any restrictions upon the merging parties in the contractual arrangements pursuant to which the acquisition is to take effect. There is now a specific reference to a more ‘dynamic’ approach to the assessment that considers potential technical innovations, economic developments and productivity gains. Some of those matters go beyond ordinary ‘market analysis’ in the traditional sense.

(e) What if there is no notification: Failure to notify, or if parties proceed with the acquisition without Commission approval has several consequences:

(i) The acquisition cannot proceed without an ‘effective notification date’. It is this “effective notification date” which drives much of the timeline of merger approval;

(ii) It is an offence not to notify the Commission of a notifiable transaction or material change in fact;

(iii) Acquisitions are ‘stayed’ until there is an effective notification date;

(iv) Failure to comply with conditions agreed with the Commission is an offence; and

(v) Acquisitions are void if implemented while ‘stayed’.

(f) Suspensory timelines: The Treasury has outlined the following phases for the new regime, mirroring an approach familiar in other merger control regimes, such as those used by the UK competition regulator.

(i) Phase 1: Determination of whether the merger can be put into effect (with or without conditions).

(ii) Phase 2: If conditions are unacceptable or the merger cannot proceed, a more detailed examination will follow, with the Commission expressing its competition concerns.

See graphic here, which outlines the two-phased process above and extensive application timelines.

(g) Substantial public benefits: After a Phase 2 determination, parties may apply to the Commission for a determination that the acquisition occurs on ‘substantial’ public benefit grounds. The Commission must be satisfied on reasonable grounds that the acquisition would likely result in a benefit to the public that would ‘substantially’ outweigh any detriment to the public resulting from the acquisition.

(h) Reviews of decisions: A merger party may apply for an internal review of the Commission’s decision. The Australian Competition Tribunal (Tribunal) can review the Commission’s decisions. This is a limited merits review and, subject to minor exceptions, cannot take into account anything not put before the Commission. The Tribunal may now make an order for costs.

(i) Fees: Fees are yet to be set, but likely to be significant, will attach to many aspects of the notification process.

Conclusion

The new regime is a significant change to the manner in which our market economy is governed, with the Commission gaining significant powers. Because every merger analysis is fact-dependent, parties may not know precisely what is relevant material for the Commission’s determination. It is likely that parties will need to put much more material before the Commission to avoid limiting any review process before the Tribunal. The new regime makes no mention of any role for the judiciary. This is a move towards a more ‘administrative state’ regime. However, the Constitutional protections in relation to ‘jurisdictional facts’ is not likely to exclude the Courts in total.

¹ Treasury Laws Amendment Bill 2024: Acquisitions (Exposure Draft).
² Section 50, Competition and Consumer Act 2010 (Cth) (Act). 
³ Part VII, Act. 
⁴ Section 87B, Act. 
⁵ Section 51ABX, Exposure Draft.