ACCC gives up on ‘user pays’ merger reform, welcomes Treasury shake-up

On Wednesday morning, Treasurer Jim Chalmers revealed what he considered to be the most substantive merger reform package in half a century.

The merger shakeups – which were developed with the benefit of consultations with the Economics Committee’s competition review – form just one part of the government’s ongoing competition reform efforts.

For years, the ACCC has been pushing for merger reform on the basis that the current system was contributing to the nation’s dwindling competition rates and rising cross-sector market concentration.

Within hours of the announcement, the ACCC welcomed the reforms – which acted on several of its recommendations and will broaden the ACCC’s power to reject anti-competitive mergers.

“These proposed changes are significant and will reinforce public confidence in Australia’s competition laws,” said ACCC chair Gina Cass-Gottlieb.

That said, the government made it clear that it would not be acting on one recommendation made by the ACCC to the competition review – a proposal that had garnered significant public attention.

Currently, it is up to the ACCC to prove why a potentially anti-competitive merger should not be allowed to proceed.

Instead, the ACCC proposed to the Economics Committee’s competition inquiry that merging parties above a certain threshold should be required to demonstrate to the ACCC that their proposed merger would not “significantly reduce competition.”

Functionally, this would put the onus on the merging parties by requiring them to demonstrate why a merger would not be excessively anti-competitive – instead of it being strictly the role of the ACCC.

Such a system would “provide greater transparency and accountability and ensure the ACCC has sufficient time to consider the competition effects of proposed mergers while providing more timing certainty for the merger parties,” said the ACCC.

“It could also transition from the existing taxpayer-funded regime towards a user pays approach” while bringing the process more in line with existing assessments for foreign acquisitions, it added.

In its report released on Wednesday, Treasury made it clear that it would not be pursuing this reform due to public backlash.

“Many stakeholders objected to the perception that this ‘reversed the onus of proof’; effectively introducing a presumptive ‘ban’ on mergers,” it said.

It added the reform could add an element of bias to the approval process, making it less likely that a merger will be accepted.

Treasury said certain stakeholders were also concerned placing the onus on the applicant could “undermine” existing legal and economic principles upon which a merger approval decision should be based.

The ACCC, in its submission to the Taskforce, said its proposed approval test would not amount to a reversal of the onus of proof, since it pertains to administrative, non-court processes.

Despite this, ACCC chair Gina Cass-Gottlieb told Accounting Times it will no longer push for this kind of reform so long as the government delivers on its proposals.

“Although there is a lot of detail to work through and anticipated in Taskforce consultation, we consider that the key elements are capable, taken together, of delivering the meaningful reform the ACCC has been seeking,” she said.

“The objectives set by the government for a reformed regime which can identify proposed mergers, enable the ACCC to effectively assess potentially anti-competitive mergers and prevent harmful mergers.”

Many of the reforms announced by Treasury appeared to have incorporated recommendations made by the ACCC.

For instance, the proposed reforms include a mandatory notification requirement for deals over a certain monetary and market share threshold, to be developed following public consultations.

Further, the criteria for reviewing merger reforms will be broadened to invite consideration of the cumulative effects of mergers on competition.

So-called “serial acquisitions” – where a business makes several separate acquisitions that have a cumulative anti-competitive effect – are not comprehensively prohibited under current merger law.

Dealing with serial acquisitions has been a “long-standing concern and challenge” of the ACCC, as individual acquisitions often fly under the radar, not triggering merger notifications or amounting, independently, to a “substantial lessening of competition.”

Beyond beefing up the powers of the ACCC, the proposals also promised to speed up the timelines for merger reviews.

Mergers that do not present competition risks will be approved to proceed within 30 days with an option to ‘fast-track’ others after 15 days.

“We want mergers to drive improvements in productivity, to put downward pressure on prices and to deliver more choice for Australians under the pump with the cost of living.”

In an AM interview, Chalmers said the reforms will amount to the “biggest changes to the mergers regime in something like 50 years.”