Competition review recommends ACCC merger law shakeup
The ACCC’s weak merger review and enforcement powers are hampering economic competition, a parliamentary committee suggested.
The Standing Committee on Economics has flagged the need for stronger ACCC powers in reviewing and regulating mergers and acquisitions to promote economic competition.
Last year, Treasury assured that merger laws would be an “immediate focus” of the Economic Committee’s competition review.
In its final report, published last week, the Committee recommended mandating pre-merger notifications for transactions above a yet-to-be-defined notification threshold.
It also recommended the Competition Policy Taskforce should consider suspending certain mergers pending ACCC clearance and that it should review the ACCC’s merger review test.
Witnesses to the review told the Committee that Australia’s merger system falls “well short” of international best practices in the context of competition.
Former ACCC chair professor Rod Sims told the Committee Australia had the “weakest merger regime of any country we compare ourselves to.”
“All those other countries have a regime where you have to notify the regulator … Our law doesn’t do any of that,” said Sims. “It simply says, ‘Don’t have a merger or acquisition that is likely to substantially lessen competition.’ Essentially that’s it.”
The ACCC submitted that the onus of proving whether a potentially anti-competitive merger should proceed ought to be shifted to the merging parties.
Currently, the onus to prove that a merger ought not to proceed resides with the ACCC.
To that end, it proposed that mergers above a certain notification threshold, to be developed, should be suspended pending ACCC approval.
This would provide “greater transparency, 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,” it said.
The ACCC also told the Committee that the relevant provisions of the Competition and Consumer Act 2010 (Cth) made it difficult for the agency to obtain a successful merger ruling in court.
Under the current merger law and review processes, ACCC-initiated litigation is often doomed to fail, said former ACCC chair, Professor Allan Fels.
Section 50 of the Act requires the court to be “convinced of the future state of the market” before disallowing a merger, said the ACCC.
Given the dynamism and uncertainty of economic markets, this requirement can often be the “driving factor” behind unsuccessful applications.
It added the legislation is “inadequate” in addressing “creeping” acquisitions, given the relevant provisions focus on the incremental impact of a given transaction.
The legislation, it said, should be amended to require consideration of whether the merger could entrench, increase, or extend the position of a “substantial market power.”
It also suggested adding a specific anti-competitive factor to the enumerated considerations to be weighed by the courts.
Several witnesses told the Committee the inadequate merger system was having a negative material impact on the competition of certain sectors.
Sims submitted evidence the system had prevented the ACCC from blocking mergers in “energy, telecommunications, railways, and a whole range of sectors” and that this had negatively affected the economy.
To illustrate, the Committee referred to the ACCC’s attempted blocking of ANZ’s takeover of Suncorp’s banking arm on the basis it would “further entrench an oligopoly market structure.”
The ACCC’s intervention was overturned on appeal to the Australian Competition Tribunal in February this year.
“Though most mergers are not anti-competitive and can be beneficial, an effective merger regulatory regime could prevent transactions that were likely to be anti-competitive,” said the Committee.
