ACCC merges its M&A review process
Following the highly publicised Harper review into Australian competition law, the long awaited reforms to the Competition and Consumer Act 2010 (Cth) (“the Act”) were passed in Parliament on 18 October 2017.
Amongst the myriad of changes, significant amendments have been made to how mergers and acquisitions are reviewed and authorised by the Australian Competition and Consumer Commission (“the ACCC”). The changes, which are due to come into effect in the coming weeks, will provide a clearer pathway for businesses to have their merger authorised directly by the ACCC, bypassing the Australian Competition Tribunal.
The ACCC’s new found power to authorise mergers provides businesses with a strong alternative option to confirm that their proposed merger does not substantially lessen competition and give them peace of mind.
In this update, Moulis Legal senior lawyer Emily Murphy outlines the new process to obtain a merger authorisation from the ACCC and what these changes mean for businesses considering a merger or acquisition.
The existing formal merger review options have been inadequate
In Australia, parties to a merger are not required to notify or seek clearance from the ACCC before the transaction is completed. However, it has been common practice for parties to approach the ACCC seeking an informal review of the proposed merger and obtain an informal merger clearance.
The informal clearance is a statement by the ACCC that effectively says that they ‘do not oppose’ the merger or acquisition. It does not provide the business with legal immunity from any future action if the merger is later considered to have substantially lessened competition. A merger that substantially lessens competition is in breach of section 50 of the Act and can result in the merger being reversed.
For more information about the informal merger review process and why the ACCC is concerned with mergers that substantially lessen competition, see our earlier article.
If parties were concerned that their merger may substantially lessen competition, there were previously two options available to obtain legal immunity from future actions – obtain formal clearance from the ACCC or seek formal authorisation from the Australian Competition Tribunal. Both of these options have seldom been used, despite being in operation since 2007.
The underutilisation of these formal options has been one of the key drivers behind the current reforms. The new provisions will change the formal clearance process, but the existing informal merger review process will remain available to parties in its current form.
ACCC’s power to authorise mergers streamlines the process
The option to obtain formal clearance from the ACCC has now been removed under the new laws. In addition, businesses can apply directly to the ACCC for formal authorisation rather than applying to the Australian Competition Tribunal.
Streamlining the formal clearance process provides a clear pathway for parties who want greater certainty that their merger does not substantially lessen competition. Mergers that obtain authorisation will also benefit from the ACCC’s knowledge and expertise in considering and applying section 50 of the Act. In addition, the new process eliminates the time, cost and pressure of obtaining authorisation from the Australian Competition Tribunal.
The draft Merger Authorisation Guidelines 2017, released by the ACCC this week, provide an overview of the new authorisation process. It includes the following steps.
- The proposed acquirer can approach the ACCC and discuss the merger and their application before lodgment. Note, only the acquirer in the merger can make an application for authorisation.
- The application for authorisation and all relevant documents are then lodged. The fee payable for the application will be $25,000.
- The validity of the application is assessed by the ACCC within five business days of its receipt.
- The ACCC will conduct market inquiries and collect further information it considers necessary.
- The ACCC will consult with other people that it consider reasonable and appropriate.
- Within 90 days (unless extended by agreement with the applicant), the ACCC will issue a determination as to whether or not it authorises the merger. If no determination is issued, the applicant can assume that the ACCC has refused the application.
Further details on each of these steps can be found in the draft guidelines. These guidelines will be finalised once the ACCC has completed its public consultation.
The test to authorise a merger is clearer
Under the new provisions, the ACCC must not authorise a merger unless it is satisfied that:
- the conduct would not have the effect, or likely effect, of substantially lessening competition; or
- the conduct would result in, or be likely to result in, a public benefit which would outweigh the public detriment that would result, or be likely to result, from the conduct.
Previously, there were multiple tests and interpretations that were applied when determining whether a merger should be authorised. The new requirements provide parties to a merger with more clarity and streamline the test to be applied by the ACCC.
Practicalities for businesses considering a merger
The commencement date for the new merger review process is expected to be announced in the coming weeks. Under the new process, the ACCC will only be able to grant authorisation to proposed or future mergers. The ACCC will not be able to grant authorisation for a merger that has already been completed.
Authorisation provides parties to a merger with peace of mind. To ensure that parties do not miss the opportunity to seek authorisation, they should turn their mind to competition issues early on in the merger process. Parties should obtain tailored legal advice to ensure they select the most efficient and effective merger review process for their specific transaction.
Whether a business seeks an informal review or a formal authorisation for their merger, these competition reforms are sure to help parties navigate the merger review process and will give much welcome clarity.
Moulis Legal’s dispute resolution team guides businesses across Australia and Asia in the management and resolution of cross-border and domestic commercial disputes in a way that is commercially focused and business-centric. We represent Australian and international organisations in various domestic and international jurisdictions on matters including contractual disputes, cross-border intellectual property disputes, competition law issues and managing and responding to regulatory investigations.
For more information, please contact Emily Murphy on +61 7 3367 6900 or email@example.com.
This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.