Announcement date
10 October 2024
Link to announcement
Historic reforms for a more competitive economy enter Parliament
Problem being addressed
While most mergers and acquisitions are unlikely to raise competition concerns, some can harm competition, allowing businesses to raise prices and not pass on economic gains to consumers. Australia’s merger control system plays a crucial gatekeeper role in preventing these mergers from harming consumers and the wider economy.
Analysis shows that competition in Australia has been declining since the 2000s. There is evidence emerging that the intensity of competition has weakened across many parts of the economy, accompanied by increasing market concentration and markups in many industries. Discouraging anti-competitive mergers and acquisitions, and stopping those that try to proceed, is crucial for maintaining downward pressure on the cost of living and creating a stronger, more competitive and more productive economy.
Proposal
The Impact Analysis considers four options.
Option 1: Status quo – Australia currently has a prohibition on acquisitions of shares or assets that would have the effect, or be likely to have the effect, of substantially lessening competition (SLC) in any market. These are reviewed through one of three pathways: voluntary informal merger review; voluntary merger authorisation; or Federal Court of Australia (Federal Court) proceedings.
Option 2: Mandatory and suspensory administrative system with an extended SLC test – introduces a single mandatory and suspensory administrative merger control system for mergers that meet certain thresholds that will replace the multiple voluntary pathways of the status quo. A merger will be permitted to proceed, unless the ACCC is satisfied that it is likely to SLC, including if it creates, strengthens, or entrenches substantial market power. Merger parties may also, following the competition assessment, seek for the merger to be approved if the ACCC is satisfied the merger would result, or be likely to result, in a benefit to the public that outweighs the detriment of the merger.
Option 3: Mandatory and suspensory administrative system with a satisfaction test – this is an alternative version of Option 2 in that it also introduces a mandatory and suspensory administrative merger control system. It differs from Option 2 in that mergers and acquisitions can only proceed if the ACCC is satisfied a merger is not likely to SLC including if it creates, strengthens, or entrenches substantial market power.
Option 4: Mandatory and suspensory judicial enforcement system with an SLC test – this is an alternative version of Option 1 that would replace the voluntary informal merger review with a mandatory and suspensory system, and retain the existing model of judicial enforcement with the SLC test. Option 4 would retain a separate merger authorisation process.
Option 2 is the recommended option as it strengthens Australia’s merger control approach by improving the ACCC’s ability to effectively and efficiently detect, review and act against anti-competitive mergers and acquisitions. Mandatory notification requirements would mean that mergers and acquisitions more likely to impose risks for the economy must be notified to the ACCC. Suspensory timeframes for review and upfront information requirements will enhance predictability and certainty for stakeholders.
The benefits of an efficient and effective merger control system are significant. Applying analysis from overseas to Australia would imply benefits of between $340–732 million per year. Greater certainty and speed will reduce costs and facilitate valuable investment in pro-competitive and benign mergers. Consumers and businesses, along with the broader community, will be better informed and more confident that the ACCC has the toolkit to perform its gatekeeper role, prevent anti-competitive mergers and maintain competitive markets in Australia.
Assessed Impact Analysis outcome
Good Practice
Assessment comments
The analysis in the IA is good quality overall. The IA addresses the seven IA questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention.
Regulatory burden
The Treasury estimates Option 2 will increase regulatory costs by $10.8 million per year.