Australia’s ACCC proposes major shift to mandatory merger regime and outlines sustainability and digital priorities

Since taking office last year, ACCC chair Gina Cass-Gottlieb has been vocal in her criticism of the regime. She says the authority often finds that filings in mandatory jurisdictions are prioritised over the Australian regime, which has hampered its ability to assess deals and prevent potentially anti-competitive mergers (see our Global trends in merger control enforcement report for more on this).

Now, in an important speech, Cass-Gottlieb has outlined the ACCC’s case for reform to the merger control rules. Significantly, the proposals will drop a number of the more controversial provisions initially put forward by her predecessor in 2021. Nevertheless they will, if adopted, amount to a major change.

Beyond merger control, Cass-Gottlieb also set out the ACCC’s position on sustainability measures and the digital economy.

Merger control reform

The ACCC will propose a formal clearance model based on overseas merger regimes:

• A mandatory, suspensory notification requirement for mergers above specified thresholds. The exact thresholds are still to be determined, but could be based on “the size of the proposed transaction, the size of the business being acquired globally and/or within Australia, or a combination of these factors”. The ACCC will also be able to “call in” below-threshold deals for review.
• An expedited process for non-contentious transactions (similar to the EU’s simplified procedure).
• The ACCC will itself take the final decision, which will be appealable to the Australian Competition Tribunal.
• A “second-stage” review will clear a merger if it is in the public interest. Parties will only be able to apply for clearance on this basis if they have had their initial application denied on competition grounds.

The ACCC will also propose reforms to the substantive assessment and test.

First, it will recommend amending the legislation to make it clear that the substantial lessening of competition test includes “entrenching, materially increasing or materially extending a position of substantial market power”. This is similar to the test in the EU, and would ensure that there is a focus on the enhancement of market power by dominant firms.

Secondly, it will propose that the rules explicitly set out factors that must be taken into account when reviewing a transaction. Notably, these include the loss of actual or potential competitive rivalry and whether the deal will result in increased access to, or control of data, technology or other significant assets. This aligns the ACCC with the approach of many antitrust authorities across the globe, which are increasingly focused on similar factors.

Sustainability and market transformation

Decarbonisation and market-based responses to climate change are a focus for the ACCC.

It has established a dedicated taskforce on sustainability issues for both competition and consumer law, commenced a series of enforcement actions into greenwashing, and intends to release publishing guidelines to assist businesses to make truthful sustainability claims.

Like many other antitrust authorities, the ACCC is also concerned about illegal collusion in the green transition. At the same time, it recognises the importance of industry collaboration. Cass-Gottlieb emphasised that the existing authorisation framework is designed to take “real, verifiable and significant environmental benefits” into account.

Digital issues

Finally, Cass-Gottlieb noted that the ACCC is particularly concerned about digital platforms engaging in certain types of anti-competitive behaviour. This includes self-preferencing, restricting interoperability, exclusivity agreements, practices that limit consumers’ ability to switch between services or devices, and denying access to technological infrastructure.

Service-specific mandatory codes of conduct are seen as a key measure to combat these practices. These codes would allow for “dynamic and flexible obligations that could be targeted and tailored to the particular competition issues relevant to each service”. This chimes with the intended approach in the UK, where draft legislation to establish a new digital markets regime has just been published.

What will the government do?

We expect the ACCC will continue to consult with government and the legal and business communities about its merger reform proposals. What the government will make of them remains to be seen. However, in watering down the 2021 proposals – a welcome move showing that the ACCC has listened to the concerns of stakeholders – it seems more likely that these changes will gain traction with the government than their previous iteration.

So far, the government response has been measured. The treasurer has acknowledged the proposals, noting that the government will carefully consider them, but at the same time recognising that “there are a range of perspectives” on the current merger control regime. Watch this space.

Compromise welcomed

While the ideas are still “a big change”, they are “substantially better” than those proposed in 2021, says Allen & Overy competition partner Peter McDonald, speaking to The Australian Financial Review on the ACCC’s call for reform to Australia’s merger processes. Peter said the ACCC deserved “some credit” for winding back the earlier proposals.

“It is substantially better and I give the ACCC credit for listening and not just sticking to its guns and saying we’ve made our predetermined position that was right. They have made material changes.”

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