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Deals may have to clear higher bar for public interest
The government’s draft legislation for proposed reforms to Australia’s merger laws has been released, which Treasurer Jim Chalmers says will make the approval system “faster, stronger, simpler, more targeted and more transparent”.
Jerome Doraisamy
Last Wednesday (24 July), the Treasury released the draft legislation setting the legal framework for the new system, which will commence on 1 January 2026 – subject to passage through Parliament.
The proposed laws, Chalmers proclaimed, “will simplify and speed up the process for mergers that are in the national interest and give the regulator stronger powers to identify and scrutinise transactions that pose a risk to competition, consumers and the economy”.
“These changes will make it easier for the majority of mergers to be approved quickly, so the ACCC can focus on the minority that give rise to competition concerns,” he said.
“The draft legislation delivers the necessary reforms that will enable the ACCC to better identify growing market power and protect Australian consumers from anti‑competitive mergers.
“Improving competition will mean higher-quality choices for consumers and fairer prices and will boost innovation, productivity and dynamism in our economy.”
In a statement issued following the release of the proposed reforms, Australian Competition and Consumer Commission (ACCC) chair Gina Cass-Gottlieb said: “The reforms are important to achieve a simplified merger control framework that prevents harmful anti-competitive transactions and benefits Australian consumers and businesses of all sizes.”
“Simplification is one of the key aims the Treasurer highlighted in designing the new merger reform. We are keen to ensure the new framework does not add complexity.”
Cass-Gottlieb added: “Having the right thresholds for proposed mergers to be reviewed by the ACCC will be key to the effectiveness of the proposed new regime and its ability to achieve the government’s policy objectives of preventing mergers that pose a risk to competition, consumers and the economy.”
“The new merger regime needs to strike the right balance between ensuring that potentially anti-competitive mergers are scrutinised and where necessary prevented, while minimising regulatory burden for acquisitions that do not have anti-competitive effects.”
Deals relying on public benefits
In conversation with Lawyers Weekly, King & Wood Mallesons partner Lisa Huett (pictured) said that the proposed reforms set a “higher bar” to be cleared for deals that rely on public benefits.
“The draft legislation only allows deals to be cleared on public benefits grounds if those benefits substantially outweigh any public detriments,” she said.
“Currently, public benefits only need to ‘outweigh’ those detriments. This means we may end up with a handful of deals over time that would have been cleared under the old test, but won’t be under the new one.”
When asked if the proposals could adversely impact dealmaking, and if so, what might be the implications for lawyers operating in this space, Huett said that the reforms – if passed, may have an impact upon deals that do give rise to some competition issues but also result in public benefits.
“The new proposal means that public benefits need to be much more significant than is currently the case in order to get ACCC clearance,” she said.
“That said, very few deals rely on public benefits arguments so, in practice, not many transactions will be affected by this change.”
Other takeaways
Elsewhere, Huett observed that the draft legislation incorporates a broad and vague definition of “control”.
Essentially, she said, ACCC clearance will be required if an acquirer obtains “control” of the target, with a rebuttable presumption that a holding of less than 20 per cent will not provide “control”.
“‘Control’ can also be acquired if there is the capacity to directly or indirectly determine the ‘policy’ of the target, including through the ‘practical influence’ that can be exerted (as opposed to the rights that can be enforced),” she said.
“This means detailed consideration will need to be given to matters such as past or future voting practices and patterns of behaviour affecting voting and other practices in order to work out if ACCC clearance is required.”
Moreover, Huett went on, the regime won’t give greater timing certainty for deals with material competition issues or that the ACCC wants to examine closely.
This is because, she outlined, “the ACCC will determine when the clock ‘starts’ (i.e. when an application is complete and can be accepted) and ‘stops’ (e.g. it can pause the timing if information is not received on time, or it issues mandatory information/document production notices)”.
Finally, Huett reflected that some details remain unknown – “most critically, the notification thresholds themselves”.
“These will be released ‘later this year’ and will likely include both monetary (e.g. turnover, profitability, deal value) and market share thresholds,” she said.
Submissions on the draft legislation are open until 13 August 2024.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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