The Australian Government has announced generational reforms to Australia’s merger control laws – the most significant changes in decades. The announcement follows an extended Australian Competition and Consumer Commission (ACCC) campaign to replace the existing, voluntary “informal clearance” process with a FIRB-like mandatory and suspensory regime.
Why reform?
In recent years, the ACCC has articulated a range of concerns about the current approach, including that:
- transactions are increasingly not notified to the ACCC (analysis relied on by the ACCC suggests that approximately 1,000 to 1,500 Australia-related mergers occur annually, with only approximately 350 notified);
- merger parties are increasingly withdrawing from the existing voluntary process (e.g., when it becomes clear that a quick approval will not be given) or otherwise threatening to complete before the ACCC has finalised its review (which the ACCC perceives to be a tactic to create additional timing pressure); and
- for global deals, merger parties will generally prioritise compliance with any applicable mandatory, suspensory regimes, and Australia is one of only three OECD countries without one.
The ACCC also has an overarching concern that the level of market concentration across important sectors of the Australian economy is too high. This mirrors Government concerns that the relatively high level of market concentration in Australia is exacerbating cost-of-living pressures.
Summary of changes
The new regime, to be effective from 1 January 2026, will involve the following.
- Mandatory notification of transactions over specified thresholds. A merger party seeking to acquire control of a business by way of an acquisition of shares or assets will be required to notify the ACCC if the transaction exceeds specified thresholds. While the detail of those thresholds has not yet been determined, they will be a combination of transaction value, sales/turnover/profitability, and/or market share measures. It remains unclear precisely how acquisitions of minority interests will be handled under the applicable control test.
- Aggregation of past acquisitions. Importantly, all transactions of the buyer and seller within the previous three years will be aggregated for the purposes of determining whether a transaction meets the mandatory notification thresholds. Under this mechanism, creeping/serial acquisition and roll-up strategies will routinely trigger a notification requirement, and potentially put buyers with those strategies at a new disadvantage in competitive bid scenarios.
- Suspensory effect. There will be a suspensory obligation not to complete a notifiable transaction until it has been cleared by the ACCC, with corporate and individual penalties for non-compliance.
- Indicative timelines of 30-120 working days and “fast-track” reviews. ACCC assessments will be conducted in two phases. The Government has indicated that the first phase is likely to be a 30 working day review, with the option of a “fast-track” clearance for uncontentious deals after at least 15 days. The clock will start only once the ACCC has accepted a complete notification, putting the onus on the parties to provide all the required information upfront. A second phase review, involving in-depth legal and economic analysis, will occur if the ACCC has a “reasonable basis to consider that the merger raises competition concerns” and will require another 90 working days. Note that these are working days from the ACCC’s perspective; the clock would be stopped for periods in which the ACCC is waiting for further information.
- Substantive test for clearance. The ACCC will be required to clear a merger unless it “reasonably believes that the merger would have the effect, or likely effect, of substantially lessening competition in a market”. Again, transactions in the past three years will be aggregated for the purposes of applying this test. The existing “merger factors” in the legislation will be replaced with “principles” that focus on market structure, the conditions for competition, the market position(s) of the merger parties, and any entrenchment of market power. Deals that raise competition concerns, but which nevertheless have substantial public benefits, may be cleared on that basis following the ACCC’s second-phase review. ACCC decisions will be subject to review by the Australian Competition Tribunal, and judicial review of Tribunal decisions will be available in the Federal Court.
- Transparency and confidentiality. All mergers reviewed by the ACCC will be listed on a public register, and while a potential buyer will be able to engage in confidential pre-notification discussions with the ACCC, it is likely that the current practice of seeking and obtaining ACCC clearance for uncontentious deals on a wholly confidential basis will cease.
- Fees. Since the existing voluntary process is not prescribed by statute, no fees are currently payable for voluntary notifications. It is proposed that the reformed system will impose fees of $50-100k for most deals, with a fee exemption for small businesses (currently undefined).
Next steps
Treasury will consult on exposure draft legislation to implement the reforms – including on the notification thresholds, timelines, fees and penalties – throughout 2024.
These reforms are set to reshape Australia’s merger control landscape, and we’ll keep you informed of further developments as they come to hand.
For more information, please contact Alistair Newton.
