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Faster, stronger and simpler? Merger rules to be re-shaped in major reforms

On 10 April 2024, Treasurer Jim Chalmers announced the biggest reforms to Australia's company merger regime in 50 years. According to the Treasurer, these reforms will create a 'faster, stronger and simpler merger system' which will drive productivity and growth in the Australian economy. The reforms are intended to come into effect on 1 January 2026.[1]

The proposed changes will introduce a compulsory merger regime to be overseen by the Australian Competition and Consumer Commission (ACCC). Under the new regime, merger parties will need to notify and seek clearance from the ACCC to proceed with a merger if monetary and market share thresholds are met. The ACCC will be able to expediate run-of-the-mill mergers within 15 working days and will target mergers requiring greater scrutiny.

While the specifics of the reform package are still to be fleshed out, it is apparent that merging parties will face increased administrative burden, high regulatory fees (up to $100,000) and the possibility of drawn out timelines. Unlike the current regime, significant penalties will apply if parties fail to notify the ACCC of the merger and the ACCC will have the power to suspend mergers from proceeding while they are under review.

This article will outline the key reforms proposed by Treasury. It will also summarise the key considerations you should be aware of if you are contemplating a merger from 1 January 2026 and what you can do to begin preparing now.

Tristram Feder, Maddocks Lawyers

What are the proposed changes to the merger regime?

The proposed changes to the merger regime include:
 

  • Mandatory Notification - it will be compulsory for businesses merging with or acquiring other businesses to notify the ACCC and obtain clearance from the ACCC to proceed with the merger, replacing the current voluntary and informal notification system. Whether parties will need to notify ASIC will be based on (yet to be released) monetary and market share thresholds;
  • Suspension Power - the ACCC's powers will be bolstered as it will now have the ability to suspend mergers from proceeding until they have been granted ACCC approval;
  • Single Pathway - one single, streamlined merger clearance process will replace the multiple fragmented clearance pathways currently in place. The ACCC claims that this will improve the integrity of the clearance regime by removing the ability of merger proponents to "cherry pick" the most suitable pathway to avoid ACCC detection;
  • Change to 'SLC' test - the grounds to prohibit mergers will be expanded by proposed amendments to the 'substantive lessening of competition' test [2] to further limit monopolies. In particular, a merger will be prohibited if the ACCC reasonably believes that it would have the effect, or be likely to have the effect, of substantially lessening competition in a market if the merger creates, strengthens or entrenches a position of substantial market power;
  • Fees - a fee of $50,000 to $100,000 will now be payable to the ACCC per merger clearance application (however small businesses may be eligible for an exemption);
  • Penalties - merger proponents may face large penalties if they are required to notify the ACCC but fail to do so;
  • Aggregation - responding to concerns that several subsequent piecemeal acquisitions (known as 'midnight mergers') are not caught by the current regime, mergers within the previous three years may be aggregated for the purposes of assessing if the merger meets the notification thresholds;
  • Public Register - the ACCC will maintain a public register of mergers notified to the ACCC to give transparency to the merger clearance process; and
  • Appeal - proponents may appeal a decision made by the ACCC in the Australian Competition Tribunal but are barred from introducing new evidence not originally provided to the ACCC.

What do the proposed changes mean for me?

If you are considering merging or acquiring a business from 1 January 2026, you should consider the following:

  • You may need to notify the ACCC of your proposed merger if the monetary and/or market share notification thresholds are met (noting the thresholds are yet to be released);
  • Anticipate higher regulatory fees (up to $100,000) if you will need to notify;
  • If your merger might be contentious, anticipate longer regulatory timelines and notify the ACCC as early as possible;
  • Be diligent in providing as much information to the ACCC as possible, as if the matter is reviewed by the Australian Competition Tribunal you will not be able to introduce new evidence;
  • Stay up to date on the progress of the drafting of the Bill and its progress through Parliament once it is introduced - the proposals are not yet law and may change; and
  • Obtain legal advice before undertaking any merger.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

Related document packages

[1] A copy of the Treasury's merger reform paper, Merger Reform: A Faster, Stronger and Simpler System for a More Competitive Economy, can be found here.

[2] Section 50 of the Competition and Consumer Act 2010 (Cth).

Last revised on : 11-06-2024
 

Lawyer in Profile

Jack Coventry
Jack Coventry
Senior Associate
+61 3 9258 3819
jack.coventry@maddocks.com.au

Qualifications: BA (Philosophy), Monash University, JD (Juris Doctor), University of Melbourne

Jack is a member of Maddocks Commercial team. He advises a range of corporate and private clients on:

  • M&A transactions,
  • corporate reorganisations, and
  • legal and tax structuring.

Jack acts for clients on both buy-side and sell-side and specialises in founder-owned businesses and Australian subsidiaries of multi-national companies. He works across a number of sectors including information technology, professional services, and property development and management including land lease.

Jack’s structuring work includes assisting multinationals to structure Australian operations, listed companies to achieve regulatory compliance / optimisation and providing general tax structuring. He has also represented clients in tax controversies including before the General Anti-Avoidance Review Panel (GAAR Panel) and the Federal Court of Australia.