ACCC Tightens the Merger Grip: Mandatory Notifications and Tougher Competition Tests

Australia is undergoing significant reforms in respect of its merger and acquisition clearance system, aimed at strengthening competition laws and enhancing market transparency.

These changes, driven by the needs to address the gaps in the current regime, introduce mandatory notification requirements, update review thresholds and reinforce the investigative powers of the Australian Competition and Consumer Commission (ACCC).

On 24 July 2024, the Federal Government released its exposure draft of the 'Treasury Laws Amendment Bill 2024: Acquisitions' (Exposure Draft) which unveils the proposed framework for the new merger regime, which, if approved, will take effect on 1 January 2026.

The Exposure Draft provides a first look at the proposed merger regime following the Government’s announcement in April 2024, in response to calls from the ACCC for greater competition, better protection of consumers and the streamlining of the approval process. While the legislation does not provide all the details, it gives a general sense of the likely direction of the new regime and what might be expected to follow.

How will the new laws change the current system?

Current system for mergers in Australia

Australia’s merger regime is governed by the Competition and Consumer Act 2010 (CCA) and enforced by the ACCC. The overall objective of the legal framework set out in the CCA is to prevent mergers that would substantially lessen competition in any market.

Under the existing regime, there is a voluntary process for seeking merger approvals in Australia, however, there is no mandatory requirement to notify or seek approval of the ACCC before completing a transaction. The decision notify the ACCC of a proposed merger or seek to obtain its approval is currently based on self-assessment by the relevant parties as to whether or not the merger will have the effect of substantially lessening competition.

Companies currently have two options if they believe that there may be a risk that a transaction will have the effect of lessening competition:

1. seek informal clearance from the ACCC by applying for an informal merger review, which involves a non-binding indicative assessment of the merger’s competitive effects; or
2. alternatively, seek formal approval by making application for authorisation by the ACCC or initiating Federal Court proceedings to obtain a court ruling.

The majority of notifications to the ACCC are currently made by way of an informal review. However, the informal review process is informal only in so far as there is no legislative framework that requires or regulates the process.

If the ACCC becomes aware of a transaction that does have the effect of substantially lessening competition, and the transaction has not been notified to the ACCC, the ACCC can take action to undo the merger or require other undertakings from the acquirer.

So what’s changing?

The Federal Government proposes introducing a mandatory merger notification regime. Unlike the current voluntary system, companies will be required to notify the ACCC before completing a proposed transaction if the transaction meets certain thresholds, and then wait for the ACCC’s approval before completing the transaction.

Our previous article provides an overview of the proposed changes under the new regime, however the Exposure Draft, and consultation paper released on 30 August 2024, provide additional clarity on the types of acquisitions which will be required to seek ACCC clearance.

Mandatory Notification

The proposed amendments under the new regime replace the voluntary notification system with a single mandatory administrative system for all acquisitions. The amendments introduce a mandatory obligation to notify the ACCC of proposed acquisitions above certain thresholds before putting it into effect.

On 30 August 2024, the Government released the highly anticipated notification thresholds for consultation. Under the proposed thresholds, an acquisition will be notifiable if at least one of the monetary or market concentration thresholds limbs set out in the table below are met and there is a ‘material connection to Australia’.

An acquisition may also require mandatory notification if there are evidence-based concerns about high-risk acquisitions. The Federal Government noted in the latest consultation paper that some acquisitions in the grocery retailing sector and other high-risk sectors could be subject to these more targeted notification requirements.

The Government is accepting submissions on the proposed notification thresholds until 20 September 2024.

Presumption of ‘control’

Under the new regime, acquisitions (above the thresholds) will only require ACCC clearance if they give the acquirer ‘control’ or the ability to materially influence the acquired business, or competitive structure of a market.

The Exposure Draft includes a rebuttable presumption, which stipulates that an acquisition of more than 20% of a company will automatically be presumed to give the acquirer control, unless proven otherwise. Control is broadly defined as the capacity to directly or indirectly determine the policy of the body corporate having regard to the practical influence of that person and any pattern of behaviour affecting the policies, making this presumption difficult to rebut.

‘Creeping’ acquisitions

Creeping or serial acquisitions (being, a series of small acquisitions which, when considered individually, do not result in material changes to the market, but over time forms part of a strategy of consolidation), are not expressly captured under the existing merger regime.

However, the Exposure Draft makes it clear that under the new regime the ACCC will consider all acquisitions in the previous 3 years by the acquiring party, within the same product or service market (regardless of geographic location). All of the transactions will be aggregated to determine if the notification thresholds are met.

Going forward, plans to roll up similar and competitive businesses will need to take account of the cumulative effect on competition within the relevant markets. This will not just be from the perspective of whether ACCC notification is required but also considering in advance whether some part of the relevant business may need to be sold as part of the strategy rather than waiting for the ACCC to intervene.

Key dates

From 30 June 2025, companies will no longer be able to make notifications under the current regime. While the transitional arrangements are yet to be addressed in any real detail, the majority of the proposed amendments under the new regime will commence on 1 December 2025, allowing parties to make a voluntary notification under the new system before the mandatory notification requirements commence on 1 January 2026.

What does this mean for proposed transactions?

If you are considering merging or acquiring a business from 1 July 2025, it will be necessary consider the following:

• the ACCC should be notified of the proposed merger if the monetary and/or market share notification thresholds are met;
• higher regulatory fees (up to $100,000) may apply if notification is required;
• if the 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 new evidence will not be able to be introduced later;
• stay up to date on the progress of the Exposure Draft – 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

• Faster, stronger and simpler? Merger rules to be re-shaped in major reforms
• Key legal trends for 2024: Generative AI and increased focus on ESG
• Navigating The Future: Unveiling Australia's Financial Reforms For 2024
• New Year, New ASIC: The 2024 Enforcement Priorities

Related document packages

• Company Registration
• Shareholders Agreement
• Service Agreement