House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Glossary

This Explanatory Memorandum uses the following abbreviations and acronyms.

General outline and financial impact

Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024

Outline

This Bill includes a package of reforms to modernise Australia's merger review framework.

The Bill replaces Australia's current approach to merger control with a faster, stronger, simpler, targeted, more transparent and streamlined system that better addresses anti-competitive mergers and acquisitions.

The Bill:

•

introduces a requirement for certain acquisitions of shares or assets to be notified to the Commission for assessment prior to completion, with penalties to support compliance;

•

establishes a new administrative system where the Commission will undertake an economic and legal assessment of whether the acquisition is likely to substantially lessen competition in a market, or is of public benefit;

•

streamlines the assessment of mergers and acquisitions with clear suspensory timelines;

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promotes integrity and good decision-making by providing for review of Commission decisions by the Tribunal;

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enhances transparency through establishment of a public register of notified acquisitions and other procedural safeguards;

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provides that fees are payable for certain actions under the reforms.

Date of effect

Part 1 of Schedule 1 to the Bill commences the day after Royal Assent.

Part 2 of Schedule 1 to the Bill commences on 1 July 2025.

Part 3 of Schedule 1 to the Bill commences on 1 January 2026.

Part 1 of Schedule 2 to the Bill commences on 1 January 2026.

Parts 2 to 5 of Schedule 2 to the Bill commence the day after Royal Assent.

Proposal announced

This Bill implements the reforms announced by the Government on 10 April 2024 and 'Competition Reform' measure in the 2024-2025 Budget.

Financial impact

Schedule 1 to the Bill is estimated to have the following impact on the underlying cash balance over the forward estimates period:

The financial impact of Schedule 2 is unquantifiable but expected to be small.

Impact Analysis

The Impact Analysis relating to the amendments in this Bill has been included in Attachment A.

Human rights implications

Schedule 1 to the Bill raises human rights issues. See Statement of Compatibility with Human Rights - Chapter 9.

Compliance cost impact

It is estimated that the reforms will result in an overall volume of mandatory notifications similar to current volumes. Based on around 300 annual notifications, the annual cost is estimated to be $10.8 million above the status quo. The number of notifications may be higher than projected, reflecting the uncertainty and difficulty in predicting future merger activity in Australia, which will depend on underlying market conditions.

Chapter 1: Overview

General outline

1.1 This Bill amends the CCA to overhaul merger review in Australia. The existing framework will be replaced with a mandatory and suspensory administrative system for acquisitions, with the Commission as the first instance administrative decision-maker. Foreign acquisitions will continue to be also subject to the process under the Foreign Acquisitions and Takeovers Act 1975 (FATA).

1.2 A corporation or person that is a party to an acquisition must provide a notification to the Commission if an acquisition is a notifiable transaction, unless the Commission has determined that the acquisition does not require notification. The Commission must undertake an assessment as to whether the acquisition is likely to substantially lessen competition or result in a public benefit. In doing so the Commission must publish details of the acquisition on a public acquisitions register and engage with businesses, stakeholders and the community. The acquisition must not be put into effect unless the Commission has made a determination that it may be put into effect.

1.3 A faster, clearer, streamlined process for the review of acquisitions will enhance efficiency, predictability and transparency. It will strengthen merger control by targeting, through a risk-based system, those mergers most likely to impact Australian consumers if they are anti-competitive.

1.4 By moving to an administrative system, business will benefit from guidance and engagement with the Commission as the expert decision-maker. This will reduce uncertainty and improve predictability. The Commission will undertake an economic and legal, evidence-based assessment of notified acquisitions, improving outcomes for competition and consumers. This will deliver lower prices and improved quality and service for consumers, businesses and the wider community. Importantly, the reforms will meet community expectations that the Commission can detect and stop harmful, anti-competitive acquisitions.

Context of amendments

Australia's approach to mergers and acquisitions

1.5 Mergers and acquisitions (acquisitions) are important for building a more productive and dynamic economy. They allow businesses to achieve greater economies of scale and to access new resources, technology and expertise.

1.6 While most acquisitions are unlikely to raise competition concerns, some can harm competition, which can lead to businesses increasing prices for consumers and not passing economic gains on to consumers. Australia's merger control framework plays a crucial gatekeeper role in focusing on preventing the small number of acquisitions that could substantially lessen competition, thereby harming consumers and the wider economy.

1.7 Australia's current approach to control of mergers and acquisitions prohibits acquisitions that would have the effect, or be likely to have the effect, of substantially lessening competition, assessed through three pathways:

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informal review by the Commission;

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formal merger authorisation by the Commission; and

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Federal Court proceedings related to the acquisition.

1.8 As businesses are not legally required to notify the Commission before completing a transaction, they can also choose to proceed without seeking clearance through one of the three pathways. However, this may put the businesses at risk of the Commission subsequently investigating and taking legal action if it considers the acquisition has the effect or likely effect of substantially lessening competition.

1.9 Informal review, a process which has developed without any legislative framework, enables businesses to manage regulatory risk and seek the Commission's non-binding view on whether an acquisition is likely to substantially lessen competition.

1.10 Merger authorisation is a formal legislative process which allows the Commission, and the Tribunal on review, to provide businesses with immunity from court action under competition law for a proposed merger or acquisition if it is satisfied that it would not be likely to substantially lessen competition or that it is likely to result in a net public benefit.

1.11 Federal Court proceedings are those in which the Commission, parties to the acquisition or third parties can seek orders relating to the acquisition.

The Commission's informal review process

1.12 Instead of applying for formal authorisation from the Commission, businesses may, to manage regulatory risk, opt to seek an informal view from the Commission on whether an acquisition is likely to breach the prohibition against anti-competitive acquisitions.

1.13 Currently, most transactions are notified to the Commission via this process. Most of these transactions are confidentially informally reviewed by the Commission, which does not permit stakeholder and community engagement. A small proportion are subject to public informal review. For these transactions, the Commission maintains a public register, and has established procedures including, for example, receiving submissions from businesses, consultation with stakeholders, and issuing voluntary and compulsory information requests. However, the informal process is voluntary and not legislated, and the Commission's view is non-binding.

The Commission's formal merger authorisation powers

1.14 The Commission may grant authorisation for an acquisition following a voluntary application by the relevant corporation or persons if it is satisfied the acquisition is not likely to substantially lessen competition or if the likely public benefit arising from the transaction outweighs the likely public detriment.

1.15 A formal Commission authorisation provides businesses with immunity from court action under competition law for a proposed transaction.

1.16 The Commission may vary, revoke or substitute merger authorisations. The Commission may also specify conditions in an authorisation, including that the relevant corporate person must give, and comply with, a court enforceable undertaking.

1.17 The Commission must keep a register of applications for merger authorisations and publish the receipt of each application. The Tribunal can review the Commission's decision to grant, decline to grant, vary or revoke a merger authorisation. The Tribunal's review of the Commission's decision is not a rehearing.

1.18 The Tribunal conducts a limited merits review of the Commission's determinations. The Tribunal can substitute the Commission's determination for the correct or preferable decision. However, the Tribunal can only generally consider information that was before the Commission and new information not in existence at the time of the Commission's determination.

1.19 A person must not give the Commission or the Tribunal information that is false or misleading in connection with an application for a merger authorisation.

Federal Court's consideration of mergers and acquisitions

1.20 The Commission, the Minister, transaction parties, or third parties can seek orders from the Federal Court where there are concerns that an acquisition may contravene the law (that is, it is likely to have the effect of substantially lessening competition).

1.21 The Commission can seek:

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an injunction to restrain the acquisition prior to completion,

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divestiture post-completion,

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an order that the completed acquisition is void where the vendor is involved in a contravention of section 50 of the CCA, and

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penalties.

1.22 Upon application by the Commission, the court may also make orders to disqualify a person from managing corporations under certain circumstances, if such an order is justified.

1.23 A party may also seek a declaration in the Federal Court that an acquisition does not substantially lessen competition. Third parties may seek a declaration, divestiture or damages. In these circumstances, such relief is at the discretion of the Federal Court and the evidentiary burden of proving the case is usually on the party seeking the orders.

1.24 The Commission may also apply to the Federal Court for a range of orders if the Commission considers that the person who gave a court enforceable undertaking has breached any of its terms.

The current approach to merger control is not fit-for-purpose

1.25 On 23 August 2023, the Government announced a Competition Review to provide advice on how to improve competition across the economy, with a focus on reforms that would increase productivity, reduce the cost of living and/or lift wages. In particular, the Competition Review Taskforce was asked to consider proposals put forward by the Commission around merger reform, as well as other competition law issues.

1.26 The Competition Review Taskforce released a consultation paper on 20 November 2023 seeking views on:

•

the effectiveness of Australia's current merger rules and processes to enable beneficial mergers while addressing those that could be anti-competitive, and

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options for improving Australia's merger rules and processes.

1.27 The Competition Review Taskforce consulted a diverse range of stakeholders - including the Commission, businesses, industry associations, academics, consumer groups and small business representatives. Stakeholder feedback identified shortcomings of the current approach to merger control, which are briefly outlined as follows:

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For business, some uncontentious mergers are subject to delays, uncertainty and added costs, with only limited guidance provided by the Commission.

•

For the wider community, engaging with the Commission's merger reviews is often difficult and the current approach lacks transparency in some aspects.

•

For the Commission, the voluntary nature of the current approach to merger review can mean it may not receive timely, upfront notifications of proposed acquisitions. This can impede its ability to detect and prevent anti-competitive mergers and acquisitions effectively and efficiently. For example, there have been instances where businesses threatened to complete a transaction before the Commission has completed its review, failed to notify (including for international cross-border mergers and acquisitions), and/or provided insufficient or inaccurate information to the Commission.

•

The cost of merger control is borne by the public due to the lack of cost recovery mechanisms in a voluntary informal system.

1.28 The Commission has also raised concerns about enforcement under the current approach if there is uncertainty or difficulty predicting the future effect of an acquisition. This is because of factors such as:

•

the emphasis that the courts place on having to predict the likely state of competition in the future with and without the acquisition in order to determine whether the acquisition would have or be likely to have the effect of substantially lessening competition;

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the information asymmetry between transaction parties and the Commission; and

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the reluctance of third parties to disclose relevant but confidential business information and give evidence in court.

1.29 In addition, several types of acquisitions by businesses also do not appear to be adequately captured by the current approach to merger control:

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creeping or serial acquisitions (a series of small acquisitions by businesses which individually do not result in material changes to market concentration or competitive dynamics, but over time forms part of a strategy of consolidation);

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acquisitions by incumbents of nascent competitors (acquisitions by a leading company in its industry of a firm that may potentially pose a serious competitive threat to that leading company); and

•

expansions into related markets, including by digital platforms.

1.30 On 10 April 2024, taking into account stakeholder feedback, the Government announced proposed reforms to improve Australia's merger rules by introducing a mandatory and suspensory administrative merger control system. The new system will be faster, stronger, simpler, more transparent and more targeted.

Summary of new law

General

1.31 The amendments replace the current approach with a mandatory and suspensory administrative system for acquisitions.

1.32 The amendments introduce a mandatory obligation on parties to acquisitions that meet certain thresholds to notify the Commission of the proposed acquisition, unless the Commission has determined that the acquisition does not require notification, before putting it into effect. Thresholds will be determined by the Minister by legislative instrument.

1.33 Thresholds will be regularly reviewed and set with respect to evidence of the risk of potential harms to the community over time. To ensure that the system is fit for purpose as businesses evolve and minimise avoidance, the Minister will be able to determine whether certain categories of transactions should be notifiable or exempt from notification. The Commission will regularly report on the number of notifications made and provide a general description of the kinds of acquisitions notified.

1.34 To increase certainty and support efficient administration of the new system, the amendments also provide for parties to seek a notification waiver from the Commission. Upon application, the Commission will be able to determine that an acquisition is not required to be notified. The requirements for a notification waiver application are to be determined by the Minister in a legislative instrument.

1.35 The amendments provide that an acquisition must not be put into effect in circumstances including in which:

•

the acquisition is required to be notified but has not been notified to the Commission;

•

the acquisition has been notified to the Commission, but the Commission has not made a determination in respect of it;

•

the Commission has determined it must not be put into effect;

•

an application for a public benefit determination may be made, or has been made but not yet determined;

•

a person may seek or has sought review by the Tribunal; or

•

12 months has elapsed after the Commission made a determination in respect of the notification or public benefit application.

1.36 An acquisition, which has been put into effect, or purportedly put into effect, when it must not be, is rendered void by the amendments.

1.37 The Commission will assess notified acquisitions by applying the 'substantial lessening of competition' test. An acquisition may have the effect of substantially lessening competition in a market if it would or would be likely to have the effect of creating, strengthening or entrenching a substantial degree of power in the market. To consider whether an acquisition is likely to substantially lessen competition, also requires an assessment of the relevant markets in which the parties compete or operate affected by the acquisition, as well as adjacent markets, whether that is at a national or local level, wholly or partly in Australia.

1.38 The amendments establish a two-phased approach for the Commission's assessment of an acquisition against the 'substantial lessening of competition' test. All notified acquisitions will be considered by the Commission in an initial stage, known as Phase 1. Where no competition concerns are raised, the Commission may quickly determine that a notified acquisition can proceed.

1.39 For acquisitions that the Commission is satisfied could be likely to substantially lessen competition, the Commission may decide that the acquisition be subject to a further in-depth stage, known as Phase 2. The Commission will give parties written notice of the decision that a notification is subject to Phase 2 review. If the Commission does not give a Phase 2 notice, the notified acquisition may proceed.

1.40 To promote timely decision-making on the merits, the opportunity to seek review under the ADJR Act for the decision to commit an acquisition to a Phase 2 review has been limited. This approach balances the need for judicial oversight with the Government's objective of providing more efficient resolutions, ensuring that critical decisions are not unduly prolonged by extensive legal challenges.

1.41 During Phase 2, the Commission must issue a notice of competition concerns to the parties setting out the Commission's preliminary assessment of whether the acquisition would be likely to substantially lessen competition in any market and the grounds for that assessment.

1.42 At the end of Phase 2, the Commission must determine that an acquisition may be put into effect, with or without conditions, unless it is satisfied that the acquisition would have the effect or be likely to have the effect of substantially lessening competition.

1.43 To facilitate mergers that are of net public benefit to the community, upon application by the parties, the Commission may approve an acquisition that would, or would be likely to have the effect of substantially lessening competition if the Commission is satisfied it would be likely to result in a public benefit that outweighs the public detriment.

1.44 The amendments set out the timeframes in which the Commission must make its determination under Phase 1 and Phase 2, and for public benefit applications. Timeframes are also specified for reviews by the Tribunal of Commission decisions.

1.45 As a safeguard and to promote the integrity of the system, parties may apply for review by the Tribunal, an independent administrative decision-making body with economic, business and legal expertise, based on the material before the Commission and other certain information at the Tribunal's discretion.

1.46 It is the intention of the Government that the administration of the system operates to deliver timely decision-making. The amendments provide for this through the levels of decision-making, primarily by:

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implementing a two-phased, scaled approach to the assessment of the competition impacts of acquisitions that meet the thresholds,

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a process for considering public benefit applications, and

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providing for merits review via the Tribunal, which appropriately balances timely decision-making and the interests of parties.

1.47 The Government considers that parties to an acquisition should be able to engage with the Commission on the status of their applications on a regular and reasonable basis. Further, the Commission will issue new and updated substantive competition and public benefit guidelines, as well as new process guidelines, to inform businesses, stakeholders and the community.

1.48 The current system fundamentally relies on enforcement and court decisions for setting incentives for merger parties. An administrative system shifts the emphasis to the Commission as administrative steward to provide public guidance and meaningful engagement for merger parties and strengthens powers for identifying and stopping anti-competitive mergers. This will provide more certainty for parties to an acquisition and improved community understanding of competition concerns - and most importantly, less incentive for anti-competitive acquisitions.

1.49 Consistent with the object of the CCA, it is also the intention of Government that the Commission has the capacity to prevent acquisitions that have an anticompetitive effect on Australians irrespective of the location of the parties to the acquisitions. The Commission will have the powers to assess acquisitions that impact Australia wherever those acquisitions occur or wherever the parties are located.

1.50 To create the new system, the amendments add new Division 1A into Part IV. New Division 1A in Part IV sets out contravention provisions which are replicated in the Schedule version of Part IV, to include them as part of the Competition Code. This ensures they operate in all States and Territories of Australia.

1.51 The amendments also introduce new Part IVA into the CCA which comprises six Divisions:

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Division 1 - preliminary (see Chapter 1: Overview)

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Division 2 - acquisitions that are required to be notified (see Chapter 2: Scope of acquisition notification requirements)

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Division 3 - notification of acquisitions (see Chapter 3: Notification process and suspensory rule)

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Division 4 - Commission consideration of acquisitions: substantial lessening of competition (see Chapter 4: Substantial lessening of competition)

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Division 5 - Commission consideration of acquisitions: public benefit (see Chapter 5: Public benefit)

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Division 6 - miscellaneous (see Chapters 2, 6 and 7).

1.52 Part IX of the CCA has been amended to include Divisions 1A and 1B to provide for review by the Tribunal (see Chapter 6: Review of Decisions).

1.53 It should be noted that the Commission as an administrative decision-maker is subject to general administrative law principles that regulate government decision-making, as well as judicial review.

1.54 As a decision-maker, the Commission must afford procedural fairness. This means the Commission must give the affected parties to an acquisition the opportunity to be heard before making a decision that affects them and be impartial in its decision-making. These general rules are known as the 'hearing rule' and the 'bias rule'. A number of specific administrative law rules will apply to Commission decisions, for example decision also cannot be 'so unreasonable that no reasonable person could have so exercised the power' (section 5 of the ADJR Act). Many of the Commission's decisions will also be subject to an obligation to provide detailed reasons under section 13 of the ADJR Act.

Acquisitions provisions

1.55 Acquisitions provision under the new law means any of the following provisions and any other provision in the CCA to the extent that it relates to such a provision:

•

a provision in the new Division 1A of Part IV;

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a provision in the new Part IVA;

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a provision in the new Division 1B of Part IX.

[Schedule 1, item 6, subsection 4(1) of the CCA, definition of "acquisitions provision"]

1.56 The new Division 1A of Part IV introduces several obligations and prohibitions in relation to notified acquisitions (e.g. obligation to notify, comply with conditions imposed by the Commission, etc.).

1.57 The new Part IVA introduces a mandatory and suspensory administrative system for certain acquisitions. A simplified outline of key aspects of Part IVA of the Act is included in section 51ABA of the Act.

[Schedule 1, item 35, section 51ABA]

1.58 New Divisions 1A and 1B of Part IX provide for review by the Tribunal of certain decisions made by the Commission and also sets out the process for applying for Tribunal review, the Tribunal's functions and powers and procedural matters such as time limits, and information gathering. Minor consequential changes are made to headings to reflect the insertion of Divisions 1A and 1B.

[Schedule 1, items 49 to 51 and 56, sections 100A to 100H, 100J to 100N, 100P to 100T, 111 to 113 and Part IX (heading) and Division 1 of Part IX (heading) of the CCA]

1.59 The amendments also insert other definitions relating to these provisions in the CCA or amend existing definitions to take account of the new provisions.

[Schedule 1, items 6 to 11 and 35, subsections 4(1) and 4A(5A) and section 51ABK of the CCA]

Application to persons, partnerships and trusts

Persons

1.60 The acquisitions provisions apply to acquisitions by persons due to the application of the Competition Code by the States and Territories. This extends the reach of the new merger control system beyond corporations to cover a wider range of economic actors.

Partnerships and trusts

1.61 The acquisitions provisions apply to partnerships and unit trusts subject to certain modifications.

[Schedule 1, item 35, subsections 51ABZZJ(1) and 51ABZZK(1) of the CCA]

1.62 The modifications ensure that the acquisitions provisions can effectively cover acquisitions involving partnerships and trusts structures, attributing obligations and liability in a manner that reflects their practical and economic realities.

Partnerships

1.63 The acquisitions provisions apply to partnerships as if they were persons, but with the following changes:

•

obligations are imposed on each partner but may be discharged by any of the partners.

[Schedule 1, item 35, subsection 51ABZZJ(2) of the CCA]

•

offences otherwise committed by the partnership are taken to be committed by each partner who did the relevant act or made the relevant omission (or aided, abetted, counselled, procured or was knowingly concerned in or party to the relevant act or omission). The same applies in relation to contraventions of civil penalty provisions.

[Schedule 1, item 35, subsections 51ABZZJ(3) and (4) of the CCA]

1.64 These provisions also provide that:

•

if all the partners in a partnership are corporations, a reference to a corporation in the acquisitions provisions is taken to include the partnership; and

•

a change in the composition of the partnership does not affect the continuity of the partnership.

[Schedule 1, item 35, subsections 51ABZZJ(5) and (6) of the CCA]

Unit trusts

1.65 The acquisitions provisions apply to unit trusts as if they were persons, but with the following changes:

•

If the unit trust has a single trustee:

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obligations are imposed on the trustee;

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offences are taken to have been committed by the trustee; and

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a reference to a corporation in the acquisitions provisions is taken to include the trust if the trustee is a corporation.

[Schedule 1, item 35, subsection 51ABZZK(2) of the CCA]

•

If the unit trust has multiple trustees:

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obligations are imposed on each trustee but may be discharged by any of the trustees;

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offences are taken to have been committed by the trustee who did the relevant act or made the relevant omission (or aided, abetted, counselled, procured or was knowingly concerned in or party to the relevant act or omission); and

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a reference to a corporation in the acquisitions provisions includes the trust if all of the trustees are corporations.

[Schedule 1, item 35, subsection 51ABZZK(3) of the CCA]

1.66 Rules that apply to offences also apply in a corresponding manner to the contravention of civil penalty provisions.

[Schedule 1, item 35, subsection 51ABZZK(4) of the CCA]

Meaning of 'party to an acquisition' and 'target'

Party to acquisitions

1.67 For the purposes of the acquisitions provisions, the new law clarifies who is considered a party to an acquisition.

1.68 A party to an acquisition is:

•

the person acquiring the shares, assets, or a determined thing (referred to as the principal party); and

•

a person party to a contract, arrangement, or understanding pursuant to which the acquisition takes place.

[Schedule 1, item 35, subsection 51ABI(1) of the CCA]

1.69 The term principal party is used to describe the key person involved in an acquisition, usually being the acquirer.

1.70 The law also clarifies that a reference to a party or principal party to an acquisition that has not been put into effect is a reference to a person that would be a party or principal party to the acquisition if the acquisition were put into effect.

[Schedule 1, item 35, subsection 51ABI(2) of the CCA]

1.71 The term target is:

•

for an acquisition of shares in the capital of a body corporate, the body corporate;

•

for an acquisition of assets of a person, the person; and

•

for an acquisition of anything determined under paragraphs 51ABB(1)(c) or (f), the person or entity determined.

[Schedule 1, item 35, subsection 51ABI(3) of the CCA]

Chapter 2: Scope of acquisition notification requirements

Detailed explanation of new law

Notification of acquisitions

Acquisitions to which acquisitions provisions apply

Acquisitions of shares and assets

2.1 The acquisitions provisions apply to a range of share and asset acquisitions, including:

•

an acquisition by a corporation of:

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shares in the capital of a body corporate;

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any assets of a person;

•

an acquisition of shares in the capital of a corporation;

•

an acquisition of any assets of a corporation.

[Schedule 1, item 35, paragraphs 51ABB(1)(a), (b), (d) and (e) of the CCA]

Acquisitions captured by ministerial determination

2.2 The Minister has the power to determine, by legislative instrument, that the acquisition provisions apply to:

•

an acquisition by a corporation of anything; and

•

an acquisition of anything relating to a corporation.

[Schedule 1, item 35, paragraphs 51ABB(1)(c), (f) and subsection 51ABB(2) of the CCA]

2.3 The Minister's determination power provides necessary flexibility to address emerging issues or transaction structures that may not be captured by the categories specified in the legislation. For instance, this may include business transactions where control is obtained via management agreements in combination with partial shareholding. This supports a risk-based system by providing a mechanism to specifically target acquisitions that should be captured while managing regulatory impacts.

2.4 The corporations power in section 51(xx) of the Constitution is the primary power relied on to support the new Part IVA of the CCA. Accordingly, the Minister's determination power will be exercised with reference to an acquisition by or relating to a corporation. Determinations will be subject to disallowance and are anticipated to be informed through consultation processes.

Acquisitions of units in unit trusts and interests in managed investment schemes

2.5 The acquisitions provisions apply to the acquisition of units in a unit trust or the acquisition of an interest in a managed investment scheme (within the meaning of the Corporations Act) as if:

•

the trust or scheme were a body corporate;

•

units in the trust or interests in the scheme were shares in the capital of the body corporate.

[Schedule 1, item 35, paragraphs 51ABC(1)(a) and (2)(a) of the CCA]

2.6 In the case of a managed investment scheme, the acquisitions provisions also apply as if the body corporate were a corporation if:

•

for a registered scheme (within the meaning of the Corporations Act) - the scheme's responsible entity (with the meaning of that Act) is a corporation, or

•

for a scheme that is not a registered scheme - the person holding the office in relation to the scheme that corresponds most closely to the office of responsible entity, is a corporation.

[Schedule 1, item 35, paragraph 51ABC(2)(b) of the CCA]

2.7 The Minister has the power to determine, by legislative instrument, modifications to how the acquisitions provisions apply to a unit trust or managed investment scheme.

[Schedule 1, item 35, subsection 51ABC(3) and paragraphs 51ABC(1)(b) and (2)(c) of the CCA]

2.8 Acquisitions of units in unit trusts or interests in managed investment schemes may raise competition concerns, similar to acquisitions of interests in other entities, such as a corporation. This power provides flexibility in relation to modifications which may be necessary to apply the acquisitions provisions to, for example, the wide variety of arrangements covered by the statutory definition of 'managed investment scheme' in the Corporations Act.

Extended application to assets

2.9 The acquisitions provisions apply to the following that is not an asset in the same way as they apply in relation to an asset:

•

any kind of property;

•

a legal or equitable right that is not property; and

•

a part of, or an interest in, either of the above.

[Schedule 1, item 35, paragraphs 51ABN(1)(a), (b) and subparagraph (c)(i) of the CCA]

2.10 For avoidance of doubt, the amendments clarify what will be treated as an asset for the purposes of the acquisitions provisions. Examples of assets that may be acquired include:

•

legal or equitable interests in tangible assets, such as options for land; and

•

intangible assets, such as intellectual property rights or contractual rights such as leases.

2.11 Similarly, the acquisitions provisions apply to the following in the same way as they apply in relation to an asset:

•

goodwill or an interest in it;

•

an interest in an asset of a partnership; and

•

an interest in a partnership that is not an interest in an asset of the partnership.

[Schedule 1, item 35, subparagraphs 51ABN(1)(c)(ii), (iii) and (iv) of the CCA]

2.12 Goodwill can be a significant component of the value of a business and its acquisition could have effects on competition (see paragraphs 4.52 to 4.54 below for more on goodwill protections). Similarly, partnerships are a common form of business structure and acquisitions of interests in partnerships could raise competition concerns in some contexts.

2.13 Applying the acquisitions provisions to both, the interests in assets held by a partnership, as well as the to the interests in the partnership itself, means that all forms of partnership acquisitions are subject to these provisions.

Land or patent

2.14 Under paragraph 4(4)(b) of the Act, a reference to the acquisition of assets of a person does not include a reference to an acquisition in the ordinary course of business ('ordinary course of business exception').

2.15 However, for the purposes of the acquisitions provisions, the ordinary course of business exception is taken not to apply to:

•

land, or an interest in land, or

•

a patent, or an interest in a patent.

[Schedule 1, item 35, subsection 51ABN(2) of the CCA]

2.16 This limitation to the ordinary course of business exception is introduced in recognition that acquisitions of land or patents can be competitively significant and should be within the scope of acquisitions that could be required to be notified.

2.17 Land is an essential input for many industries and the acquisition of land holdings could, for example, create barriers to entry or expansion. For example, in May 2024, the Senate Select Committee on Supermarket Prices identified the use of land banking as a way of reducing competition and solidifying market power in grocery retailing. Similarly, the acquisition of patents conferring exclusive rights could restrict competition.

2.18 These amendments do not change the scope of the ordinary course of business exception in paragraph 4(4)(b) for acquisitions under the existing prohibition against anti-competitive acquisitions in section 50 of the CCA.

Acquisitions to which acquisitions provisions do not apply

Internal restructures and reorganisations

2.19 The acquisitions provisions do not apply to an acquisition that is (or is part) of a restructure or reorganisation of a group of persons who are related:

•

in the ways referred to in section 4A of the CCA (i.e. related bodies corporate, including holding companies, subsidiaries, etc.); or

•

by means of a trust or partnership.

[Schedule 1, item 35, subsection 51ABD(1) of the CCA]

2.20 Internal restructures or reorganisations within a corporate group (or among entities related through trust or partnership structures) are not within scope of the acquisitions provisions. This exclusion avoids imposing unnecessary regulatory burden on corporate groups seeking to streamline, restructure or reorganise their internal operations, activities and structures.

Government authorities

2.21 For the purposes of the first limb of this exclusion (i.e. entities related in the ways referred to in section 4A of the CCA), the law treats the Commonwealth, States, and Territories as though they were bodies corporate, with their respective authorities considered as subsidiaries of the relevant jurisdiction.

[Schedule 1, item 35, subsection 51ABD(2) of the CCA]

2.22 As a result, the exclusion for internal restructures and reorganisations is extended to cover restructures involving government-owned corporations and different authorities within the same jurisdiction.

2.23 The law clarifies that treating jurisdictions and their authorities in this manner does not automatically establish a relationship between different authorities within the same jurisdiction. This means that merely being part of the same jurisdiction does not make two authorities related for the purposes of this exclusion.

[Schedule 1, item 35, subsection 51ABD(3) of the CCA]

2.24 Extending this exclusion to government-owned corporations and authorities means that internal restructures or reorganisations within State or Commonwealth entities will be excluded from the new system. This would apply to intra-Commonwealth, State and Territory authority restructures and not between or among Commonwealth, State and Territory authorities.

2.25 Because of this specific exemption, and exemptions to the requirement to notify outlined below, consequential amendments are made to section 95AA of the CCA to limit the Commission's general class exemption power to not include Division 1A of Part IV.

[Schedule 1, item 48, subsections 95AA(1) and (5) of the CCA]

Conditional contracts, arrangements and understandings

2.26 For the purposes of the acquisitions provisions, if:

•

a person enters into a contract, arrangement, or understanding to acquire shares in a body corporate, assets of another person, or anything determined by the Minister (under subsection 51ABB(2)), and

•

that contract, arrangement, or understanding is conditional upon one or more conditions being met, then the person does not make the relevant acquisition unless and until all conditions are satisfied and the agreement becomes binding

[Schedule 1, item 35, section 51ABL of the CCA]

2.27 This amendment applies the acquisitions provisions only to transactions that are binding. Contracts, arrangements, or understandings subject to conditions precedent (such as obtaining regulatory approvals or financing) are excluded until those conditions are met (for example, by the fulfilment of certain circumstances or through the relevant party or parties agreeing to waive the condition) and the agreement becomes binding. This provides clarity and commercial certainty to parties, allowing them to negotiate and plan their arrangements.

Changes in joint ownership

2.28 For the purposes of the acquisitions provisions, if a joint holder of a particular parcel of shares in the capital of a body corporate begins to hold the shares alone, they are taken to acquire those shares.

[Schedule 1, item 35, section 51ABM of the CCA]

Notification requirements for regulated acquisitions

When acquisitions are required to be notified

2.29 An acquisition is required to be notified to the Commission if it meets either of the following:

•

it occurs in circumstances determined by the Minister under subsection 51ABP(1) ('notification thresholds'); or

•

it belongs to a class of acquisitions determined by the Minister under subsection 51ABQ(1) ('class determinations').

[Schedule 1, item 35, section 51ABO of the CCA]

Notification thresholds

2.30 The Minister has the power to determine, by legislative instrument, the circumstances in which an acquisition must be notified based on specified thresholds.

[Schedule 1, item 35, subsections 51ABP(1) and (2) of the CCA]

2.31 These thresholds may relate to factors such as:

•

the value of the acquisition or the underlying contract, arrangement, or understanding;

•

the turnover of a person, business, or part of a business;

•

the level of market concentration; or

•

any assets of a person.

[Schedule 1, item 35, subsection 51ABP(3) of the CCA]

2.32 For the avoidance of doubt, any instrument made under this section does not affect the meaning of substantially lessening competition. This provision confirms that the mere determination of circumstances does not imply that in those circumstances there will be a substantial lessening of competition.

[Schedule 1, item 35, subsection 51ABP(4) of the CCA]

2.33 Monetary thresholds generally relate to the size of the acquisition based on well understood financial metrics such as turnover, assets and transaction value. Monetary thresholds can be used to capture mergers by medium to very large businesses that are economically significant in size. They can also be structured to capture other mergers of concern such as serial acquisitions and nascent acquisitions.

2.34 Market concentration metrics are a good indicator of the market structure and potential competitive impact of the merger. Market concentration thresholds can ensure that acquisitions not captured by monetary thresholds that could appreciably impact competition will be captured.

Class determinations

2.35 The Minister may determine, by legislative instrument, specific classes of acquisitions that must be notified.

[Schedule 1, item 35, subsection 51ABQ(1) of the CCA]

2.36 When making a class determination, the Minister may determine the class by referring wholly or partly to any of the following:

•

a party, or a class of parties, to an acquisition or to a contract, arrangement or understanding;

•

an asset or a class of assets;

•

a business or a class of businesses;

•

a market or a class of markets;

•

an industry or a class of industries; or

•

another acquisition, or a class of acquisitions.

[Schedule 1, item 35, subsection 51ABQ(2) of the CCA]

2.37 Setting what constitutes a 'notifiable acquisition' in legislative instruments permits flexibility to calibrate these details over time to ensure the system is risk-based and targeted at acquisitions that are capable of affecting competition and most likely to result in harm to competition and consumers (including, for example, serial acquisitions and acquisitions of nascent competitors).

2.38 This flexibility will mean that the system is able to respond to, for example, emerging issues and competition concerns or high-risk acquisitions, while keeping the overall compliance costs low for businesses.

2.39 The ability to make a determination in relation to an acquisition, the reference to 'wholly or partly' in subsection 51ABQ(2), and subsection 33(3A) of the Acts Interpretation Act 1901 means that the determination can exclude exemptions from itself.

2.40 In making the determination, the Minister must consider all of the following:

•

the likely effect of making the instrument on:

-

the interests of consumers;

-

promoting competition;

-

the public interest;

•

the likely regulatory impact of requiring the class of acquisitions (to which the determination relates) to be notified; and

•

any other matters the Minister considers relevant.

[Schedule 1, item 35, subsection 51ABQ(3) of the CCA]

2.41 The Minister may also consider any reports or advice of the Commission in making a class determination, including any reports provided to the Minister as part of the consultation process with the Commission, as explained below.

[Schedule 1, item 35, subsection 51ABQ(4) of the CCA]

2.42 Instruments made under this section:

•

are to commence no earlier than the 30th day after the Instrument is registered under the Legislation Act 2003;

•

are repealed 5 years after registration, unless repealed earlier;

•

do not affect the meaning of substantially lessen competition.

[Schedule 1, item 35, subsections 51ABQ(5) to (7) of the CCA]

Consultation

2.43 Before making an instrument to determine a class of acquisitions that must be notified, the Minister may follow a consultation process with the Commission.

[Schedule 1, item 35, subsection 51ABR(1) of the CCA]

2.44 The Minister may ask the Commission to analyse the following matters:

•

the likely effect of making the instrument on:

-

the interests of consumers;

-

promoting competition;

-

the public interest;

•

the likely regulatory impact of requiring the class of acquisitions to be notified; and

•

any other matters the Minister considers relevant.

[Schedule 1, item 35, subsection 51ABR(1) of the CCA]

2.45 Upon receiving the Minister's request, the Commission must analyse the matters and provide the Minister with a written report of its analysis.

2.46 The Minister must ensure that the Commission's report is published on the Department's website. In addition, the Minister must not make the instrument until at least 60 days have passed since the publication.

[Schedule 1, item 35, subsection 51ABR(2) of the CCA]

2.47 The consultation process and the Commission's independent analysis ensures that the Minister's powers to determine notifiable acquisitions can be exercised with the benefit of the Commission's analysis.

2.48 The publication of the Commission's report, including the waiting period, aims to promote transparency, providing stakeholders time to consider and respond to the proposed instrument before it takes effect.

2.49 The law also clarifies that this process does not limit, the general consultation requirements under section 17 of the Legislation Act 2003, or the Minister's ability to consider reports or advice from the Commission under subsection 51ABQ(4). Before making an instrument, the Minister must be satisfied that there has been appropriate and reasonably practicable consultation (in accordance with section 17 of the Legislation Act 2003).

[Schedule 1, item 35, subsection 51ABR(3) of the CCA]

Classes of acquisitions that are not required to be notified

Acquisitions that do not result in control (control exemption)

2.50 An acquisition by a person of shares in the capital of a body corporate is not required to be notified if either of the following apply:

•

immediately after the acquisition is put into effect, the person does not control (within the meaning of section 50AA of the Corporations Act) the body corporate; or

•

the person controlled the body corporate immediately before putting the acquisition into effect.

2.51 However, if the acquisition is in a class of acquisitions determined by the Minister under subsection 51ABS(5), this exemption does not apply and the acquisition must be notified.

[Schedule 1, item 35, subsection 51ABS(1) of the CCA]

2.52 The question of whether control is capable of being exercised is one of substance, not form. Entering into or carrying out a scheme (or part of a scheme) where it would be reasonable to conclude that it was entered into or carried out for the purpose of avoiding the notification requirement must be disregarded. A scheme is:

•

any agreement, arrangement, understanding, promise or undertaking (whether express or implied);

•

any scheme, plan, proposal, action, course of action or course of conduct (whether unilateral or not); or

•

any combination of these.

[Schedule 1, item 35, subsections 51ABS(3) and (4) of the CCA]

Meaning of 'control'

2.53 'Control' within the meaning of section 50AA of the Corporations Act refers to the capacity of one entity to determine the outcome of decisions about another entity's financial and operating policies. In determining whether someone has that capacity, it is the practical influence that they can exert (rather than the rights they can enforce) that is the issue to be considered, and any practice or pattern of behaviour affecting the body corporate's financial and operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

2.54 Aligning with a definition of 'control' that is familiar and understood by businesses will increase certainty. However, modifications are necessary to ensure that the definition is fit for purpose in the context of the acquisitions provisions. For the purposes of this exemption from notification, the following rules will apply to the concept of control:

•

a person is taken to control the body corporate if they and their associates (within the meaning of Chapter 6 of the Corporations Act) jointly have the capacity to determine the outcome of decisions about its financial and operating policies (even if the acquirer alone does not have this capacity).

[Schedule 1, item 35, paragraph 51ABS(2)(a) of the CCA]

•

for an acquirer that is a special purpose vehicle - the rule that deems an entity not to have control if it is under a legal obligation to exercise its influence for the benefit of others, is disregarded.

[Schedule 1, item 35, paragraph 51ABS(2)(b) of the CCA]

•

the requirement that the acquirer be under a legal obligation to exercise its influence for the benefit of someone other than its own members is also disregarded to the extent it applies to a legal obligation the acquirer has as a subsidiary of a body corporate.

[Schedule 1, item 35, paragraph 51ABS(2)(c) of the CCA]

2.55 For anti-avoidance purposes, it is important that the voting power of those who are capable of influencing the actions of a party are aggregated and considered together. For example, this may be where both entities are controlled by the same entity or where parties are within the same corporate group. Relationships which may mean that a person or body corporate is an 'associate' include where there is control by an entity of another entity, where both entities are controlled by the same entity (common control), a relevant agreement to control or influence the board composition or conduct of affairs of another entity, or where parties act in concert (see section 12 of the Corporations Act 2001).

2.56 Businesses may structure transactions in certain ways for tax and other purposes, including through the establishment of special purpose vehicles. Adopting the meaning of 'control' from section 50AA of the Corporations Act 2001 without modification may risk excluding arrangements involving special purpose vehicles or certain structures within corporate groups from the notification requirement. This is because subsection 50AA(4) of that Act provides that an entity is not taken to control another where it is able to influence decisions about another entity's financial and operating policies and is also under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members. Therefore, for avoidance of doubt, these amendments make it clear that it is intended that transactions involving special purpose vehicles or subsidiary arrangements should be capable of notification, and that subsection 50AA(4) of the Corporations Act 2001 does not apply in the context of special purpose vehicles and subsidiaries.

Ministerial determination

2.57 The Minister may determine a class of acquisitions of shares in the capital of bodies corporate by legislative instrument. The Minister may determine the class including (without limitation) by reference to the size of an interest in, or the nature of a person's control of, a body corporate.

[Schedule 1, item 35, subsection 51ABS(5) to (7) of the CCA]

2.58 The Ministerial determination power provides flexibility to adjust the scope of the exemption based on emerging issues or other developments in markets and the broader economy over time. For example, the Minister could require notification where there are changes from sole control of an entity to joint control, or changes in the identity of those who jointly control an entity. The power may also be used to ensure the scope of the exemption from notification can be appropriately limited.

Acquisitions of shares in the capital of Chapter 6 entities (Chapter 6 exemption)

2.59 An acquisition of shares in the capital of a body corporate is not required to be notified if:

•

the body corporate is a Chapter 6 entity, and

•

the acquisition does not result in any person's voting power (within the meaning of the Corporations Act) in the body corporate increasing:

-

from 20 per cent (or below) to more than 20 per cent; or

-

from a starting point that is above 20 per cent and below 100 per cent.

[Schedule 1, item 35, subsection 51ABT(1) of the CCA]

Meaning of Chapter 6 entity

2.60 For the purposes of the CCA, a Chapter 6 entity is:

•

a listed company (within the meaning of the Corporations Act);

•

an unlisted company with more than 50 members (within the meaning of the Corporations Act), counting joint holders of a particular parcel of shares as one person; or

•

a listed registered scheme (within the meaning of the Corporations Act).

[Schedule 1, item 35, subsections 51ABJ(1) and (2) of the CCA]

2.61 References to Chapter 6 of the Corporations Act in sections 603 (extends Chapter 6 to some listed bodies that are not companies), 604 (extends Chapter 6 to listed registered schemes) and 605A (Chapter 6 does not apply to mutual capital instruments) of that Act are taken to include references to the definition of a Chapter 6 entity in subsections 51ABJ(1) and (2) of the CCA, as well as Subdivision B of Division 2 (provisions relating to particular kinds of acquisitions that do not result in control or involve the acquisition of shares in the capital of Chapter 6 entities), and Subdivision D of Division 6 of Part IVA (surprise hostile takeovers).

[Schedule 1, item 35, subsection 51ABJ(3) of the CCA]

2.62 This provision provides a 'safe harbour' for acquisitions that do not result in a person having voting power above 20 per cent. This threshold is the point at which takeovers of certain widely held entities are regulated under Chapter 6 of the Corporations Act. Acquisitions below the takeover threshold in Chapter 6 are not required to be notified because they generally fall short of the point beyond which control of the entity could be said to have passed: see ASIC Regulatory Guide 6: Takeovers: exceptions to the general prohibition at RG 6.7. This is intended to provide certainty for acquisitions involving publicly listed companies, widely held companies (that is, unlisted companies with more than 50 members) or listed registered scheme (such as managed investment trusts) that they do not need to notified to the Commission, and minimise the impact on financial and capital markets.

2.63 When determining whether an acquisition meets the voting power threshold, a person is not considered to have acquired a 'relevant interest' (within the meaning of the Corporations Act) in the shares until the contract, arrangement, or understanding becomes binding.

[Schedule 1, item 35, subsection 51ABT(2) of the CCA]

2.64 This approach clarifies, for the purposes of applying the safe harbour, the interaction between:

•

the timing of when a person acquires a 'relevant interest', and accordingly 'voting power' under section 608 of the Corporations Act (which can be when a person first enters into a conditional agreement: see subsection 608(8) of the Corporations Act); and

•

the treatment of conditional contracts under the acquisitions provisions discussed in paragraphs 2.36 and 2.37, where an acquisition is not considered to occur until all conditions are satisfied and the agreement becomes binding.

Notification waiver determinations

Notification waiver process

2.65 The new law introduces a notification waiver process that allows parties to an acquisition to request that the Commission relieve them of the obligation to notify an acquisition that would otherwise be required to be notified. For the avoidance of doubt, a notification waiver does not exempt an acquisition from the operation of section 50 of the Act.

Notification waiver applications

2.66 A person may apply to the Commission for a determination that an acquisition is not required to be notified. The application must comply with requirements set by the Minister in a legislative instrument, which may include specific forms, information, and payment of a fee.

[Schedule 1, item 35, subsections 51ABU(1) to (5) of the CCA]

2.67 A determination made by the Minister under subsection 51ABU(3) specifying requirements for notification waiver applications is a legislative instrument.

2.68 A determination may include requirements for an application to be in a particular form, include particular information and be accompanied by any applicable application fee. The application form and requirements for information and documents will be set by legislative instrument so that these requirements can be modified from time to time. This will allow the Commission to perform its functions and duties in an efficient manner.

2.69 If an application is made according to the requirements set out by the Minister's legislative instrument, it is considered a valid notification waiver application.

Notification waiver determination

2.70 Upon receiving a valid application, the Commission may determine in writing that the acquisition is not required to be notified or not to make the determination applied for.

[Schedule 1, item 35, subsections 51ABV(1) and 51ABV(6) of the CCA]

2.71 In making this determination, the Commission must comply with any requirements determined by the Minister by legislative instrument and the Commission must have regard to:

•

the object of the Act,

•

the interests of consumers,

•

if circumstances are determined under subsection 51ABP(1) (Notification thresholds) the likelihood that, if the acquisition were put into effect, those circumstances would apply, and

•

the likelihood that the acquisition would, if put into effect, have the effect of substantially lessening competition (as mentioned in paragraph 51ABZE(2)(c)).

2.72 An instrument may determine a requirement that in specified circumstances the Commission must not make the determination applied for, or provide for Tribunal review of decisions in relation to notification waiver applications.

[Schedule 1, item 35, subsections 51ABV(2) to (4) of the CCA]

2.73 The Commission must give written notice and a written explanation of why it made the determination to the applicant.

[Schedule 1, item 35, subsection 51ABV(5) of the CCA]

2.74 The notification waiver process offers a flexible mechanism for parties to seek relief from the notification requirement. This process is intended to reduce the regulatory burden on businesses while ensuring that all acquisitions with potential competition concerns remain subject to the Commission's review.

Confidential review processes

2.75 To balance effective regulatory oversight with the commercial realities of time-critical or commercially-sensitive acquisitions, the new law introduces confidential review processes for certain acquisitions, specifically:

•

Surprise hostile takeover bids involving the acquisition of shares in a body corporate; and

•

Certain acquisitions involving voluntary transfers under the FSTR Act.

2.76 These processes enable the Commission to assess certain acquisitions without disclosing the notification on the acquisitions register for a specified period.

Surprise hostile takeovers

2.77 The requirement to notify the Commission of a proposed acquisition and the subsequent inclusion of the notification on a public register may unduly impact the ability to make a surprise takeover bid where on-market acquisitions commence immediately after a bid is publicly proposed. To accommodate these kinds of takeover bids, a bidder proposing to acquire shares in a Chapter 6 entity through a bid that has not been publicly proposed may request that the notification be kept confidential.

2.78 This confidential review process is available if all of the following conditions are met:

•

the body corporate is a Chapter 6 entity;

•

the acquisition is a takeover acquisition in relation to a proposed takeover bid;

•

the proposed bid has not been publicly proposed; and

•

the notifying party makes a written request for confidentiality at the time of notifying the Commission.

[Schedule 1, item 35, subsection 51ABZZL(1) of the CCA]

Request for confidential review

2.79 The written request must state that:

•

the bidder (within the meaning of the Corporations Act) intends that the bid will be a takeover bid to which paragraphs (c) and (d) of item 2 of the table in section 611 of the Corporations Act 2001 apply (that is, the bid is for all the voting shares in the bid class, and the bid is either unconditional or subject only to certain prescribed conditions);

•

the bidder has not entered into any agreement with, nor obtained support from, the target's board for the proposed bid; and

•

if the Commission determines that the acquisition may be put into effect in Phase 1, the bidder will submit a bidder's statement (within the meaning of the Corporations Act) to the target within one business day after the day the Commission gives the notifying party written notice of its determination.

[Schedule 1, item 35, paragraph 51ABZZL(1)(d) and subsection 51ABZZL(2) of the CCA]

Effect of confidentiality request

2.80 If a valid confidentiality request is made, the Commission must not include information or documents relating to the notification on the acquisitions register before the 17th business day after the effective notification date.

[Schedule 1, item 35, subsection 51ABZZL(3) of the CCA]

2.81 If the Commission decides to cease considering the notification within this period (under section 51ABZD), no information about the notification will be published on the register at all.

[Schedule 1, item 35, subsection 51ABZZL(4) of the CCA]

2.82 The Commission may, at any time after the confidentiality request is made up to and including the 15th business day after the effective notification date, determine in writing that the confidential review provisions do not apply if it is satisfied that:

•

the bid is not or is not likely to be a bid to which paragraphs (c) and (d) of item 2 of the table in section 611 of the Corporations Act apply;

•

the bidder has done, or intends to do, any of the things it stated it would not do (as per paragraph 2.82 above) (i.e. entering into an agreement with or obtaining support from the target's board); or

•

it is not likely that the bidder will give a bidder's statement within one business day of written notice of the Commission's determination as required.

[Schedule 1, item 35, subsection 51ABZZL(5) of the CCA]

2.83 In such cases, the Commission must give the notifying party written notice of its determination that the confidential review provisions do not apply. Those provisions are considered never to have applied to the notification.

[Schedule 1, item 35, subsection 51ABZZL(6) of the CCA]

Modified stay and Tribunal review

2.84 If the Commission makes a determination under paragraph 51ABZE(1)(a) that the acquisition may be put into effect and the acquisition was subject to the confidential review process for surprise hostile takeover bids immediately before the Commission makes the determination, the usual stay on acquisitions during the Tribunal review period is modified.

2.85 Specifically, subsection 51ABE(3), which imposes the stay, does not apply to such acquisitions, unless an application for review is made, in which case the disapplication of the stay ends when the bidder becomes aware that the application has been made.

[Schedule 1, item 35, subsections 51ABZZM(1) and (2), and 51ABE(3) of the CCA]

2.86 The acquisition is also not stayed at the time it is put into effect, to the extent the acquisition results from an on market transaction (within the meaning of the Corporations Act) that occurs so soon after the bidder becomes aware, or ought reasonably to be aware of it, that the application has been made, that it is not reasonably possible for the bidder to prevent the transaction from occurring.

[Schedule 1, item 35, subsection 51ABZZM(3) and (4) of the CCA]

2.87 If the acquisition is put into effect during the modified stay period, the bidder is not entitled to exercise any voting rights attached to any of the shares acquired. This provision is based on section 613 of the Corporations Act which imposes a similar restriction on voting rights attached to shares acquired on-market where an off-market takeover bid does not proceed.

2.88 The restriction on exercising voting rights ends at the end of the period in which a Tribunal review can be sought. If an application for review under subsection 100C(1) is made, the period ends at the earliest time at which the notification has been finally considered or the period for making a public benefit application (in the case of a determination that the acquisition must not be put into effect).

[Schedule 1, item 35, subsections 51ABZZM(5) and (6) of the CCA]

2.89 However, ASIC may either exempt a person from the restriction on exercising voting rights or make a declaration that the restriction applies to a person as if specified provisions were omitted, modified or varied (as specified in the declaration).

2.90 In exercising this power, ASIC must consider the purposes of Chapter 6 of the Corporations Act (which includes ensuring the acquisition of control takes place in an efficient, competitive and informed market). This power enables ASIC, once relevant competition considerations have been determined, to provide relief to the bidder from the ongoing restraint on their voting rights on terms or conditions that take into account the impact of the interruption to the bid arising from the application to the Tribunal. For example, ASIC may provide relief on condition that a new bid is made to ensure holders of bid class securities have all had a reasonable and equal opportunity to participate in the benefits of the bidder's acquisition of a substantial interest in the target. This relief may be given in conjunction with the exercise of ASIC's powers under section 655A of the Corporations Act.

[Schedule 1, item 35, subsections 51ABZZN(1) and (2) of the CCA]

2.91 The exemption or declaration by ASIC may:

•

apply to all persons, specified persons, or a specified class of person;

•

relate to all bid class securities, specified bid class securities, or a specified class of bid class securities; and

•

relate to any other matter generally or as specified.

[Schedule 1, item 35, subsection 51ABZZN(3) of the CCA]

2.92 If the instrument applies only to a specified person (other than a person specified by membership of a class) or persons associated with that specified person it will be a notifiable instrument. Otherwise it is a legislative instrument.

[Schedule 1, item 35, subsection 51ABZZN(4) of the CCA]

2.93 An exemption may be granted unconditionally or subject to conditions. It is a requirement for a person to comply with any conditions specified in the exemption. If a person does not comply, ASIC can seek an order from the Federal Court to enforce compliance.

[Schedule 1, item 35, subsection 51ABZZN(5) of the CCA]

2.94 An exemption or declaration applies in relation to shares after the relevant acquisition determination is no longer subject to review.

[Schedule 1, item 35, subsection 51ABZZN(6) of the CCA]

2.95 The Corporations Act provisions that allow the Takeovers Panel to review certain ASIC decisions will also apply to ASIC's decisions to exempt a person from, or modify the application of, the CCA restrictions on voting rights for shares acquired during the modified stay period for hostile takeover bids under the CCA. This allows the Takeovers Panel to review decisions of ASIC. For the purposes of those review provisions, references to Chapter 6 of the Corporations Act will be taken to include references to the CCA provisions on hostile takeover bids.

[Schedule 1, item 35, subsections 51ABZZN(7) and (8) of the CCA]

2.96 ASIC must take reasonable steps in writing or otherwise to notify each person affected by a decision of ASIC to exempt or declare under this process, and the person's right to seek review of the decision by the Takeovers Panel. However, ASIC is not required to give notice if it determines that doing so is not warranted, considering:

•

the cost of providing notice; and

•

the way in which the person's or persons' interests are affected by the decision.

[Schedule 1, item 35, subsections 51ABZZO(1) and (2) of the CCA]

2.97 Failure to provide notice does not affect the validity of ASIC's decision.

[Schedule 1, item 35, subsection 51ABZZO(3) of the CCA]

Person must cease to hold shares

2.98 A person must cease to hold shares within 12 months after the Tribunal makes a determination that the acquisition must not be put into effect, or imposes a condition that was not complied with if all the following conditions apply:

•

the Commission makes a determination under paragraph 51ABZE(1)(a) that the acquisition may be put into effect;

•

the acquisition is put into effect at a time at which the acquisition is not stayed because of subsection 51ABZZM(2) or (3) referred to above;

•

an application for Tribunal review is made; and

•

either:

-

on review, the Tribunal determines that the acquisition must not be put into effect; or

-

the result of the review is that the acquisition is subject to a condition that was not complied with and the non-compliance occurred before the Tribunal's determination.

2.99 ASIC may extend the 12-month period once upon application by the person, if the application is made before the end of the initial 12-month period.

[Schedule 1, item 35, subsections 51ABZZP(1), (2) and (3) of the CCA]

2.100 Any voting rights attached to the shares cannot be exercised while the person continues to hold the shares. Continuing to hold shares after the 12-month period (including any extension) is a strict liability offence, with a maximum penalty of 20 penalty units per day.

[Schedule 1, item 35, subsections 51ABZZP(4) to (6) of the CCA]

2.101 A contravention of section 51ABZZP does not affect the validity of any transaction. If voting rights are exercised in contravention of this section, the Court (within the meaning of the Corporations Act) may declare the meeting or resolution (on which the voting rights were exercised) invalid if it is of the opinion that:

•

a substantial injustice has been or may be caused; and

•

the injustice cannot be remedied by any other order of the Court.

[Schedule 1, item 35, subsections 51ABZZP(7) and (8) of the CCA]

Voluntary Transfers

2.102 The confidential review process applies to acquisitions notified to the Commission that are part of a voluntary transfer of business under the FSTR Act, provided that the certificate of transfer states the transfer is necessary:

•

to promote financial system stability in Australia, or

•

if the transferring body is an ADI - to protect the interests of depositors of the ADI, or

•

if the transferring body is a life insurance company - to protect the interests of policy owners or prospective policy owners of the life insurance company.

[Schedule 1, item 35, subsection 51ABZZQ(1) of the CCA]

2.103 If the confidential review process applies:

•

the Commission may make a determination on the acquisition before the earliest time specified under subsection 51ABZI(1) of 15 business days after the effective notification date of the notification in Phase 1; and

•

the Commission must not include any information or documents relating to the notification on the acquisitions register until it makes a determination on the acquisition under subsection 51ABZE(1).

[Schedule 1, item 35, subsection 51ABZZQ(2) of the CCA]

2.104 These provisions facilitate urgent acquisitions where APRA considers the transfer necessary to promote the stability of the financial system or the interests of depositors in an ADI or policy owners or prospective policy owners of a life insurance company. The confidential review process allows the Commission to assess and determine such acquisitions promptly and without public disclosure, minimising the risk of market disruption and protecting sensitive information.

2.105 Enabling the Commission to make determinations earlier than usual means that that urgent acquisitions can be reviewed and put into effect without delay, reducing the potential for market speculation or uncertainty.

Chapter 3: Notification process and suspensory rule

Detailed explanation of new law

Commission must be notified of certain acquisitions

3.1 The Commission must be notified of certain acquisitions.

3.2 A person contravenes the requirement to notify the Commission of an acquisition if:

•

the person is a principal party to an acquisition, and

•

the acquisition is required to be notified, and

•

the acquisition is put into effect, and

•

when the acquisition is put into effect:

-

the acquisition is not a notified acquisition; or

-

no notification of the acquisition has an effective notification date; or

-

the latest notification of the acquisition that has an effective notification is stale.

[Schedule 1, item 27, section 45AW of the CCA]

3.3 Putting an acquisition into effect includes purportedly putting the acquisition into effect. A person purportedly puts an acquisition into effect if they engage in conduct that would, apart from Division 1A, constitute putting the acquisition into effect.

[Schedule 1, item 27, section 45AV of the CCA]

3.4 The intent of this notification obligation is to ensure that a corporation or person who is a party to an acquisition provides a notification to the Commission if the acquisition is required to be notified.

3.5 The types of acquisitions that must be notified to the Commission will be determined via legislative instrument.

3.6 Notification by one of the parties or proposed parties to the acquisition is sufficient to satisfy the notification obligation.

Notified acquisition

3.7 An acquisition is a notified acquisition if the Commission is notified of a proposed acquisition, regardless of whether or not the acquisition is required to be notified, and whether or not a previous notification of the acquisition has been made. Acquisitions voluntarily notified become subject to the requirements of the new system.

[Schedule 1, item 35, subsections 51ABW(1) and (2) of the CCA]

3.8 For a notified acquisition, the principal party that makes the notification, or each of the principal parties that jointly make the notification, is a notifying party in relation to the notification.

[Schedule 1, item 35, subsection 51ABW(3) of the CCA]

3.9 Acquisitions are time sensitive transactions. As such, the legislation sets specific times within which the Commission must take various actions. To ensure it is clear when the determination period starts, the amendments introduce the concept of effective notification date. The effective notification date is the day the notification is made. This basic rule is modified by:

•

paragraph 51ABZ(1)(a): for notifications that are materially incomplete or misleading, the notification is taken never to have had an effective notification date;

•

subsection 51ABZA(5): for notifications that are incomplete or misleading but additional information and documents are provided, the effective notification date is the day additional information or documents are given;

•

subparagraph 51ABZB(2)(a)(i): for material changes of fact, the effective notification may be changed by the Commission to the date on which the Commission becomes aware of the change of fact.

[Schedule 1, item 35, subsection 51ABW(4) of the CCA]

3.10 The Commission's deadline for the acquisition determination is tied to the effective notification date. The parties are made aware of these timeframes as the Commission must give each notifying party, or at least one of the notifying parties, written notice that the Commission has received the notification, including confirmation of the effective notification date.

[Schedule 1, item 35, subsection 51ABW(5) of the CCA]

3.11 A notification of a proposed acquisition must be made in writing by the principal party or parties. See below for further information about the requirement for the information to be provided in a notification of a proposed acquisition and the impact on the effective notification date if information required by the form is not provided.

[Schedule 1, item 35, paragraphs 51ABX(1)(a) and (c) of the CCA]

3.12 A notification must be accompanied by the prescribed fee (if any). If there is a prescribed fee, the notification is taken not to be made until such time as the fee is paid. The fees will be set out in legislative instruments.

3.13 The setting of fees in legislative instruments is consistent with other parts of the CCA, in particular the provisions governing merger authorisations and notifications, where detailed operational matters, including fees, are delegated to subordinate legislation, enabling timely adjustments without the need for frequent amendments to the primary legislation.

3.14 Cost recovery principles prescribe that, as an identifiable group creating a specific demand for a specific regulatory activity, notifying parties should pay fees. The fees should reflect the resources required by the Commission to efficiently carry out the review of an acquisition. The fees will ensure the Commission is properly resourced to undertake its expert administrative decision-making role.

[Schedule 1, item 35, paragraph 51ABX(1)(b), and subsections 51ABX(2) and (3) of the CCA]

3.15 For the notification to be made in accordance with subsection 51ABX(1), at least one of the following must apply:

•

the acquisition is to take place pursuant to a contract, arrangement or understanding that has been entered into,

•

the proposed contract, arrangement or understanding has not been entered into, but the proposed parties intend to enter into it;

•

the acquisition will be a takeover acquisition in relation to a takeover bid. The bid must have been publicly proposed or must have been already made. Alternatively, the parties must

-

intend that the bid meets certain criteria in the Corporations Act (essentially, that it be comprehensive and non-discriminatory, certain and fair) and

-

intend to make a request under the surprise hostile takeover provisions of this Act (paragraph 51ABZZL(1)(d)).

•

the acquisition is to take place pursuant to a proposed arrangement between a Part 5.1 body and its creditors or members or any class of them, under Part 5.1 of the Corporations Act, and the arrangement has been publicly proposed by the Part 5.1 body.

[Schedule 1, item 35, paragraph 51ABX(1)(d) and subsection 51ABX(4) of the CCA]

3.16 The form and requirements for information and documents will be set by legislative instrument so that these requirements can be modified from time to time. This will ensure the form and requirements for information and documents are appropriately calibrated to the likely potential harm arising from an acquisition, minimising the cost for businesses and enabling the Commission to review an acquisition in an efficient manner.

3.17 The exemption from disallowance is appropriate as it is important to provide commercial certainty to parties to an acquisition in relation to compliance with the form and accompanying requirements, particularly for time-critical transactions, that the instruments will not be disallowed. As the new system will operate in all States and Territories of Australia through the Competition Code, disallowance may also create uncertainty for the States and Territories about the application of the Competition Code under State and Territory law.

Notifications may cover multiple acquisitions

3.18 A proposal to put an acquisition into effect may include a proposal to put another related acquisition into effect. For such proposals, the proposed acquisitions may be notified in a single notification, and the acquisition provisions will apply in relation to such notifications as if:

•

those acquisitions together constituted a single acquisition; and

•

each party to those acquisitions were a party to that single acquisition; and

•

each principal party to those acquisitions was a principal party to that single acquisition.

3.19 For the avoidance of doubt, even if the parties do not notify together, the Commission may still have regard to the identity of the acquirers involved and the effect that all of their acquisitions may have on competition.

[Schedule 1, item 35, subsection 51ABX(5) of the CCA]

Multiple notifying parties

3.20 Where there is more than one notifying party in relation to the notification of an acquisition:

•

a reference to giving a notice to the notifying party is taken to refer to giving a notice to any of those notifying parties; and

•

a reference to the notifying party doing a thing (such as giving additional information or documents or making a request or application) is taken to refer to all of those notifying parties doing that thing together jointly.

3.21 This is intended to facilitate administrative efficiency and minimise the burden and cost on both the parties and the Commission by avoiding the lodgement and processing of multiple identical notices.

[Schedule 1, item 35, subsection 51ABX(6) of the CCA]

When acquisitions are stayed, subject to conditions, have not been finally considered or become stale

When acquisitions are stayed

3.22 An acquisition is stayed in each of the following circumstances:

•

if the acquisition is required to be notified but has not been;

•

if the acquisition has been notified, but has not been finally considered;

•

if the Commission has determined that the notified acquisition must not be put into effect and the Commission has not subsequently determined that the acquisition is of public benefit (see subsection 51ABZE(1) and paragraph 51ABZW(1)(a));

•

if the acquisition has been notified and the most recent notification is stale.

[Schedule 1, item 35, section 51ABE of the CCA]

3.23 A stayed acquisition cannot be put into effect. If the stayed acquisition is put into effect, the acquisition will be void.

When acquisitions are subject to conditions

3.24 These amendments allow the Commission to make a determination that an acquisition may be put into effect subject to conditions, if it considers that any competition concerns can be addressed, or that there would be a public benefit, if the parties to the acquisition complied with certain conditions. The Commission may determine the nature, form and scope of the conditions, and may also have regard to its effect on consumers and any resulting consumer benefits. The notifying party may offer conditions to the Commission during Phase 1 or Phase 2 or during the public benefits review.

3.25 An acquisition will be subject to a condition if:

•

the most recent determination under subsection 51ABZE(1) includes that condition (the determination condition). Since making that determination, the Commission must not have made a determination on a public benefit application in respect of the notification, or

•

the most recent determination under subsection 51ABZW(1) includes that condition (the public benefit condition). Since making that determination, the Commission has not made a determination in respect of a notification of the acquisition.

3.26 This provides for situations in which the Federal Court might require the Commission to remake its competition decision (under subsection 51ABZE(1)) due to an error of law. It is therefore possible that a public benefit determination made by the Commission may be superseded by a competition decision under subsection 51ABZE(1).

[Schedule 1, item 35, section 51ABH of the CCA]

Specific conditions for acquisitions must be complied with

3.27 A person who puts an acquisition into effect that is subject to specified conditions must comply with those conditions. A failure to comply with any of the conditions constitutes is a contravention of the Act.

[Schedule 1, item 27, section 45AZ of the CCA]

When notifications have not been finally considered

3.28 An acquisition is stayed and cannot proceed if it has been notified, but has not been finally considered.

3.29 A notification of an acquisition will be finally considered in the following circumstances:

•

when the Commission has made a determination under subsection 51ABZE(1) in respect of the notification; and

•

the determination is no longer subject to review.

3.30 Additionally, if the determination is subject to conditions, or is a determination that the acquisition must not be put into effect, the notification will be finally considered:

•

if the determination includes conditions and a public benefit application has not been made;

•

if the determination is that the acquisition must not be put into effect, once the period for making a public benefit application has ended and no such application has been made; or

•

if a public benefit application has been made, the Commission has made a determination or otherwise finished considering the application.

[Schedule 1, item 35, subsection 51ABF(1) of the CCA]

3.31 If an application has not been made under subsection 100C(1) for review of the determination and the period during which such an application could be made has ended, an application is no longer subject to review.

[Schedule 1, item 35, paragraph 51ABF(2)(a) of the CCA]

3.32 Where an application has been made under subsection 100C(1) for review of the determination, the application will be no longer subject to review in the following cases:

•

where the application has been withdrawn, or the reinstatement period has ended and no reinstatement application has been made; or

•

the Tribunal has dismissed the application; or

•

the Tribunal has made a determination affirming, setting aside or varying the acquisition determination under paragraph 100N(1)(a).

[Schedule 1, item 35, paragraph 51ABF(2)(b) of the CCA]

3.33 A notified acquisition that is not finally considered is stayed and cannot be put into effect. If the stayed acquisition is put into effect, the acquisition will be void.

When notifications become stale

3.34 A notification of an acquisition becomes stale (and cannot be put into effect) 12 months after the time (if any) at which the Commission either:

•

makes a determination that the acquisition may be put into effect (either subject or not subject to specified conditions); or

•

if a public benefit application relates to the notification-makes a determination that the acquisition would be of public benefit (including a determination that the acquisition would be of public benefit if specified conditions were complied with).

[Schedule 1, item 35, section 51ABG of the CCA]

3.35 There are many reasons why a notification of an acquisition should become stale after 12 months. Market conditions can materially change a year after the determination, meaning the Commission's assessment that the acquisition is not likely to substantially lessen competition, or would be of public benefit, may no longer be accurate, in which case, it is appropriate that the acquisition should be re-notified to the Commission and assessed again before it may be put into effect.

3.36 Market conditions may change over time which could mean that an acquisition which may have substantially lessened competition at a point in time no longer does so. Where the Commission has made a determination that an acquisition must not be put into effect, the parties to the acquisition may re-notify at a later date.

Powers of the Commission in response to incomplete and misleading notifications and changes of fact

Notifications that are materially incomplete or misleading

3.37 The Commission may decide, in writing, that a notification of an acquisition has no effective notification date.

3.38 The Commission may make this decision if the Commission is satisfied that the notification is materially incomplete or misleading, or contains false information in a material particular, and

•

the notification is not subject to a Phase 2 review; or

•

the Commission has not made a determination in respect of the notification under subsection 51ABZE(1) (that the acquisition may be put into effect (with or without conditions) or must not be put into effect).

3.39 This is intended to incentivise and encourage notifying parties to provide all relevant, accurate and required information to the Commission with the notification in the first instance. This ensures the Commission has sufficient information to conduct reviews efficiently and effectively.

3.40 The decision (that there is no effective notification date) must be made within a reasonable period after the Commission determines that the information is incomplete or misleading, or contains false information.

[Schedule 1, item 35, subsections 51ABY(1), (2) and (3) of the CCA]

3.41 Subsection 172(3) of the CCA provides that strict compliance with a prescribed form is not required for the purposes of the CCA and that substantial compliance is sufficient. However, in considering whether a notification is materially incomplete or misleading or contains false information, the Commission may have regard to:

•

the extent to which the notification is in the form determined by the Minister;

•

the extent to which the notification includes, or is accompanied by, any information or document determined by the Minister; or

•

any additional information or documents given to the Commission in response to any previous determination that the notification does not have an effective notification date; or

•

any change of facts that the Commission becomes aware of after the notification is made and that are material to the Commission making a determination under Division 3 of Part IVA.

3.42 A notification could be materially incomplete, materially misleading or contain information that is false in a material particular at the time it is made (for example because it does not include upfront information which may be required by the form) or it can become (for example, because of a change of fact) materially incomplete, materially misleading or contain information that is false in a material particular after the notification is made - even if it was complete, not misleading and did not contain false information at the time the notification was made.

[Schedule 1, item 35, subsections 51ABY(4) and (8) of the CCA]

3.43 For the purpose of the Commission's consideration of whether or not a notification is materially incomplete or misleading, or contains information that is false in a material particular, the Minister may determine in writing information or documents for the purpose of the Commission's consideration in relation to the notification and the form of the notification.

3.44 Such a Ministerial determination is a legislative instrument but is not disallowable. It may include a requirement that information about goodwill protection provisions in the contract pursuant to which the acquisition would take place is specified in the notification.

[Schedule 1, item 35, subsections 51ABY(5), (6) and (7) of the CCA]

3.45 If the Commission decides that a notification should be taken never to have had an effective notification date, the Commission must give the notifying party written notice of both the decision and the grounds on which the Commission is satisfied that the notification is materially incomplete or misleading or contains information that is false in a material particular.

[Schedule 1, item 35, subsection 51ABZ(1) of the CCA]

3.46 If the Commission has determined that the notification does not have an effective notification date, the Commission cannot make a determination in respect of the notification under subsection 51ABZE(1).

[Schedule 1, item 35, subsection 51ABZ(2) of the CCA]

Providing additional information and documents in relation to notifications that are incomplete or misleading

3.47 The following applies if the Commission decides, in writing, that there is no effective notification date under subsection 51ABY(1) and the notifying party gives the Commission additional information or documents in response to the Commission's decision:

•

The additional information or documents must be given in writing and accompanied by the fee (if any).

•

Any additional information or documents are taken not to be given until the requisite fee (if any) is paid.

•

The effective notification date of the notification of the acquisition is the day that the additional information or documents are given to the Commission.

•

The Commission must give the notifying party written notice of the effective notification date.

[Schedule 1, item 35, section 51ABZA of the CCA]

3.48 This situation should be distinguished from the requirement to provide the Commission with additional information during the Commission's information gathering and consultation process.

Material changes of fact

3.49 The notifying party is under an ongoing obligation to notify the Commission of any material changes of fact in the notification until the Commission makes a determination under subsection 51ABZE(1), to ensure the determination is made on correct and up-to-date information.

[Schedule 1, item 27, section 45AX of the CCA]

3.50 If the Commission becomes aware of a change of fact relating to a notification, and it is satisfied that the change is material to the Commission's determination, the Commission may (in writing):

•

if the notification is not subject to Phase 2 review,

-

decide that the effective notification date of the notification of the acquisition is the date on which the Commission becomes aware of the change of fact; or

-

extend the Phase 1 determination period for the notification; or

•

if the notification is subject to Phase 2 review, extend the Phase 2 determination period for the notification.

3.51 The extension for either determination period starts when the Commission decides on the extension and includes:

•

each day that the Commission is not given the relevant information or documents; and

•

the day the notifying party gave the Commission the relevant information or documents.

[Schedule 1, item 35, subsections 51ABZB(1), (2) and (3) of the CCA]

3.52 Examples of a material change of fact include the immediate or short-term exit of a major competitor, the destruction of assets which are relevant to the Commission's assessment of the notified acquisition or significant regulatory change.

3.53 The Commission has the option to continue its review on the extended statutory timeline. The Commission will consider when it is appropriate to reset the effective notification date pursuant to subsection 51ABZB(2)(a) or extend the timeline. It is expected that notifying parties will comply such that this will only be used by the Commission in rare cases.

3.54 The Commission's decision must be made within a reasonable period after it becomes aware of the change of fact, and it must give the notifying party written notice of its decision.

[Schedule 1, item 35, subsections 51ABZB(4) and (5) of the CCA]

3.55 If the Commission extends the Phase 1 or Phase 2 determination period as outlined above, the period for making an acquisition determination is extended by the same period of time.

Schedule 1, item 35, subsections 51ABZB(6) and (7) of the CCA]

3.56 If the Commission extends either determination period because of a material change of fact and additional information or documents are provided to the Commission, the information or documents must be accompanied by the applicable fee (if any). Information and documents are taken not to be given before the fee (if any) is paid. Information must also be given in writing.

[Schedule 1, item 35, section 51ABZC of the CCA]

When the Commission may cease considering a notified acquisition

3.57 The Commission may cease considering a notified acquisition if the Commission is satisfied that the parties to the acquisition no longer intend to put the acquisition into effect.

3.58 For example, the Commission may form this view if there is a public announcement by the parties, or other evidence of a good faith intention or agreement to no longer proceed with the acquisition.

[Schedule 1, item 35, subsections 51ABZD(1) and (3) of the CCA]

3.59 The Commission must also cease considering the notification if it is requested to do so, in writing, by the notifying party in relation to the notification. Where a hostile takeover has been proposed, it is expected that the Commission will have regard to the facts, practical circumstances and commercial realities before deciding to cease considering the notification and not simply cease to consider a notification solely at the request of the target company (unless they are also the notifying party).

3.60 A decision by the Commission to cease considering the notification must be made in writing and be given to the notifying party.

[Schedule 1, item 35, subsection 51ABZD(2) and paragraph 51ABZD(5)(a) of the CCA]

3.61 If the Commission decides to cease considering a notification under subsection 51ABZD(2) or (3) (which do not limit each other), Subdivision B (Commission considerations of incomplete and misleading notifications and changes of fact) and Division 4 (substantial lessening of competition) will not apply to the notification.

[Schedule 1, item 35, subsection 51ABZD(4) and paragraph 51ABZD(5)(b) of the CCA]

3.62 A decision by the Commission to cease considering the notification of an acquisition means that the acquisition is stayed and must not be put into effect.

[Schedule 1, item 35, note to subsection 51ABZD(5) of the CCA]

3.63 To avoid doubt, a decision to cease considering the notification of an acquisition does not have the effect that the acquisition ceases to be a notified acquisition.

[Schedule 1, item 35, subsection 51ABZD(6) of the CCA]

Commission must be notified of material changes of fact in relation to notified acquisitions

3.64 Notifying parties have an obligation to keep the Commission informed of material changes of fact relevant to notified acquisitions that are still being determined by the Commission.

3.65 This obligation is engaged if the notifying party becomes aware of a change in fact:

•

either on or after the effective date of the notification; and

•

when the Commission is considering the notification; and

•

while the Commission has not made a determination in respect of the notification; and

•

if the notification is subject to Phase 2 review- prior to 15 business days before the end of the Phase 2 determination period for the notification.

3.66 The change of fact must be material to the Commission's determination of the notified acquisition. An example of a material change of fact would be the immediate or short-term exit of a major competitor, the destruction of assets which are relevant to the Commission's assessment of the notified acquisition or significant regulatory change.

[Schedule 1, item 27, subsections 45AX(1) and (2) of the CCA]

3.67 The obligation also arises in circumstances where the notifying party has made a public benefit application in respect of the notification and the notifying party becomes aware of a change of fact that is material to the Commission's determination of the public benefit application.

[Schedule 1, item 27, subsection 45AX(3) of the CCA]

3.68 A person is taken to become aware of a change of fact at the earliest time when the person becomes aware of the change and that it is material to the Commission's determination in respect of the notification or public benefit application.

[Schedule 1, item 27, subsections 45AX(2) and (4)]

3.69 Material changes of fact must be reported to the Commission as soon as practicable after the person becomes aware of the change. If the person is the only notifying party, they are required to notify the Commission. If there are multiple notifying parties, then all the notifying parties must notify the Commission jointly.

[Schedule 1, item 27, subsection 45AX(5) of the CCA]

3.70 A person who ought reasonably to be aware of something is presumed to be aware of thing.

[Schedule 1, item 27, subsection 45AX(6) of the CCA]

3.71 What constitutes a material change of fact is left to the discretion of the Commission. It is intended that the Commission would have regard to market developments or other competitively significant events when considering whether there has been a material change of fact. For a change of fact to be material, it must be of meaningful significance to the Commission's determination of the notified acquisition or public benefit application.

Stayed acquisitions must not be put into effect

3.72 A person must not put an acquisition into effect if the acquisition is stayed. A person contravenes the Act if they put an acquisition into effect and the acquisition is stayed.

[Schedule 1, item 27, section 45AY of the CCA]

3.73 In determining whether an acquisition has been put into effect, regard should be had to the practical circumstances of each matter, however, it does not require legal ownership to have transferred. Examples of putting into effect an acquisition may include terminating the employment of key employees, closing key facilities or integrating IT systems.

Acquisitions void if put into effect while stayed

3.74 If an acquisition is put into effect, or purportedly put into effect, in circumstances where the acquisition is stayed, the acquisition is, and is taken always to have been, void.

[Schedule 1, item 27, subsections 45AZA(1) and (2) of the CCA]

Chapter 4: Substantial lessening of competition

Detailed explanation of Commission consideration of acquisitions

4.1 The amendments provide that if the Commission is notified of a proposed acquisition, the Commission may, in writing, determine that the acquisition:

•

may be put into effect; or

•

must not be put into effect.

4.2 The determination may include conditions and/or a declaration regarding goodwill protection contractual provisions. A reference in the CCA to a determination will include a reference to any condition or declaration included in it.

[Schedule 1, item 35, subsections 51ABZE(1), 51ABZF(1) and (4) and 51ABZG(1) and (4) of the CCA]

4.3 For the Commission to determine that the acquisition must not be put into effect:

•

the notification must be subject to a Phase 2 review;

•

the Commission must have given a notice of competition concerns to the notifying party; and

•

the Commission must be satisfied that putting the acquisition into effect would, in all the circumstances, have the effect, or be likely to have the effect, of substantially lessening competition.

4.4 The Phase 2 review is a process intended for in-depth economic and legal analysis of acquisitions that the Commission is satisfied could be anti-competitive following an initial Phase 1 review.

4.5 There must be a causal link between the acquisition and the effect, or likely effect, on competition for the Commission to make a determination that the acquisition must not be put into effect.

[Schedule 1, item 35, subsection 51ABZE(2) of the CCA]

4.6 The process for deciding that the notification is to be subject to Phase 2 review is discussed below.

4.7 It is intended that the Commission will apply its expertise and exercise its discretion having regard to all the relevant information before it.

4.8 In making a determination, the Commission must consider the object of the CCA (which is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection) and all relevant matters, including the interests of consumers.

4.9 The interests of consumers may include price and non-price parameters, such as quality of goods or services, and choice of goods or services. For example, an acquisition could lead to the consolidation of data and technology, potentially impacting costs for consumers and reducing choice.

[Schedule 1, item 35, subsection 51ABZE(3) of the CCA]

4.10 Recognising the complex legal and economic assessment that the Commission must undertake, it is expected that the Commission would consider the relevant matters discussed below in making its determination. It is anticipated that the Commission will draw on economic and data analysis to determine the welfare effect on consumers. This means the observable characteristics of proposed acquisitions that are predictive about whether they are likely to substantively lessen competition and thus harm consumers. The welfare effects on consumers includes the potential impacts in the long term, which can include how fast technology and other market dynamics are changing.

4.11 The Commission must give written notice of its determination (together with a written statement of reasons (including any relevant theory of economic harm), to the notifying party.

[Schedule 1, item 35, subsection 51ABZE(4) of the CCA]

4.12 For the purposes of the Act (other than Division 4 and Subdivision B of Division 6 of Part IVA and paragraph 51ABZZM(2)(a)), the Commission's determination is taken to be made when the Commission includes a copy of it on the acquisitions register.

4.13 This amendment ensures that the date of the Commission's determination is clear for all parties, particularly where it may have implications for the timing of certain review rights (such as judicial review).

[Schedule 1, item 35, subsection 51ABZE(5) of the CCA]

Conditions

4.14 When considering whether to include conditions in a determination the Commission must have regard to all relevant matters. Matters which may be relevant are described below. In addition, the Commission may have regard to the effect that the conditions could have on the interests of consumers and any consumer benefits that would result, or be likely to result, from compliance with the conditions.

4.15 The Commission must not include conditions unless it is satisfied that the acquisition could substantially lessen competition in any market, if there were no conditions. In this context, 'could' denotes a possibility. This amendment is intended to be a safeguard against conditions which are unnecessary where there are no competition concerns. However, it is not intended to prevent the Commission from accepting a remedy proposal in Phase 1.

[Schedule 1, item 35, section 51ABZF of the CCA]

4.16 The Commission may impose conditions which accept a remedy proposal that is offered by a party to the acquisition (in the form of commitments or an undertaking). Ordinarily a remedy proposal condition or undertaking will be offered by the notifying party after taking into account feedback from consultation with interested market participants.

4.17 If a remedy is offered by a party to the acquisition (subject to specified timeframes), the Commission may extend the determination period to allow time for consultation with interested market participants on the remedy proposal offered by the notifying party.

4.18 Commitments or undertakings that are offered by a party to the acquisition to remedy competition concerns do not need to be in a form capable of immediate acceptance by the Commission. However, there must be sufficient detail to enable the Commission to consider and consult with market participants about the remedy proposal offered by the notifying party.

4.19 Where there are multiple possible remedies offered by the parties, the Commission is entitled to include conditions that it considers most appropriate and likely to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection, consistent with the object of the Act, having regard to all relevant matters.

Substantial lessening of competition

4.20 The Commission will have regard to a number of matters when considering whether an acquisition, if put into effect, would, in all the circumstances, have the effect, or be likely to have the effect, of substantially lessening competition. Section 4G of the CCA considers the meaning of the term 'lessening of competition'.

4.21 The 'substantial lessening of competition' test requires consideration of the closeness of competition between the parties to the acquisition, to understand what may be lost, in terms of competition, as a result of the acquisition. This is a well understood concept which currently applies to the assessment of acquisitions in Australia (see section 50 of the CCA), as well as other provisions of the CCA such as the prohibition against the misuse of market power (see section 46 of the CCA).

4.22 The Commission must have regard to all relevant matters. In addition, and without limiting its capacity to have regard to any relevant matter, the Commission may have regard to:

•

the existing or proposed commercial relationships of the parties to the acquisition, including agreements between them (and, if any of the parties is a body corporate, the relationship of other related bodies corporate); and

•

the contract, arrangement or understanding, or proposed contract, arrangement or understanding, pursuant to which the acquisition is to take place.

[Schedule 1, item 35, subsections 51ABZH(1), (2) and (3) of the CCA]

4.23 For the purposes of this Part, the acquisition may have the effect or be likely to have the effect of substantially lessening competition in a market if the acquisition would, in all the circumstances, have the effect, or be likely to have the effect, of creating, strengthening or entrenching a substantial degree of power in the market.

4.24 Matters relevant to working out whether a corporation has a substantial degree of power in a market have effect for the purposes of this Part with some modifications.

[Schedule 1, item 35, subsections 51ABZH(4) and (5) of the CCA]

4.25 The amendments emphasise the importance of considering the competitive structure of the market in the overall assessment of the effects of the acquisition on competition, by making it clear that a substantial lessening of competition can include creating, strengthening or entrenching a substantial degree of market power. This concept is explained further below.

4.26 The assessment of whether an acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market is a complex economic and legal assessment of the likely forward-looking effects of an acquisition requiring a single evaluative judgement. This requires explicit emphasis on economic methodology and analysis of competitive effects.

Relevant matters

4.27 In undertaking its analysis of whether acquisitions would have or be likely to have the effect of substantially lessening competition, it is important for the Commission to focus on potential economic harms, including adapting to new economic challenges over time.

4.28 Economic factors to which the Commission could be expected to have regard in assessing the risks to competition include:

•

the market position of the parties to the acquisition and their economic and financial power;

•

whether the acquisition would result in the removal of a vigorous and effective competitor;

•

the nature of competition, including potential competition, in the market;

•

the effect of the acquisition on the conditions for competition in the market;

•

the structural and/or other conditions affecting competition, including the level of concentration in the market;

•

the conditions or barriers to entry and expansion to the market and the impact of the acquisition on those barriers;

•

the nature and strength of competitive constraints, whether within and/or outside the market, including the potential for the acquisition to give rise to increases in prices and/or profit margins;

•

the degree of product and/or service differentiation in the market;

•

the degree of dynamism, whether through innovation or otherwise, in the market;

•

the degree of countervailing power in the market;

•

the extent to which the acquisition may give rise to efficiencies that could not otherwise be obtained and the extent to which those efficiencies may ultimately benefit consumers.

4.29 These points are not a checklist of factors to consider but are intended to guide the Commission's assessment of the competitive impact of acquisitions, based on economic and legal analysis of evidence, information and data.

4.30 In doing so, these factors will help inform the Commission's substantive guidelines that set out its approach to the complex economic and legal assessment of whether an acquisition is likely to substantially lessen competition. Those guidelines will guide and inform businesses, stakeholders and the community. These factors may also be a reference point to guide the Tribunal in its review of Commission determinations, and the courts in the event of any applications for review of Commission and Tribunal decisions.

4.31 These factors are not intended to limit the Commission's discretion as to what constitutes a relevant matter. What is relevant and the weight to be attributed in the Commission's consideration will depend on the facts and circumstances, recognising that it involves predictions about the future.

4.32 While not determinative, the Commission may distinguish between acquisitions that may be anti-competitive and those that are likely to be benign or pro-competitive, by having regard to changes in market conditions (outlined in the above factors) that would be likely to result from an acquisition. This may mean considering the market position of the parties to the acquisition and their economic and financial power. This includes the commercial relationships between the parties to the acquisition and between each of the parties to the acquisition and third parties. This is because, for example, the nature of vertical relationships in supply chains or the extent to which there is vertical integration, may impact on competition. It may also mean considering how an acquisition may impact on the ability and incentives of competitors (both existing competitors and potential future entrants to a market), and whether it would reduce, retain or foster competitive tension. For example, heightened barriers to entry that deter or impede the prospect of new entrants into the relevant market may be a relevant consideration. Alternatively, the acquisition of a key facility that downstream businesses rely on may have intermediate or longer-term impacts on the ability and incentives of market participants to compete.

4.33 In considering the effect of the acquisition on conditions for competition, the Commission may take into account the closeness of competition between the parties to the acquisition, and the competitive environment that may result, post-acquisition. For example, an acquisition that leads to the removal of a close competitor with products or services with similar characteristics where the parties closely follow each other's pricing, range or service offerings may reduce competitive tension and be an indicator of a less competitive market.

4.34 Efficiencies are a relevant matter for the Commission to consider in its analysis of the likely effect of the acquisition on competition. One of the principal benefits of competition is that it promotes economic efficiency. Some mergers may generate efficiencies without substantially lessening competition. For example, vertical mergers that generate efficiencies and do not raise rivals' costs or foreclose competition are not likely to substantially lessen competition. However, an acquisition may generate efficiencies in the form of lower costs but still lead to an increase in market power This consideration is different from the public benefit test (discussed in Chapter 5), which requires the weighing of any competitive detriment with offsetting public benefit.

Commercial relationships of the parties

4.35 The Commission may have regard to the commercial relationships of the parties to the acquisition, including any related bodies corporate (if applicable). For example, other commercial agreements (such as access or service agreements) between the parties may affect their likely behaviour, ability and incentives in connection with the proposed acquisition. This assessment does not involve weighing the competitive effects likely to result from other agreements, together with the acquisition. However, the assessment should be undertaken in light of all relevant circumstances, which may include other commercial agreements or arrangements between the parties.

Contract, arrangement or understanding pursuant to which the acquisition is to take place

4.36 The Commission may have regard to any documentation or information relevant to the acquisition. The documentation includes the contract, arrangement or understanding, or proposed contract pursuant to which the acquisition is to take place.

4.37 The Commission may also consider any goodwill protection provisions contained in the documents and information that the Commission is to have regard to.

Creating, strengthening or entrenching a substantial degree of market power

4.38 The effect of these amendments is to make it clear that a substantial lessening of competition can be constituted by a creation, strengthening or entrenching of substantial market power.

4.39 The amendments do not limit the circumstances in which a substantial lessening of competition occurs (that is, a substantial lessening of competition does not have to involve the creation, strengthening or entrenching of substantial market power).

4.40 The Commission will as relevant undertake an assessment of whether an acquisition creates, strengthens or entrenches a substantial degree of market power and whether that has the effect, or likely effect of substantially lessening competition.

4.41 The specific mention of 'creating, strengthening or entrenching a substantial degree of power in a market' is intended to increase the focus on the market power of the parties to the acquisition and to clarify that even an incremental change in market power may still amount to a substantial lessening of competition, if the acquisition strengthens the acquirer's market power (that is, their ability to act with a degree of freedom from competitive constraints).

4.42 In addition, establishing a position of substantial market power in another market that the acquirer (or relevant business) previously did not operate in, may also constitute a substantial lessening of competition depending on the characteristics of the parties involved or nature of the market.

4.43 A substantial lessening of competition can arise through creation of the power to generate supra-competitive profits or exclude entry where that power did not previously exist. If a firm has that power already, the substantial lessening of competition can arise through a strengthening or entrenching of that power. This reflects the economic link between a lessening of competition and an increase in market power, and it should be seen as an elucidation of the ways in which a substantial lessening of competition can arise rather than a change to the meaning of a substantial lessening of competition.

4.44 This amendment applies to the 'substantial lessening of competition' test for acquisitions assessed by the Commission under these new provisions (and section 50 of the Act), and its inclusion in these provisions is intended to clarify that creating, strengthening or entrenching market power can amount to a substantial lessening of competition. It is not intended to alter or limit the scope of the general meaning of 'substantial lessening of competition' in the Act in this regard.

Cumulative effects of serial acquisitions

4.45 The Commission may treat the effect of an acquisition as being the combined effect of the acquisition and certain earlier acquisitions.

[Schedule 1, item 35 subsections 51ABZH(6) and (7) of the CCA]

4.46 This is intended to allow the Commission to be able to take into account the impact of serial acquisitions, which are a series of acquisitions by parties which individually may not substantially lessen competition, but may have the effect of substantially lessening competition when considered as a whole. Acquisitions in small, local markets can have a significant impact on competition in local areas, as well as national, regional and/or State-wide competition.

4.47 The amendments allow the Commission to consider the combined effects of the current acquisition and previous acquisitions that involve goods or services that are the same or substitutable for, or otherwise competitive with, each other, irrespective of geographic area in Australia. The Commission may consider the aggregated impact of such acquisitions, but is not required to do so.

4.48 The circumstances in which the Commission may consider the combined effect of an acquisition and earlier acquisitions are when:

•

the earlier acquisition is put into effect during the 3 years ending on the effective notification date of the notification of the current acquisition; and

•

the parties to the earlier acquisition include a party to the current acquisition (or if a party to the current acquisition is a body corporate, a related body corporate of that party); and

•

involve the supply or acquisition of the same goods or services, or that are substitutable for, or otherwise competitive with, each other, as the current acquisition.

[Schedule 1, item 35, subsection 51ABZH(6) of the CCA]

4.49 Three years is considered an appropriate reference period to capture strategic business behaviour and take account of dynamic conditions of competition in markets.

4.50 These considerations in relation to the combined effect of certain acquisitions do not limit the circumstances in which an acquisition would or could, if put in effect, have the effect, or be likely to have the effect, of substantially lessening competition.

[Schedule 1, item 35, subsection 51ABZH(7) of the CCA]

4.51 The provisions of Subdivision B (substantial lessening of competition) do not affect the meaning of substantially lessening competition outside the new system in Part IVA of the CCA.

[Schedule 1, item 35, subsection 51ABZH(8) of the CCA]

Goodwill protections

4.52 Where the contract pursuant to which an acquisition takes place is a contract for the sale of a business or of shares in the capital of a body corporate carrying on a business, the Commission may declare, in respect of a notification of the acquisition, that paragraph 51(2)(e) of the Act does not apply to a goodwill provision of the contract. However, the Commission may only do this if it is satisfied that the provision is not necessary for the protection of the purchaser under the contract in respect of the goodwill of the business.

[Schedule 1, items 6 and 35, subsection 4(1) definition of "goodwill protection provision", subsections 51ABZG(1) to (3) of the CCA]

4.53 Provisions in business sale contracts that are solely to protect the goodwill of a business for the purchaser are exempt from the prohibitions against anti-competitive conduct in Part IV of the CCA (under paragraph 51(2)(e)). The Commission will be able to declare that this goodwill exemption does not apply, for example, where the contract includes a non-compete clause, if the duration and/or geographic scope is broader than necessary for the protection of the purchaser in respect of the goodwill of the business. The broader the scope or longer the duration is, the less likely any obligations or restrictions on the activities on the parties will be regarded as necessary and solely to protect the goodwill of the business.

4.54 If the Commission does not make a declaration in respect of a goodwill provision this does not preclude the Commission from commencing action in relation to a potential breach of the prohibitions against anti-competitive conduct in Part IV of the CCA in relation to the relevant provision in the contract for sale at a later stage.

[Schedule 1, item 35, subsection 51ABZG(4) of the CCA]

Process for considering acquisitions

4.55 Schedule 1 to the Bill provides for the process for considering acquisitions under the new Part IVA of the CCA.

Time for making determinations

4.56 As acquisitions are time-sensitive, prompt decision-making is critical. Clear review timelines are an important procedural safeguard and will assist parties in planning their transactions and interested stakeholders in engaging with the Commission's review. To ensure prompt reviews by the Commission, the amendments include timeframes that the Commission and parties must comply with.

4.57 These timelines assume that the Commission has all the information and evidence it needs to consider an application. Therefore, timing can be extended in certain circumstances, for example, if the Commission requests additional information.

4.58 The earliest time that the Commission may make a determination is 15 business days after the effective notification date of the notification. After that 15 business day period in Phase 1, the Commission may make a determination at any point in Phase 1 or at any point in Phase 2, subject to certain time limits.

[Schedule 1, item 35, subsection 51ABZI(1) of the CCA]

4.59 The 15 business day period ensures that stakeholders have adequate time to engage with the Commission and make submissions in relation to the notification. It also allows the option of a prompt 'fast track' determination if no concerns are identified by the Commission.

4.60 Business days are defined as not including a Saturday or Sunday, or a day that is a public holiday in the Australian Capital Territory, or any day between 23 December and 10 January. Subsection 36(1) of the Acts Interpretation Act 1901 makes it clear that, if a period of time is expressed to occur between 2 days, the period of time includes those days. This means that the reference to 'any day between 23 December and 10 January' means 23 December and 10 January are to be treated as non-business days in Part IVA of the CCA.

4.61 If the Commission does not make a determination within the determination period, it is deemed to have made a determination that the acquisition may be put into effect. The determination period is the Phase 1 determination period for the notification, or the Phase 2 determination period for the notification (if the notification is subject to Phase 2 review). However, a determination that is deemed to have been made does not include any condition or declaration included in it.

4.62 The purpose of the statutory timeframes is to provide certainty to businesses. It is in the notifying party's interests to provide information promptly to facilitate an efficient review by the Commission. The statutory timeframes set out the maximum time period in which the Commission must make its determination, subject to any extensions. The Commission may therefore make a determination in a shorter period of time, provided any relevant statutory requirements are met (such as the lapse of the 15 business day period in subsection 51ABZI(1) or requirement for the Commission to provide a notice of competition concerns for acquisitions subject to Phase 2 review, pursuant to section 51ABZK).

[Schedule 1, item 35, subsections 51ABZI(2) and (3) of the CCA]

•

The Phase 1 determination period is 30 business days starting on the effective notification date, subject to any extensions under subparagraph 51ABZB(2)(a)(ii) and section 51ABZZE of the CCA.

[Schedule 1, item 35, subsection 51ABZI(4) of the CCA]

•

The Phase 2 determination period is 90 business days starting immediately after the end of the Phase 1 determination period, subject to any extensions under paragraph 51ABZB(2)(b) and subsections 51ABZK(5), 51ABZL(4) and 51ABZN(2) and section 51ABZZE of the CCA.

[Schedule 1, item 35, subsection 51ABZI(5) of the CCA]

4.63 If the Commission purports to make a determination in respect of a notification of an acquisition, and the determination is invalid or the Federal Court sets the determination aside or requires the Commission to remake the determination, this does not result in the Commission having been taken to have made a determination at the end of the determination period. Thus, these circumstances do not automatically lead to a determination that the acquisition may be put into effect.

[Schedule 1, item 35, subsections 51ABZI(6) and (7) of the CCA]

4.64 If the Commission decides that a notification of an acquisition is to be subject to Phase 2 review, it must do so in writing during the Phase 1 determination period.

4.65 The Commission may decide that the notification is to be subject to Phase 2 review if the Commission is satisfied that the acquisition could, in all the circumstances, have the effect, or be likely to have the effect, of substantially lessening competition in any market. In this context, 'could' denotes a possibility. This is intended to recognise that by the end of Phase 1, the Commission may have identified possible competition concerns which require further investigation.

4.66 The Phase 2 review allows the Commission to undertake in-depth legal and economic analysis of acquisitions identified as potentially anti-competitive following the Phase 1 review.

[Schedule 1, item 35, subsection 51ABZJ(1) of the CCA]

4.67 The Commission must give the notifying party written notice that it has decided that the notification should be subject to Phase 2 review. The written notice must detail the day by which the fee (if any) for the Phase 2 review must be paid. The fee and the timing for payment of the fee are both determined by the Minister by legislative instrument.

[Schedule 1, item 35, subsection 51ABZJ(2) and (4) of the CCA]

4.68 The notice will explain why the Commission is satisfied that the acquisition, to which the notification relates, if put into effect, could in all the circumstances, have the effect, or be likely to have the effect, of substantially lessening competition in any market, by reference to the nature of the theories of harm being considered and the matters the Commission intends to investigate before making a determination. It is intended to be a brief explanation including a description of the parties to the acquisition and the economic activities in which they engage.

[Schedule 1, item 35, subsection 51ABZJ(3) of the CCA]

4.69 When deciding that a notification should be subject to Phase 2 review, it is not intended that the Commission be required to provide reasons that adhere to the requirements of section 25D of the Acts Interpretation Act 1901. The Commission is therefore not required to set out the findings on material questions of fact and refer to the evidence or other material on which those findings were based, though it may choose to do so.

4.70 The Commission must not make an acquisition determination if the Phase 2 fee has not been paid. Further, the Commission is taken to have ceased considering the notification if the fee has not been paid by the time on which the time for payment is due.

[Schedule 1, item 35, paragraphs 51ABZJ(2)(c) and (d) of the CCA]

4.71 Schedule 1 to the Bill amends the ADJR Act by adding that decisions under subsection 51ABZJ of the CCA are excluded from ADJR Act review.

4.72 The decision to subject a notification to Phase 2 review is a procedural step in the review process. It is important that the Commission is able to provide a timely decision about whether an acquisition should be put into effect which would not be possible if review were available and sought on the decision to subject the notification to Phase 2 review.

4.73 Safeguards are provided for in the Bill to ensure the process is subject to review and that the notifying parties have an opportunity to be heard on matters which may affect the Commission's acquisition determination.

[Schedule 1, item 80, Schedule 1 to the ADJR Act]

Notice of competition concerns

4.74 Within 25 business days after the start of the Phase 2 determination period, or as soon as practicable thereafter, the Commission may provide written notice (a 'notice of competition concerns') which sets out the Commission's preliminary assessment of whether the acquisition, if put into effect, would have the effect, or be likely to have the effect, of substantially lessening competition in any market.

4.75 The notice should also set out the grounds on which the Commission has made that preliminary assessment, referring to the evidence or other material on which those grounds are based.

4.76 Combined with the effect of subsection 51ABZE(3), the Commission must issue a notice of competition concerns within the 25 business day time period if the Commission wishes to determine that an acquisition cannot be put into effect.

4.77 This will not apply if the Commission makes a determination in respect of the notification of the acquisition on or before the 25th business day after the start of the Phase 2 determination period.

[Schedule 1, item 35, subsections 51ABZK(1) to (4) of the CCA]

4.78 Where the notice of competition concerns is not given before the end of the 25th business day:

•

with the notifying party's written agreement-the Phase 2 determination period (and the period in which remedies may be offered in paragraph 51ABZZE(3)(b)) is extended by the number of business days (as applicable) during which the notifying party's written agreement is in force:

-

business days that occur after the 25th business day from the start of Phase 2;

-

business days on or before which the Commission does not give the notice of competition concerns;

•

in any other case-the 15 days mentioned in subsections 51ABZZD(3) and (5) (Information gathering) are reduced by the number of those applicable days, unless the reduction would be of more than 15 business days (in which case, the limitations on the information that may be requested and/or taken into account pursuant to those subsections do not apply in relation to making the determination).

[Schedule 1, item 35, subsections 51ABZK(5) to (7) of the CCA]

4.79 The notifying party is to be given a reasonable opportunity to make oral or written submissions to the Commission in relation to the grounds set out in the notice to ensure procedural fairness. The notifying party may also request additional time to make such submissions to the Commission, if required.

4.80 The notice of competition concerns is an important step in the process and ensures the notifying party is informed of the Commission's preliminary assessment of whether the notified acquisition would be likely to have the effect of substantially lessening competition in any market. It is intended to complement and provide further particulars of any issues identified by the Commission during the Phase 1 process as well as any other relevant matters.

4.81 This process is intended to ensure that the Commission sets out and explains its competition concerns to the notifying party. The explanation must include the grounds on which the Commission has made its preliminary assessment, referring to the evidence or other material on which those grounds are based which formed the basis of the Commission's satisfaction. The Commission is not required to provide access to its case file or confidential third party information.

4.82 The notifying party will have the opportunity to respond to the notice of competition concerns, ahead of the Commission's determination, to ensure procedural fairness. The notifying party may also request additional time (more than once) to make such submissions to the Commission, if required.

4.83 Upon receiving the notice of competition concerns, the notifying party may make submissions to the Commission during the period starting on the day the Commission gives the notice of competition concerns and ending on the 25th business day after that day.

4.84 Unless an extension is granted, the Commission must not take into account submissions from the notifying parties about the notice of competition concerns received after this period expires. This ensures the Commission has sufficient time to assess, consider and take into account the submissions ahead of making its determination. If the Commission extends the period for responding to the notice of competition concerns, the Phase 2 determination period is also extended by the same number of days.

4.85 The notifying party is not precluded from providing material to the Commission after this point. However, the information must relate to information or developments not otherwise addressed in the notice of competition concerns, or relate to information requested by the Commission, to be taken into account by the Commission (or the Tribunal upon review). Under section 51ABZZD, the Commission may consult and receive or obtain submissions or information until 15 business days before the end of Phase 2 or the public benefit determination period.

[Schedule 1, items 8 and 35, subsection 4(1) definition of "notice of competition concerns", subsections 51ABZL(1) to (4) of the CCA]

4.86 Sections 51ABZK and 51ABZL do not prevent the Commission from making a determination that the acquisition may be put into effect at any time before the end of the determination period. Parties to an acquisition should be able to engage with the Commission on the status of their notification on a regular and reasonable basis therefore the Commission may engage with the notifying parties earlier than 25 business days into Phase 2 and may provide the notice of competition concerns before then.

[Schedule 1, item 35, section 51ABZM of the CCA]

False or misleading information

4.87 The Commission may extend the Phase 2 determination period if satisfied that the notification is materially misleading, contains information that is false in a material particular or information given by the notifying party to the Commission in relation to the notification is false in a material particular.

4.88 The Commission may extend the period starting on the day the Commission makes a decision under subsection 51ABZN(2) and including each day on which the notifying party has not given the Commission the information or documents and including the day the notifying party does give the information or documents.

4.89 The Commission must make its decision within a reasonable period and must give written notice of the decision to the notifying party. If the Phase 2 determination period is extended other timeframes (under section 51ABZK and paragraph 51ABZZE(3)(b)) are similarly extended.

[Schedule 1, item 35, section 51ABZN of the CCA]

4.90 If the Commission has decided to extend the Phase 2 determination period due to false or misleading information, and the notifying party gives information or documents to the Commission in response, the information or documents must be accompanied by the fee determined by the Minister via legislative instrument. Any information given must be in writing. Unless the fee is paid the information or documents are taken not to be given.

[Schedule 1, item 35, section 51ABZO of the CCA]

Conditions

4.91 The Commission must not have regard to a commitment or undertaking offered by a party to the acquisition to remedy competition concerns, unless it is offered within the specified time periods.

4.92 The Commission has discretion to consider any commitments (including in the form of undertakings) offered by the parties to the acquisition in making a determination subject to certain timeframes.

4.93 The Commission must not have regard to a commitment or undertaking offered by a party to the acquisition if the commitment or undertaking is offered later than 20 business days after the notification is made (that is, the effective notification date) in Phase 1.

4.94 However, if the notification is subject to Phase 2 review, the Commission may have regard to a commitment or undertaking if it is offered no later than the 60th business day occurring on or after the start of the Phase 2 determination period, or if an extension has been made in accordance with subsection 51ABZZE(3) then the date for when a commitment or undertaking may be offered is extended accordingly.

[Schedule 1, item 35, section 51ABZZC of the CCA]

Chapter 5: Public benefit

Outline of Chapter

5.1 The amendments create a process for the Commission to determine whether an acquisition may be put into effect even if it would otherwise be anti-competitive. This determination can only be made if the Commission is satisfied that the acquisition would result in a benefit to the public that would outweigh any detriment to the public from the lessening of competition.

5.2 This chapter explains the public benefit application process, including the sequential approach of assessing competitive effects before public benefits, the circumstances in which a public benefit application can be made and the Commission's determination powers.

Detailed explanation of new law

Making a public benefit application

5.3 The notifying party to an acquisition may make a public benefit application if

•

the Commission determines that the acquisition must not be put into effect, or

•

the Commission determines that the acquisition may be put into effect subject to conditions included in the determination and the acquisition has not been put into effect.

This is called a 'public benefit application'.

5.4 The Commission must be satisfied that the acquisition would, or would be likely to, have the effect of substantially lessening competition, or could do so but for specified conditions, before a public benefit application can be made.

5.5 An assessment of the magnitude of the harm to competition and other public detriments will be required to determine the magnitude of the public benefits required to outweigh that harm. The statutory timeframes in Phase 1 and Phase 2 set out the maximum period by which the Commission must make its determination. However, the Commission may expedite its assessment to make a determination in a shorter timeframe (subject to the 15 business day period in subsection 51ABZI(1)), including if the parties promptly provide relevant information to the Commission.

[Schedule 1, item 35, subsections 51ABZP(1) and (5) of the CCA]

5.6 A public benefit application must be made in writing within 21 days of the Commission's determination. The Minister may determine a fee that is payable to make a public benefit application. An application is taken to have not been made if the notifying party has not paid the fee. See below for further information about the requirement for the information to be provided in an application and the impact on the effective application date if information required is not provided.

[Schedule 1, item 35, subsections 51ABZP(2), (3) and (4) of the CCA]

5.7 Acquisitions are time sensitive transactions. As such, the legislation sets specific times within which the Commission must take various actions. To ensure it is clear when the determination period starts, the amendments introduce the concept of effective application date. This is the day the application is made, subject to certain provisions about payment of the application fee, incomplete or misleading information, material changes of fact, and provision of further information. The Commission's deadline for the public benefit process is tied to this effective application date. The parties are made aware of these timeframes as the Commission is required to give written notice that it has received the public benefit application and confirm the effective application date for the application.

[Schedule 1, item 35, subsections 51ABZP(6) and (7), paragraph 51ABZR(1)(a), subsection 51ABZS(5), and paragraph 51ABZT(2)(a) of the CCA]

Public benefit applications that are materially incomplete or misleading

5.8 The Commission may decide that the application does not have an effective application date if it has not already made a determination in relation to the application and it is satisfied that the application is materially incomplete, materially misleading, or contains information that is false in a material particular. The Commission must make a decision that an application does not have an effective application date in writing, within a reasonable period.

5.9 If the Commission decides that the application does not have an effective application date, the Commission must not make a determination in relation to the public benefit application.

5.10 An application could be materially incomplete, materially misleading or contain information that is false in a material particular at the time it is made (for example because it does not include upfront information which may be required by the form) or it can become, because of a change of fact, materially incomplete, materially misleading or contain information that is false in a material particular after the application is made, for the purpose of a decision by the Commission.

[Schedule 1, item 35, subsections 51ABZQ(1), (2), (7) of the CCA]

5.11 Subsection 172(3) of the CCA provides that strict compliance with a prescribed form is not required for the purposes of the CCA and that substantial compliance is sufficient. However, in considering whether a notification is materially incomplete or misleading or contains false information, the Commission may have regard to:

•

the extent to which the application is made in the form determined by the Minister; and

•

the extent to which the application includes, or is accompanied by, the information or documents determined by the Minister;

•

any additional information or documents provided by the notifying party in the circumstances where the Commission has previously determined that the application does not have an effective application date because it is incomplete or misleading; and

•

any change of fact that the Commission becomes aware of after the notification is made, and that is material to the Commission's decision that the notification was incomplete or misleading.

5.12 A determination by the Minister in relation to the form of an application is made and the information or documents that must accompany it will be a legislative instrument that is not disallowable. The exemption from disallowance is appropriate as it is important to provide commercial certainty to parties to an acquisition in relation to compliance with the form and accompanying requirements, particularly for time-critical transactions, that the instruments will not be disallowed.

5.13 Strict compliance with a prescribed form is not required for the purposes of the CCA and substantial compliance is sufficient (see subsection 172(3) of the CCA). Therefore, the application must be materially incomplete or misleading before the Commission amends the effective application date.

[Schedule 1, item 35, subsections 51ABZQ(3) to (6) of the CC A]

5.14 What constitutes a reasonable period of time is not provided for in Schedule 1 to the Bill as it is considered that this will vary depending on the nature and circumstances of the application. If the application is voluminous and complex, it is considered that a reasonable period of time will be longer than if the application is short and straightforward.

5.15 If the Commission decides that an application does not have an effective application date, it must give the notifying party written notice of the decision and the grounds on which the decision was made and must not make a determination about a public benefit application.

[Schedule 1, item 35, sections 51ABZR of the CCA]

5.16 The notifying party may apply for the Commission to undertake an internal review of the decision, or otherwise make an application for a review of the decision in the Tribunal (see Chapter 6 for more information).

5.17 If the Commission determines that the application does not have an effective application date, the notifying party may provide the Commission with additional information and documents.

5.18 The application will get a new effective application date if the notifying party provides the additional information (in writing) and additional documents to address the deficiency of their application.

5.19 However, the additional information and documents are not taken to have been given to the Commission until the fee (if any) determined by the Minister by legislative instrument has been paid.

5.20 The new effective application date will be the day the additional information or documents are provided. The Commission must give the notifying party written notice of the new date.

[Schedule 1, item 35, section 51ABZS of the CCA]

Material changes of fact

5.21 The Commission may also decide a different effective application date if it becomes aware of a material change in fact in relation to the proposed acquisition. The effect of this is that the effective application date changes to the date on which the Commission becomes aware of the change of fact, if the Commission is satisfied that the change is material.

5.22 The Commission may only decide that the application does not have an effective application date if it has not already made a determination in relation to the application.

5.23 The Commission must make this decision in writing and within a reasonable period of time after becoming aware of the material change of fact. The Commission must give written notice to the notifying party of the decision.

5.24 Alternatively, the Commission may extend the determination period for the application by the number of days in the period starting on the day the Commission makes the decision that there is a material change of fact up until and including the day the notifying party gives the Commission information or documents about the material change of fact.

5.25 If the determination period is extended, the timeframes which apply under related provisions (such as the timeframes for the Commission to provide its public benefit assessment, or for the parties to offer commitments or undertakings) will be similarly extended.

[Schedule 1, item 35, section 51ABZT of the CCA]

5.26 The notifying party may apply for the Commission to undertake an internal review of the decision, or otherwise make an application for a review of the decision in the Tribunal (see Chapter 6).

Providing additional information and documents

5.27 If the Commission has decided to extend the determination period due to a material change of fact, and the notifying party provides the Commission with information or documents in response to that decision, the information or documents must be:

•

in writing (in the case of information), and

•

accompanied by the fee (if any) determined by the Minister by legislative instrument.

[Schedule 1, item 35, subsections 51ABZU(1) to (3) of the CCA]

5.28 The information or documents are taken not to have been provided until the required fee (if any) has been paid.

[Schedule 1, item 35, subsection 51ABZU (4) of the CCA]

Ceasing to consider a public benefit application

5.29 The Commission may cease considering a public benefit application if it is satisfied that the parties to the acquisition no longer intend to put the acquisition into effect. For example, the Commission may form this view if there is a public announcement by the parties, or evidence of a good faith intention or agreement to no longer proceed with the acquisition. The Commission must also cease considering an application if requested to do so in writing by the notifying party.

[Schedule 1, item 35, subsection 51ABZV(2) and (3) of the CCA]

5.30 The Commission can only make a decision to cease considering a public benefit application if it has not already made a determination regarding the application.

[Schedule 1, item 35, subsection 51ABZV(1) of the CCA]

5.31 A decision to cease considering a public benefit application must be made in writing and the Commission must give written notice of its decision to the notifying party.

[Schedule 1, item 35, subsection 51ABZV(4) and (5) of the CCA]

5.32 The notifying party may apply for the Commission to undertake an internal review of the decision, or otherwise make an application for a review of the decision in the Tribunal (see Chapter 6).

Determining a public benefit application

5.33 When a public benefit application has been made, the Commission may determine (in writing):

•

that the acquisition would be of public benefit; or

•

not to make the determination applied for.

[Schedule 1, item 35, subsection 51ABZW(1) of the CCA]

5.34 The determination may include conditions.

[Schedule 1, item 35, section 51ABZX]

5.35 The Commission must not make a determination that the acquisition would be for the public benefit, or would be if subject to specified conditions, unless it is satisfied that, were the acquisition put into effect (and any conditions included in the determination complied with):

•

the acquisition would, in all the circumstances, result, or be likely to result, in a benefit to the public; and

•

the benefit would, in all the circumstances, outweigh the detriment to the public that would result, or be likely to result, from the acquisition.

[Schedule 1, item 35, subsection 51ABZW(2) of the CCA]

5.36 The Commission has broad discretion to consider what constitutes a public benefit, providing it with the flexibility to enhance the welfare of Australians by approving acquisitions likely to result in net benefits that are of value to the community generally. However, the public benefit must outweigh any detriment to the public that would result, or be likely to result, from the acquisition, to satisfy the test.

5.37 In making its determination of whether the acquisition would be for the public benefit, or not, the Commission must have regard to all relevant matters, including the interests of consumers, and the object of the CCA, which is to enhance the welfare of Australians through the promotion of competition and fair trading and consumer protection.

[Schedule 1, item 35, subsection 51ABZW(3)]

5.38 The Commission must give the notifying party a written notice of its determination and a written statement of the Commission's reasons for making the determination. This determination is subject to review by the Tribunal.

[Schedule 1, item 35, subsection 51ABZW(4) of the CCA]

5.39 For the purposes of the CCA (other than the provisions relating to consideration of public benefit applications and the acquisitions register), the Commission's determination is taken to be made when the Commission includes a copy of the determination on the acquisitions register.

5.40 This ensures that the date of the Commission's determination is clear for all parties, particularly where it may have implications for the timing of certain review rights (such as judicial review).

[Schedule 1, item 35, subsection 51ABZW(5) of the CCA]

5.41 In considering whether to include conditions in a determination, the Commission must have regard to all relevant matters. Without limiting those considerations, the Commission may also have regard to:

•

the effect on the interests of consumers that compliance with the conditions would have, or would be likely to have; and

•

without limiting that consideration, any consumer benefits that would result, or be likely to result from compliance with the conditions.

[Schedule 1, item 35, subsection 51ABZX(2) of the CCA]

5.42 These matters that the Commission must have regard to are intended to incentivise parties to an acquisition to engage constructively and offer a remedy proposal that address the Commission's concerns. Ordinarily the Commission will not include a condition unless it has been offered by the notifying party and that condition takes into account feedback from consultation with interested market participants.

5.43 In considering whether an acquisition, if put into effect, would result in, or would be likely to result in a benefit to the public that would outweigh any resulting detriment, the Commission must have regard to all relevant matters. Without limiting those matters, the Commission may also have regard to the contract, arrangement or understanding, or proposed contract, arrangement or understanding, pursuant to which the acquisition is to take place.

[Schedule 1, item 35, section 51ABZY of the CCA]

Process for considering public benefit applications

5.44 The Commission has 50 business days from the effective application date to make a public benefit determination unless that period is extended. If the Commission does not make a determination within that period, it is taken to have not made the determination that was applied for.

5.45 The purpose of the statutory timeframe is to provide certainty to businesses. It is in the notifying party's interests to provide information promptly to facilitate an efficient review by the Commission. The statutory timeframe sets out the maximum time period in which the Commission must make its determination, subject to any extensions. The Commission may therefore make a determination in a shorter period of time, provided that any relevant statutory requirements are met (such as the requirement for the Commission to provide a public benefit assessment discussed below).

[Schedule 1, item 35, subsections 51ABZZ(1) and (2) and sections 51ABZR, and 51ABZZE of the CCA]

5.46 If the Commission's determination is invalidly made, or a court sets aside or remits the determination, the purported determination is taken to have never been made.

[Schedule 1, item 35, subsections 51ABZZ(3) and (4) of the CCA]

5.47 If a public benefit application in relation to a notification of an acquisition has an effective application date, the Commission must give the notifying party a public benefit assessment.

5.48 The public benefit assessment will set out the Commission's preliminary assessment of the benefits and detriments to the public that the Commission has identified could result, or be likely to result, from the acquisition, including an assessment of the significance of those benefits and detriments, and the grounds on which the Commission makes the preliminary assessment, referring to the evidence or other material that forms the basis for those grounds.

[Schedule 1, item 35, subsections 51ABZZA(1) and (2) of the CCA]

5.49 The assessment must be given on or before 20 business days, or if it is not practicable to give the assessment by that day, as soon as practicable after that date.

[Schedule 1, item 35, subsections 51ABZZA(3) of the CCA]

5.50 If the Commission does not provide the public benefit assessment within 20 business days after the effective application date, the determination period for the public benefit application may be extended as follows:

•

if the notifying party agrees in writing, the determination period is extended by the number of business days:

-

occurring after the 20th business day from the start of the determination period, and

-

on or before which the Commission does not give the public benefit assessment, for the duration of the notifying party's agreement;

•

regardless of any agreement, the 15-day period during which the Commission must not request or consider late information or submissions (under subsections 51ABZZD(3) and (5)) is reduced by the number of business days:

-

occurring after the 20th business day from the start of the determination period, and

-

on or before which the Commission does not give the public benefit assessment.

•

However, if the reduction under point 2 would exceed 15 business days, the limitations on the Commission's ability to request or consider late information or submissions under subsections 51ABZZD(3) and (5) do not apply at all in relation to making the determination.

[Schedule 1, item 35, subsections 51ABZZA(4) to (6)]

5.51 The Commission must give the notifying party a reasonable opportunity to make oral or written submissions in relation to the public benefit assessment before the Commission makes a determination. However, when making the determination, the Commission must not consider submissions in relation to the public benefit assessment that are received more than 15 business days after it gave the assessment to the party, unless the notifying party requests additional time to make such submissions to the Commission. The Commission may extend the time more than once for the notifying party to make submissions in relation to the public benefit assessment.

5.52 If the Commission extends the period, the determination for the public benefit application is extended by the same number of days.

[Schedule 1, item 35, subsections 51ABZZB of the CCA]

5.53 The Commission may extend the period it has to consider a public benefit application by written notice to the notifying party. It may do so in any of the following circumstances:

•

where a party offers, in writing, a commitment or undertaking in accordance with subsection 51ABZZE(3), and the extension is for no more than 15 business days.

•

where the notifying party does not provide requested information by the date specified by the Commission;

•

where the Commission serves a section 155 notice on the notifying party and the notifying party has not furnished information, produced documents or appeared before the Commission within 10 business days after the section 155 notice being served;

•

where the notifying party has requested the Commission to extend the determination period.

[Schedule 1, item 35, subsection 51ABZZE(1) and (2) of the CCA]

5.54 If the determination period is extended for any reason except for the offering of a commitment or undertaking, the final date to offer a remedy is extended by the same number of days, with corresponding changes to the availability of extensions associated with remedy offers (in accordance with paragraph 51ABZZE(2)(a), subsection 51ABZZE(3) and subsection 51ABZZE(4)).

[Schedule 1, item 35, subsections 51ABZZE(3) and (4) of the CCA]

5.55 It should be noted that extensions may be granted under the same circumstances in relation to the Phase 1 and Phase 2 determination periods.

5.56 When considering a public benefit application, the Commission must not have regard to a commitment or undertaking offered by a party to an acquisition unless the commitment or undertaking is offered during a period to which subsection 51ABZZE(3) applies.

[Schedule 1, item 35, subsection 51ABZZC(2) of the CCA]

Chapter 6: Review of Decisions

Detailed explanation of new law

Internal review of decisions

6.1 The notifying party in relation to a notification may apply (in writing) to the Commission for an internal review of a reviewable decision if the decision was made by a delegate of the Commission who was not a member of the Commission.

[Schedule 1, item 35, subsection 51ABZZG(2) of the CCA]

6.2 The following are reviewable decisions:

•

in respect of a notification of an acquisition:

-

a decision under subsection 51ABY(1) that a notification of an acquisition should be taken not to have an effective notification date (in response to materially incomplete or misleading notifications)

-

a decision under subsection 51ABZB(2) that the effective notification date is the date on which the Commission becomes aware of a material change of fact or that the phase 1 or 2 determination period should be extended because of a material change of fact

-

a decision under subsection 51ABZD(3) to cease considering a notification if the Commission is satisfied that the parties to the acquisition no longer intend to put the acquisition into effect

-

a decision under subsection 51ABZN(2) to extend the phase 2 determination period if the notification is false or misleading, and

•

in respect of a public benefit application in relation to a notification of an acquisition:

-

a decision under subsection 51ABZQ(1) that a public benefit application in relation to a notification of an acquisition should be taken not to have an effective application date (in response to materially incomplete or misleading public benefit applications)

-

a decision under subsection 51ABZT(2) that the effective application date of the application is the date on which the Commission becomes aware of a material change of fact or that the determination period should be extended because of a material change of fact; and

-

a decision under subsection 51ABZV(3) to cease considering a public benefit application if the Commission is satisfied that the parties to the acquisition no longer intend to put the acquisition into effect

•

a decision under paragraph 51ABZZE(2)(c) to extend a period in relation to making an acquisition determination in respect of a notification of an acquisition.

[Schedule 1, item 35, subsection 51ABZZG(1) of the CCA]

6.3 An application for an internal review must be made within 7 days after the day on which the decision was made.

[Schedule 1, item 35, subsections 51ABZZG(3) of the CCA]

6.4 The Commission must review and either affirm, vary or revoke the decision within 7 days after receiving an application for internal review.

6.5 If the Commission revokes the decision, it must make such other decisions (if any) that the Commission thinks appropriate.

6.6 The Commission must, within 1 business day after making the decision, give the notifying party a written statement of the Commission's reasons for the decision.

[Schedule 1, item 35, subsections 51ABZZG(4) and (5) of the CCA]

6.7 A delegate of the Commission can reconsider the decision and perform the Commission's functions under subsections 51ABZZG(4) and (5). If a delegate is making the internal review decision, the delegate must not have been involved in making the original reviewable decision and must hold a position or perform duties of a higher level than the delegate who made the original reviewable decision.

[Schedule 1, item 35, subsection 51ABZZG(6) of the CCA]

6.8 Both the original reviewable decision made by the Commission itself or a delegate who is a member of the Commission, and the internal review decision can be subject to review by the Tribunal.

[Schedule 1, item 35, subsection 51ABZZG(7) of the CCA]

Merits review of determinations

6.9 Schedule 1, excluding Division 1A, provides for an amended Tribunal review process that adopts the limited merits review process for determinations made by the Commission under the merger authorisation process, with some modifications which are discussed below.

6.10 Paragraphs below outline the limited merits review process applicable only to acquisition determinations. The existing review processes in the CCA will continue to apply to all determinations that are not acquisition determinations.

Tribunal review of applications - general

6.11 Applications for review of certain Commission decisions may be made by a person to the Tribunal. For example, a person may seek review of an internal review decision by the Commission in relation to an effective notification date or effective application date (see above). The Tribunal must review the decision if the application is made according to the relevant requirements and within the time allowed as determined by the Minister via legislative instrument.

[Schedule 1, item 50, sections 100A and 100B of the CCA]

6.12 The Tribunal has specific obligations if a person applies to the Tribunal for review of a reviewable decision made by the Commission or an internal review decision. It must make its decisions within 14 days from when it received the review application and give to the applicant notice of, and a statement outlining the reasons for making, the decision within 1 business day after the decision is made. Such reviews by the Tribunal are a re-hearing.

[Schedule 1, item 50, subsection 100B(2) of the CC A]

6.13 The Tribunal may perform all the functions and exercise all the powers of the Commission.

[Schedule 1, item 50, paragraph 100B(1)(b) of the CCA]

6.14 For the purpose of hearing and determining proceedings, the Tribunal must be constituted by a Division of the Tribunal consisting of a presidential member and two members who are not presidential members. However, if the proceedings are under Division 1A of Part IX, the Tribunal may be constituted by a presidential member sitting alone.

[Schedule 1, item 20, section 37 of the CCA]

Tribunal review of applications - acquisition determinations

6.15 A person dissatisfied with an acquisition determination by the Commission (hereafter, the applicant) may apply to the Tribunal for a review of the determination:

•

as determined by the Minister by legislative instrument; and

•

before the end of 14 days after the statement of the Commission's reasons for making the determination is included on the acquisitions register.

6.16 An application can be made by the notifying party, or if the Tribunal has otherwise allowed an application for review to be made, another party.

6.17 Considerations the Tribunal must have regard to when considering whether a non-notifying party can make an application include the person's interest in the matter, the efficient administration of the acquisitions provisions, whether there are any reasonable prospects of success, and any other matter that the Tribunal considers relevant. For example, a third-party application for review of a phase 1 Commission decision that an acquisition may be put into effect may have no reasonable prospects of success if there is no competition basis for the review, and should therefore be dismissed.

[Schedule 1, item 50, subsection 100C(1)-(4) of the CCA]

6.18 Under subsection 109(2) of the CCA, the Tribunal may, upon such conditions as it thinks fit, permit a person to intervene in proceedings before the Tribunal.

6.19 A notifying party of a notification is entitled to participate in any proceedings before the Tribunal instituted by another person in relation to an acquisition determination in respect of the notification.

[Schedule 1, item 55, subsection 109(1AA) of the CCA]

6.20 An applicant for review must give the Tribunal the information or documents determined by the Minister via a legislative instrument in relation to the application either when the applicant applies for review or within 30 days. If the information or documents are not given within this time, the application is taken to be withdrawn at the end of the 30-day period.

[Schedule 1, item 50, section 100D of the CCA]

Limited Merits Review

6.21 The purpose of limited merits review is for the Tribunal to stand in the shoes of the original decision-maker, and make its own findings of fact and reach its own decision, based on the information which was before the Commission (unless otherwise permitted in limited circumstances). In doing so, the review body needs the ability to perform all the functions and exercise all the powers of the original decision-maker (to the extent it is permitted to do so).

6.22 These provisions give the Tribunal those powers and functions in relation to acquisition determinations. Accordingly, the Tribunal may affirm, vary or set aside the determination.

[Schedule 1, item 50, subsection 100B(1) of the CCA]

6.23 A determination by the Tribunal affirming, setting aside and remaking the determination, or varying a determination is to be taken to be a determination of the Commission.

[Schedule 1, item 50, subsection 100B(3) of the CCA]

6.24 The presiding Tribunal member may require the Commission to give information, make reports and provide assistance to the Tribunal, as specified. The Tribunal may have regard to any information, documents or evidence given to the Commission in the context of the decision under review.

[Schedule 1, item 50, subsection 100B(4)-(5) of the CCA]

6.25 The Tribunal's review of an acquisition determination is not a re-hearing. This is the same as the existing position for a review of a determination in relation to a merger authorisation application (or minor variation) or merger authorisation revocation and substitution of another merger authorisation. Minor consequential changes are made to:

•

existing section 101 to repeal reference to the review of an application, variation, revocation or substitution of a merger authorisation not being a re-hearing

•

existing section 104 to allow regulations to make provision for all material facts and considerations to be brought before the Tribunal and the Commission.

[Schedule 1, items 52 to 54, subsection 101(2) and sections 102A and 104 of the CCA]

6.26 The Tribunal is empowered to consult with consumer associations or consumer interest groups, and the Tribunal may have regard to their views (in the form of information, documents or evidence) in making its decision. This allows for a greater involvement of consumer groups and consumer advocates in the Tribunal review process, and allows for the Tribunal to conduct proceedings expeditiously, with as little formality as required for proper consideration of the issues. This will help to minimise costs and facilitate participation by consumer groups. Assistance may be given by the Tribunal to consumer associations and consumer interest groups, if necessary or reasonably incidental to the consultation under subsection 100S(1).

[Schedule 1, item 50, subsection 100S(1) of the CCA]

6.27 The Tribunal is empowered, at its discretion, to seek information, documents or evidence from, or ask questions of, a technical expert (such as economic or industry experts), and to have regard to any such evidence, documents or information it receives. The Tribunal may allow a participant in the proceedings, or the Commission, to ask questions of the technical expert.

[Schedule 1, item 50, subsection 100Q of the CCA]

Review

6.28 The Tribunal may require the Commission to provide assistance to the Tribunal as required, including to give information and make reports. The Tribunal is able to have regard to any information, documents or evidence given to the Commission in connection with the making of the determination to which the review relates. The Tribunal cannot have regard to any information, documents or evidence which the Commission could not have regard to in making the determination, except in relation to the circumstances provided for in section 100S, discussed below.

6.29 The Tribunal may allow a person to provide new information, documents or evidence that the Tribunal is satisfied was not in existence at the time the Commission made the determination to which the review relates. This will allow the Tribunal to take account of a change in circumstances that has occurred since the Commission's determination. For example, if there is new entry to the relevant market after the Commission's determination is made, the Tribunal may allow a person to provide new information about the entrant so this change in circumstances can be taken into account in the Tribunal's review.

6.30 The Tribunal may also permit the notifying party to provide new information, documents or evidence if the Tribunal is satisfied that:

•

the information, documents or evidence are relevant to the grounds on which the Commission made the determination and

•

the person was not given a reasonable opportunity to make submissions to the Commission in relation to those grounds, or the evidence or other material on which those grounds were based, before the Commission made the determination (including because the person was not informed of the grounds, evidence or other material).

6.31 The Commission may not have done so in order to protect the confidentiality of commercially sensitive information provided by third party stakeholders, while seeking to provide due process through the disclosure of the substance of the evidence or other material.

6.32 These amendments recognise the need to facilitate continued cooperation and engagement from third party stakeholders in merger reviews including those that might have commercially sensitive and confidential information that may be relevant to the review. The Tribunal has rules and processes that can be used to protect confidential third-party information. This provision is not intended to reduce the incentive for such stakeholders to provide information in the future. Rather it is intended to ensure the Tribunal is empowered to exercise discretion in limited circumstances to provide parties with appropriate procedural fairness while at the same time being able to balance a desire to avoid harm to the interests of third party stakeholders and the need to ensure that third parties continue to participate in merger reviews.

[Schedule 1, item 50, section 100R and subsection 100S(2) of the CCA]

6.33 The Tribunal must not have regard to any information, documents or evidence other than specified. Limitations on the information that may be considered by the Tribunal appropriately balance the interests of all parties to the review. In particular, they are intended to ensure that notifying parties in relation to a notification of an acquisition provide the Commission with all relevant material at the time of the notification, and do not delay the production of that material until later in the process or until the Tribunal review takes place. The limitations also facilitate the Tribunal conducting its review expeditiously given the time-sensitive nature of acquisitions.

[Schedule 1, item 50, section 100T of the CCA]

Functions and Powers of the Tribunal

6.34 Section 100N empowers the Tribunal to review determinations made under Division 1B of Part IX in relation to an acquisition determination that has been made by the Commission in respect of a notification of an acquisition.

6.35 The Tribunal may make a determination to affirm, set aside or vary the acquisition determination and the decision of the Tribunal is taken to be a determination of the Commission. The Tribunal may also perform all the functions and exercise all the powers of the Commission.

[Schedule 1, item 50, subsections 100N(1) and (4) of the CCA]

6.36 The Tribunal may make an acquisition determination by consent if the applicant, the notifying party and all other parties who have intervened agree to the acquisition determination. The Tribunal may make the determination, even if the Tribunal is not satisfied that the acquisition would or could have the effect, or be likely to have the effect, of substantially lessening competition in any market, or would be of public benefit.

[Schedule 1, item 50, subsections 100N(1) and (3) of the CCA]

Time within which Tribunal must make determination on review

6.37 The Tribunal must not make a determination on a review of an acquisition determination under Division 1B until 45 days after the Commission makes its acquisition determination.

6.38 The Tribunal must make a determination on a review within 90 days of the later of:

•

the last day when an application for review could have been made; and

•

the day the applicant gave the Tribunal additional information or documents as prescribed by any legislative instrument made under subsection 100D(1).

[Schedule 1, item 50, subsections 100P(1) and (2) of the CCA]

6.39 The Tribunal may, in writing, extend by 60 days the period in which it must make a determination of a review. Such an extension must be made before the determination on the review is due, including if there is a period of extension under subsection 100P(5), and can only be made once.

[Schedule 1, item 50, subsection 100P(3) and (4) of the CCA]

6.40 The Tribunal may, in writing, extend by 90 days the period in which it must make a determination of a review if it is satisfied that the matter cannot be dealt with properly within the period because of any of the following:

•

the complexity of the matter;

•

the volume of information, documents and evidence before the Tribunal relating to the matter;

•

the Tribunal has allowed new information, documents or evidence; or.

•

other special circumstances.

6.41 Such an extension must be made before the determination on the review is due, including if there is a period of extension under subsection 100P(3), and can only be made once.

[Schedule 1, item 50, subsection 100P(5) and (6) of the CCA]

6.42 If the Tribunal makes a time extension under this section, the Tribunal must give a copy of the extension to each participant in the proceedings for a review and to the Commission.

[Schedule 1, item 50, subsection 100P(7) of the CCA]

Withdrawing and dismissing applications

6.43 These amendments set out the circumstances in which an application may be withdrawn or the Tribunal can dismiss an application. This includes where the applicant withdraws, or the participants consent to the application being dismissed, if fees (if any) are not paid or if the application is frivolous or vexatious, misconceived, lacking in substance, has no reasonable prospects of success, or is otherwise an abuse of the process of the Tribunal. It also sets out in what circumstances an application can be reinstated after it is dismissed.

Applicants or participants may withdraw

6.44 The applicant may, at any time, withdraw in writing the application for review of the Commission's decision.

[Schedule 1, item 50, subsection 100E(1) of the CCA]

6.45 Other than the applicant, a participant to the proceedings may give written notice to the Tribunal that it wishes to cease being a participant and, if so, the Tribunal may order that that participant ceases to be a participant to the proceedings.

[Schedule 1, item 50, section 100K of the CCA]

Tribunal may dismiss application if the parties consent

6.46 The Tribunal may dismiss an application for review of the Commission's decision at any time if it has the consent of the participants to the proceedings for review. This includes the applicant for review.

[Schedule 1, item 50, section 100F of the CCA]

Tribunal may dismiss application if fee is not paid

6.47 The Tribunal may dismiss an application for review if a fee (if any) payable by the applicant in respect of the application is not paid by the time prescribed.

[Schedule 1, item 50, section 100G of the CCA]

Tribunal may dismiss an application if the applicant fails to comply with an order etc.

6.48 The Tribunal may dismiss an application if the applicant fails to comply with the requirements of the Act, for example, providing the information or documents in relation to the application by the 30 day period under paragraph 100D(3)(b), or an order of the Tribunal in relation to the proceedings relating to the application.

[Schedule 1, item 50, section 100H of the CCA]

Tribunal may dismiss an application if frivolous, vexatious etc.

6.49 The Tribunal may dismiss an application for review if the Tribunal is satisfied that the application is frivolous, vexatious, misconceived, lacking in substance, has no reasonable prospects of success, or is otherwise an abuse of the process of the Tribunal.

[Schedule 1, item 50, section 100J of the CCA]

Tribunal may reinstate an application

6.50 If the application is withdrawn, a participant in the proceedings for review (other than the applicant) may apply to the Tribunal for reinstatement of that application within 7 days after the participant receives notice that the application is withdrawn (or such longer period as the Tribunal, in special circumstances, allows).

[Schedule 1, item 50, subsection 100E(2) of the CCA]

6.51 If a participant applies to the Tribunal for reinstatement of the application and the Tribunal believes it to be appropriate to reinstate the application for review, the Tribunal may do so and make such orders as appear to the Tribunal to be appropriate in the circumstances.

[Schedule 1, item 50, subsection 100E(3) of the CCA]

Tribunal giving notice of withdrawals and dismissals

6.52 If an applicant withdraws an application, or the Tribunal dismisses an application, the Tribunal must give the Commission and each participant to the proceedings notice of the withdrawal or dismissal.

[Schedule 1, item 50, section 100L of the CCA]

Public Benefit Applications

6.53 Public benefit applications affect the timing of applications for review of acquisition determinations.

6.54 If a public benefit application has been made to the Commission following an acquisition determination made under subsection 51ABZE(1) and the Commission has not:

•

decided to cease considering the public benefit application (because the notifying party to the notification requested the Commission cease considering the application; or the Commission was satisfied that the parties to the acquisition no longer intend to put the acquisition into effect); and

•

made a determination in respect of the public benefit application,

•

then a person must not apply to the Tribunal for a review of the acquisition determination.

6.55 This ensures that there is no concurrent Tribunal review of an acquisition determination made under subsection 51ABZE(1) and Commission consideration of a public benefit application in relation to the same acquisition. For the avoidance of doubt, either the parties to the acquisition or third parties can seek Tribunal review following a Commission determination on the public benefit application.

[Schedule 1, item 50, subsection 100M(1) of the CCA]

6.56 In relation to such an application for review, a day is not counted for the purposes of the 14-day time limit in which applications must be made if the day occurs:

•

on or after the day a public benefit application is made in relation to the notification; and

•

before either the day on which the Commission ceases considering the public benefit application (because the notifying party has requested in writing that the Commission do so; or the Commission is satisfied the parties to the acquisition no longer intend to put the acquisition into effect); or makes a determination on the public benefit application.

[Schedule 1, item 50, subsection 100M(2) of the CCA]

6.57 Public benefit applications also affect the timing of Tribunal reviews of acquisition determinations. If a review of an acquisition determination made under subsection 51ABZE(1) is underway and a public benefit application is made, the Tribunal must cease proceedings until either:

•

the Commission ceases considering the public benefit application (because of a request from the notifying party; or the Commission was satisfied that the parties to the acquisition no longer intend to put the proposed acquisition into effect); or

•

the Commission makes a determination in relation to the public benefit application.

[Schedule 1, item 50, subsection 100M(3) of the CCA]

6.58 For the purposes of the time within which the Tribunal must make a determination of such a review of an acquisition determination made under subsection 51ABZE(1), a day is not counted if the day occurs on or after the day a public benefit application is made and on or before the day on which the Commission either:

•

ceases considering the public benefit application (because the notifying party has requested in writing that the Commission do so or because the Commission is satisfied the parties to the acquisition no longer intend to put the acquisition into effect); or

•

makes a determination in respect of the public benefit application.

[Schedule 1, item 50, subsection 100M(4) of the CCA]

Order for costs

6.59 The Tribunal may order that a participant in proceedings for review under Division 1A or 1B pay all or a specified part of the costs of another participant in the proceedings if the Tribunal is satisfied that it is appropriate to do so. This could be, for example, if the Tribunal is satisfied that the application is frivolous or vexatious. What constitutes a frivolous or vexatious application is not specified in Schedule 1 to the Bill. It is intended that the Tribunal will exercise this discretionary power having regard to established legal precedent. For the avoidance of doubt, the Commission or consumer associations or consumer interest groups cannot be the subject of a cost order.

6.60 If the Tribunal makes a costs order against a participant, the Tribunal may make further orders that it believes appropriate in relation to the assessment or taxation of the costs.

6.61 The Minister may, by legislative instrument, make provision for and in relation to fees payable for the assessment or taxation of costs ordered by the Tribunal to be paid.

6.62 If a participant is ordered to pay some or all of the costs of another participant in the proceedings, the amount of the costs may be recovered in the Federal Court as a debt due by the participant against the other participant. For example, if a costs order is made against the applicant in favour of the Commission, the Commission may seek recovery in the Federal Court.

[Schedule 1, item 56, section 111 of the CCA]

Tribunal may charge fees

6.63 This amendment allows the Tribunal to charge fees on behalf of the Commonwealth as determined by the Minister, by legislative instrument.

6.64 The determination made under the legislative instrument may provide for fees to be paid if a person makes an application to the Tribunal, in Tribunal proceedings generally (such as in relation to production of documents under summons), and if the Tribunal undertakes a taxation of costs in relation to such proceedings.

6.65 The determination may prescribe things such as the circumstance in which a fee must be paid, who should pay it, when payment must be made, and any remittal, refund or waiver of fees that should apply.

6.66 The instrument can:

•

prescribe fees in respect of a particular class or classes of applications, costs, or proceedings,

•

prescribe different fees in respect of different classes of applications, costs or proceedings,

•

prescribe the amount of, or method for working out the amount of, a fee,

•

make provision in relation to the whole or a part of a fee, and

•

provide for the Tribunal to make orders relating to the payment of a fee in relation to a proceeding.

6.67 The fees are administrative in nature and are included in delegated legislation so that they may be amended from time to time to ensure fees remain appropriate.

6.68 Fees may not be prescribed in a way that would amount to a tax. This is because it is inherent in the concept of a fee that the liability does not amount to taxation.

6.69 Any fees imposed under these provisions are a debt owing to the Tribunal (on behalf of the Commonwealth) and can be recovered by the Tribunal (on behalf of the Commonwealth) in a court with jurisdiction to hear the debt recovery matter.

[Schedule 1, item 56, section 112 of the CCA]

Standing of Commission to Seek Judicial Review

6.70 This amendment extends the meaning of the term "person aggrieved" in the Administrative Decisions (Judicial Review) Act 1977 to include the Commission. The extension applies in relation to:

•

a decision made by the Tribunal under Part IX

•

a failure to make a decision under Part IX

•

conduct engaged in for the purposes of making a decision under Part IX.

6.71 This means that participants to a proceeding, and the Commission, may seek judicial review of a Tribunal determination where they consider an error of law has been made.

6.72 All other terms used in this section and the Administrative Decisions (Judicial Review) Act 1977 have the same meaning.

[Schedule 1, item 56, section 113 of the CCA]

Chapter 7: Remedies, enforcement and miscellaneous

Detailed explanation of new law

Court orders

Orders relating to void acquisitions

7.1 The Federal Court may make orders relating to acquisitions that are void, or would be void (under subsection 45AZA(2)). The Federal Court may order that the voiding of the acquisition does not apply or never applied, or such other order it considers appropriate.

7.2 The Federal Court may also make any such orders as it deems appropriate as an alternative to voiding for all types of transactions. This includes international transactions, where voiding might be unenforceable but local (Australian) divestiture orders may be appropriate.

7.3 Before making such an order, the Federal Court must have regard to the seriousness of the related contravention of section 45AY (that is, a person putting into effect an acquisition that is stayed), including the effect of the contravention on persons who are not parties to the acquisition. Apart from specific regard to those matters, the Federal Court is given discretion to determine when it is appropriate to make orders. In certain circumstances, it may be appropriate for the Federal Court to order that the voiding does not apply to ensure a just outcome, or avoid a perverse outcome, and ameliorate the impact of the voiding in appropriate circumstances.

7.4 In making such orders, it is expected that the Federal Court may have regard to other criteria that are linked with contravention of the suspensory rule (see Chapter 3), but not the substantive competition issues.

7.5 An application for such an order can be made by the Commission or any other person but must be made within 6 years after the date the acquisition was put into effect, or purportedly put into effect. If an application is made by a person other than the Commission, the Court must give a copy of the application to the Commission and the Commission has discretion to intervene in the proceedings. If the Commission intervenes in the proceedings, the Commission is taken to be a party to the proceedings.

[Schedule 1, item 40, section 77D of the CCA]

Orders relating to divestiture

Acquisition determinations made on the basis of false or misleading information

7.6 The Federal Court may make divestiture orders and declarations voiding acquisitions where an acquisition determination was made by the Commission on the basis of false or misleading information which was provided by the notifying party or a related body corporate.

7.7 If the Court is satisfied that:

•

as part of putting the acquisition into effect, the notifying party or a related body corporate acquired a thing (such as shares, assets, or other interests); and

•

the Commission made an acquisition determination in respect of the notification; and

•

apart from the determination, putting the acquisition into effect would have contravened the acquisition obligations in Subdivision B of Division 1A of Part IV; and

•

the Commission made the determination on the basis of information that was false or misleading in a material particular, given by the notifying party or a related body corporate; and

•

the information was material to the Commission making the acquisition determination; and

•

the Court (or another court) has found the person giving the information contravened section 45AZB (or the equivalent criminal offence in the Criminal Code);

then the Court may, on application by the Commission, make an order directing the disposal of anything acquired (divestiture), or declare the acquisition to be void from the day it occurred.

[Schedule 1, item 44, subsections 81B(1), (2), (4) and (5)of the CCA]

Declaring the acquisition void - Additional requirement

7.8 The Court may only declare an acquisition void if, in addition to the above requirements, it is satisfied that the vendor (the person from whom the thing was acquired) was involved in the giving of false or misleading information in contravention of section 45AZB of the CCA or the Criminal Code. If such a declaration is made, the thing acquired is taken not to have been disposed of by the vendor, and the vendor must refund any amount paid by the acquirer.

[Schedule 1, item 44, subsections 81B(6) and (7) of the CCA]

Conditions not complied with

7.9 The Court may also make divestiture orders and declarations voiding acquisitions where an acquisition determination made by the Commission included conditions and those conditions were not complied with.

[Schedule 1, item 44, subsections 81B(1) and (3) of the CCA]

Court may accept an undertaking

7.10 Instead of making a divestiture or declaration order, the Court may accept an undertaking from the person to dispose of other things owned by the person, subject to any conditions the Court considers appropriate.

[Schedule 1, item 44, subsection 81B(8) of the CCA]

7.11 An application for a divestiture order or declaration voiding an acquisition must be made within 3 years after the day the acquisition was put into effect. The Court may also make an order with the consent of all parties, whether or not it is satisfied of the necessary matters.

[Schedule 1, item 44, subsections 81B(9) and (10) of the CCA]

7.12 These powers ensure that parties cannot retain the benefits of an acquisition obtained through providing false or misleading information to the Commission or by breaching conditions of the Commission's determination. These powers provide a significant deterrent and allow the Commission to seek appropriate orders or undertakings.

Injunctions

Acquisition determinations made on the basis of false or misleading information

7.13 The amendments provide the Federal Court with the power to grant injunctions, on application of the Commission, if an acquisition determination has been made on the basis of false or misleading information.

7.14 The Court may grant an injunction in such terms as the Court determines to be appropriate if it is satisfied that:

•

a person is proposing to put an acquisition into effect; and

•

the Commission made a determination to put the acquisition into effect (with or without conditions) under paragraph 51ABZE(1)(a) or that the acquisition would be of public benefit under paragraph 51ABZW(1)(a); and

•

that determination was made on the basis of information that was false or misleading in a material particular; and

•

the information was material to the Commission making the determination; and

•

the false or misleading information was given by the person proposing to put the acquisition into effect or a related body corporate; and

•

apart from the determination, putting the acquisition into effect would contravene the acquisition obligations in Subdivision B of Division 1A of Part IV.

[Schedule 1, item 43, section 80AD of the CCA]

7.15 A consequential change is made to section 157 of the CCA to ensure the disclosure of documents by the Commission in certain circumstances when a proceeding is instituted against a corporation under sections 80AD and 81B (see above).

[Schedule 1, items 68 and 69, paragraph 157(1)(c) of the CCA]

7.16 This enforcement tool recognises that the Commission would not have approved the acquisition if the false or misleading information had not been provided. The injunction can therefore prevent an acquisition from proceeding where the approval was obtained on the basis of false or misleading information.

General injunction power

7.17 The CCA's existing injunction powers are extended to contraventions of the new obligations and prohibitions relating to acquisitions in Subdivision B of Division 1A of Part IV.

[Schedule 1, item 42, subsection 80(1A); refer to section 80 of the CCA]

7.18 On application by the Commission (and not any other person), the Court may grant an injunction in such terms as it determines to be appropriate if it is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a contravention of the acquisition obligations in Subdivision B of Division 1A of Part IV of the Act. This includes circumstances where a person is aiding, abetting or attempting to contravene the acquisition obligations.

Pecuniary penalties

Contravention of acquisition obligations

7.19 The amendments introduce pecuniary penalties for contraventions of the following obligations under these new rules:

•

obligation to notify the Commission about proposed acquisitions

•

prohibition on putting into effect stayed acquisitions.

[Schedule 1, Division 1A, Subdivision B (sections 45AW and 45AY) of the CCA]

7.20 These penalty provisions reflect the seriousness of contravening the acquisition obligations and are designed to deter non-compliance. Parties have strong incentives to notify acquisitions and respect the suspensory rule. A person that has aided, abetted or attempted to contravene the notification obligation or put a stayed acquisition into effect may also be liable for pecuniary penalties.

7.21 The amendments also clarify that the rule (under subsection 76(3) of the CCA) that prevents a person from being penalised twice for the same conduct does not apply to conduct that contravenes both the obligation to notify an acquisition (section 45AW) and the prohibition about putting into effect a stayed acquisition (section 45AY).

[Schedule 1, item 39, subsection 76(4AA) of the CCA]

7.22 For the avoidance of doubt, section 86E of the CCA could apply to a contravention of new Division 1A of Part IV. This means that directors can be disqualified if they contravene the obligation to notify the Commission about proposed acquisitions or put a stayed acquisition into effect, and the Federal Court considers that disqualification is appropriate.

Providing false or misleading information about an acquisition

7.23 The amendments also introduce a civil penalty for providing false or misleading information to the Commission or the Tribunal about an acquisition alongside existing criminal penalties under the Criminal Code.

[Schedule 1, item 27, section 45AZB of the CCA]

7.24 A person contravenes this provision if:

•

the person gives information to the Commission or the Tribunal about an acquisition; and

•

the information is false or misleading in a material particular; and

•

the person knows that, or is reckless as to whether, the information is false or misleading in a material particular.

[Schedule 1, item 27, section 45AZB of the CCA]

7.25 The existing pecuniary penalty provisions in section 76 of the CCA apply. Consistent with the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, the primary objective of this civil penalty is deterrence. Providing false or misleading information, even recklessly, could seriously undermine the integrity of the new system and lead to anti-competitive acquisitions proceeding based on false or misleading information.

7.26 The civil penalty ($50 million for body corporates and $2.5 million for persons) is set at a level that will provide a strong deterrent against conduct that could undermine the new system. The penalty amount is also consistent with existing penalty amounts that apply across the CCA and provides the Commission with a flexible and proportionate enforcement tool to address non-compliance with information requirements.

7.27 As above, section 86E of the CCA could apply to a contravention of new Division 1A of Part IV such that directors can be disqualified if they are involved in the contravention of the new civil penalty provision for providing false or misleading information and the Federal Court considers that disqualification is appropriate.

Miscellaneous

Information gathering

7.28 To support its administrative decision-making, the Commission may:

•

invite persons (whether located in Australia or somewhere else) who appear to the Commission to be interested in the acquisition to make written submissions regarding the notified acquisition - for example, market participants such as consumers, suppliers and competitors, industry associations, or consumer groups, and

•

consult with persons (whether located in Australia or somewhere else) it believes to be reasonable and appropriate to consult with for the purposes of making a determination - for example, other government agencies, economists or industry experts.

7.29 An example of the types of consultations the Commission might engage in is with interested market participants after a remedy proposal has been offered by the notifying party so the Commission can take into account feedback as the Commission must not include conditions unless it is satisfied that the acquisition could substantially lessen competition in any market, if there were no conditions.

7.30 When a person is a party to a notified acquisition, the Commission may request, via written notice, that the person provide (either orally or in writing) additional information relevant to the determination. The Commission can also request, via written notice, that any person (including parties to the acquisition) provide (either orally or in writing) particular information relevant to making the determination.

7.31 If the Commission exercises its powers to request information through submissions or consultation, it is required to take this information into account, so long as it is provided in accordance with specified timeframes.

7.32 The Commission must not take into account submissions or information that is received outside the specified timeframes, namely within 15 business days of the end of the relevant determination period (that is, the Phase 2 determination period or the determination period in relation to a public benefit application). This is to ensure the Commission has sufficient time to consider the submissions or information in making a determination.

7.33 This does not limit the processes associated with submissions in response to a notice of competition concerns or in response to a public benefit assessment.

7.34 The Commission must not request information within 15 business days of the end of a Phase 2 or public benefit determination period, unless the notifying party has provided consent in writing or the request relates to information received before those 15 business days. This limitation on information requests does not apply to the Commission during the Phase 1 determination period. This is intended to allow the Commission to have a period of time to finalise its analysis, clarify queries relating to the material received to date, carry out any cross checks, and finalise its determination.

7.35 Where the notifying party has consented to an information request or the Commission has requested clarifying information relating to material received or obtained prior to the 15 business day period before the end of Phase 2 or the public benefit determination period, the Commission may take that information into account.

[Schedule 1, item 35, section 51ABZZD of the CCA]

7.36 The Commission's information gathering powers do not prescribe the types of information that the Commission can request. The amendments make clear that the Commission is required to have regard to any information that it obtains through its information gathering powers, indicating the expectation that the information be relevant to the Commission's determination.

7.37 To the extent that the Commission collects and/or uses personal or sensitive information, as defined in the Privacy Act 1988, it is required to comply with its privacy obligations under that Act when handling that information.

7.38 Further, persons who are requested by the Commission to provide submissions and additional or particular information are not required to comply. A failure to provide submissions or information means that the Commission's determination will proceed in the absence of such material. If the notifying party fails to comply with an information request, this may result in an extension of the determination period (see paragraph 51ABZZE(b)).

Providing false or misleading information in response to section 155 notices

7.39 Section 155 notices are a key investigatory tool that allow the Commission to gather information to administer and enforce the CCA. The CCA prohibits a person in purported compliance with a notice knowingly furnishing information or giving evidence that is false or misleading. A person who contravenes this prohibition is guilty of an offence punishable on conviction by imprisonment for 2 years or a fine not exceeding 100 penalty units.

[Schedule 1, item 66, subparagraph 155(2)(b)(iia) of the CCA]

7.40 The Commission's existing power in paragraph 155(2)(a), in combination with the new contraventions relating to failure to notify and putting stayed mergers into effect, will also enable the Commission to issue compulsory notices to investigate whether a proposed acquisition would meet the notification thresholds and therefore should be notified.

7.41 The new system seeks to enhance the Commission's ability to carry out its investigative functions and gather all relevant information and evidence. As part of this reform, the new law introduces a civil penalty for contravention of this prohibition when it occurs on or after 1 January 2026. The new civil penalty amounts are set out as follows:

•

For individuals - 200 penalty units per contravention.

•

For bodies corporate - 1,000 penalty units per contravention.

[Schedule 2, items 1 to 4, subparagraph 76(1)(a)(iiic), subsections 76(1A) and 155(5) of the CCA]

7.42 Consistent with the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, the objective of imposing this civil penalty is deterrence. Knowingly or recklessly furnishing information or giving evidence that is false or misleading in purported compliance with such notices could undermine the Commission's investigative functions and ability to administer the competition law. The ability to issue notices under this section would also be undermined if recipients could provide false or misleading material.

7.43 Imposing a civil penalty for providing false or misleading information provides the Commission with a flexible and proportionate enforcement tool that is effective in practice and provides the Commission with an additional enforcement tool to assist in encouraging compliance.

7.44 The civil penalty amounts are set at a level that provides a strong deterrent against conduct that could undermine the public confidence in the regulatory process. These amounts are also consistent with civil penalty amounts for similar contraventions across other Commonwealth legislation.

7.45 For the avoidance of doubt, this civil penalty is separate to the civil penalty imposed for contravening the prohibition for providing false or misleading information to the Commission in relation to an acquisition (see above).

Anti-overlap provisions

7.46 The amendments also introduce anti-overlap provisions in relation to the new acquisition obligations. The making of a contract by a corporation is not a contravention of the cartel prohibitions to the extent that the contract provides for an acquisition, if the contract is subject to a condition that the provision will not come into force unless and until the acquisition becomes a notified acquisition. However, this does not prevent the giving effect to such a provision of a contract from constituting a contravention of the cartel prohibitions.

[Schedule 1, items 28 and 29, subsections 45(7), (8B) and (8C) of the CCA]

7.47 In addition, sections 45AF and 45AJ will not apply to the making of a contract containing a cartel provision to the extent it provides for an acquisition, if the contract is subject to a condition that the provision will not come into force unless and until the acquisition becomes a notified acquisition. Similarly, sections 45AF, 45AG, 45AJ and 45AK will not apply in relation to a contract, arrangement or understanding containing a cartel provision, insofar as the cartel provision provides for an acquisition, if the acquisition is a notified acquisition. The evidential burden rests with the person seeking to rely on the exceptions in subsections 45AMA(1) and 45AT(3) of the CCA.

[Schedule 1, items 25 and 26, section 45AMA and subsections 45AT(3) and (4) of the CCA]

7.48 Consistent with the principles in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, imposing an evidential burden is appropriate in these circumstances as the person seeking to rely on the anti-overlap provisions is best placed to adduce or point to evidence in relation to the relevant contract, arrangement, understanding or acquisition. In contrast, it would be significantly more difficult and costly for the prosecution to disprove as they may not have visibility of the relevant information.

Consequences of a Court setting aside or remitting a determination

7.49 For a determination made in respect of a notification of an acquisition, if a court sets aside or remits the determination back to the Commission to be considered again, Division 4 of Part IVA will apply to the notification, except that:

•

the Commission may determine that such an acquisition must not be put into effect even if the notification is not subject to Phase 2 review and without giving a notice of competition concerns; and

•

the notice and fee provisions associated with the decision that the notification is subject to Phase 2 review do not apply; and

•

the provisions dealing with the giving of the notice of competition concerns do not apply.

7.50 Additionally, if a court sets aside or remits such a determination, the Phase 1 determination period for the notification is taken to start on the day the court sets aside the determination.

[Schedule 1, item 35, subsections 51ABZZF(1) and (2) of the CCA]

7.51 For a determination made in respect of a public benefit application, if a court sets aside, or remits it back to the Commission to be made again, Division 5 of Part IVA will apply in relation to the application, except that the determination period for the application will be taken to start on the day the court sets aside or remits the decision.

[Schedule 1, item 35, subsections 51ABZZF(3) and (4) of the CCA]

7.52 The resetting of the relevant determination period to start from the date of the Federal Court decision ensures the Commission has adequate time to reconsider the matter, taking into account any new information, changed market conditions, or direction provided by the Federal Court. This is important because it ensures that the Commission's new determination is based on an up-to-date assessment of the competitive effects of the acquisition.

7.53 However, the amendments do not alter the substantive competition test or public benefit test that the Commission must apply in making its new determination. The Commission must still assess whether the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market (under subsection 51ABZE(2)), or whether it would result, or be likely to result, in a public benefit that outweighs any detriment (under subsection 51ABZW(2)).

7.54 The amendments also do not affect the ability of the parties to the acquisition or other interested persons to seek review of the Commission's determination by the Tribunal under Part IX of the CCA. The normal review processes and timeframes will apply to any such review application.

Acquisitions register

7.55 The establishment of a register of notified acquisitions will facilitate transparency, and ensure that information and documents relating to acquisition determinations made by the Commission are publicly released and accessible to parties to acquisitions and the community more broadly.

7.56 The Commission must keep a register of notified acquisitions available on the internet where the public can inspect the register. The Commission may correct or update information and documents on the acquisitions register so the register remains accurate and fit-for-purpose.

[Schedule 1, item 35, section 51ABZZH of the CCA]

7.57 The register must include certain information or documents for each notified acquisition.

7.58 Certain things must be included on the register within one business day from when the relevant determination, decision or notification is made. These include a copy of each acquisition determination made in respect of notifications, including statements of the Commission's reasons for making the determination, a copy of the notice stating that a notification is subject to Phase 2 review, and details of each notification of the acquisition determined by the Minister by legislative instrument.

7.59 The Minister may also determine, by legislative instrument, other information or documents that are to be included on the register.

7.60 This register serves to ensure transparency of the Commission's process and allows any relevant stakeholders to be aware of intended acquisitions so they can engage in the Commission's review. It will also facilitate transparency and predictability in relation to decisions that the Commission may make and provide the public with an insight into the economic and legal reasoning that has been applied by the Commission when assessing notified acquisitions.

[Schedule 1, item 35, section 51ABZZI of the CCA]

Confidential reviews

7.61 While transparency is a key objective of the new system, it is important that orderly operation of capital markets is not unduly affected. The amendments therefore allow certain transactions involving surprise hostile takeovers to be considered confidentially for 17 business days before information is published on the acquisitions register (see Chapter 2 for more on confidential reviews).

7.62 Similarly, APRA is required to consult with the Commission when approving voluntary and compulsory transfers of authorised deposit-taking institutions (ADIs) and other regulated entities under sections 12 and 26 of the FSTR Act, respectively, unless the Commission has notified APRA that it does not wish to be consulted about the transfer concerned or the relevant class of transfers. To support the stability of the financial system and avoid delays, in circumstances where APRA states that it considers the transfer to be necessary either to promote financial system stability in Australia or, if the transferring body is an ADI or life insurance company, to protect the interests of deposit holders or policy owners/prospective policy owners respectively, voluntary transfers of business under the FSTR Act will be reviewed by the Commission confidentially, with no information or documents included on the acquisitions register until the Commission makes a determination. The Commission may make a determination on the acquisition before the earliest time specified under subsection 51ABZI(1). This will enable the Commission to make a timely and confidential determination.

Review of the operation of Part IVA

7.63 The Minister must cause a review of Division 1A of Part IV, Part IVA and Divisions 1A and 1B of Part IX to occur. The persons conducting the review must begin the review on 1 December 2028 at the earliest and must finish and provide the Minister with a written report of the review by 31 December 2029 at the latest.

[Schedule 1, item 35, subsections 51ABZZU(1) and (2) of the CCA]

7.64 This review, a few years into the operation of these amendments, will allow for timely assessment of the functionality and efficiency of the new system to ensure that it is operating as intended.

7.65 Copies of the report must be tabled in each House of Parliament within 15 sitting days of each house.

[Schedule 1, item 35, subsection 51ABZZU(3) of the CCA]

Delegation

Delegation by Commission

7.66 The Commission may delegate its powers under an acquisitions provision to a member of Commission staff who is an SES or acting-SES employee, but only if the Commission is satisfied the staff member has appropriate qualifications, training or experience to exercise those powers.

[Schedule 1, item 35, subsections 51ABZZR(1) and (2) of the CCA]

7.67 These provisions are consistent with delegation provisions in other Commonwealth legislation. They are intended to support the Commission to exercise its powers and functions efficiently and effectively, and in a way that is consistent with its internal processes.

7.68 As the Commission retains responsibility for how its powers under the acquisitions provisions are exercised, the delegate must comply with any written directions of the Commission when exercising the delegated powers or functions.

[Schedule 1, item 35, subsection 51ABZZR(3) of the CCA]

Delegation by Minister

7.69 The Minister may (in writing) delegate any or all of the Minister's functions or powers under an acquisitions provision (other than the Minister's powers to determine certain matters by legislative instrument) to an SES level employee or acting SES level employee in the Department of the Treasury if the Minister is satisfied that the person has the appropriate qualifications, training or experience. In performing a delegated function or exercising a delegated power, the delegate must comply with any written directions of the Minister.

7.70 Powers to determine the form, and accompanying information and documents, for acquisition notifications and public benefit applications, may also be delegated to the Commission, a member of the Commission or an SES employee or acting SES level employee of the Commission.

[Schedule 1, item 35, section 51ABZZS of the CCA]

7.71 Delegation powers are needed because it is not practicable for such functions and powers to only be exercisable at the Ministerial level. The provisions recognise the significance of appropriate delegation, by requiring the delegation to only be made to an employee at SES level. This is consistent with Senate Standing Committee for the Scrutiny of Delegated Legislation Guidelines-Principle (c).^[1]

Information gathering

7.72 The amendments also introduce a new provision which provides for more comprehensive delegation arrangements for the Commission's information-gathering powers under section 155.

7.73 It allows the Commission, Chairperson, Deputy Chairperson, or a member of the Commission to delegate any or all of their functions or powers under section 155 to an SES employee or acting SES employee of the Commission. This delegation is subject to similar conditions as the acquisitions provisions, including the requirement for the delegate to have appropriate qualifications, training or experience, and to comply with any written directions of the delegator.

[Schedule 2, Part 4, item 11, section 155AAAA of the CCA]

7.74 A consequential change is made to subsection 155AAA(21) of the CCA (relating to the protection of certain information) such that a core statutory provision for the purposes of that section includes new Part IVA.

[Schedule 1, item 67, subsection 155AAA(21)]

Constitutional Basis

7.75 Schedule 1 to the Bill amends section 2B of the CCA, which binds the States and Territories insofar as they 'carry on a business', to include the new acquisitions provisions. Similarly, the amendments provide that the acquisitions provisions will also apply to local government bodies.

[Schedule 1, items 3 to 5, subsection 2B(1) and section 2BA of the CCA]

7.76 Schedule 1 to the Bill amends section 5 of the CCA to extend the application of the new mandatory and suspensory administrative system to conduct engaged in outside Australia by bodies corporate incorporated or carrying on business within Australia, or Australian citizens, or persons ordinarily resident within Australia.

7.77 Further, the amendments extend the application of the new system to persons who are not corporations with some modifications.

7.78 Finally, to improve readability, the amendments insert headings Cartel conduct, Acquisitions, Payment surcharges, Certain provisions of Australian Consumer Law, and Offences relating to cartel conduct before the relevant subsections in section 6 of the CCA.

[Schedule 1, items 12 to 18, paragraphs 5(1)(fa), 6(2)(h) and subsections 6(2A), 6(2C), 6(2EA) to (2ED), 6(3) and 6(5A) of the CCA]

Acquisition of property

7.79 Schedule 1 to the Bill does not apply in relation to an acquisition if the operation of the amendments would result in an acquisition of property otherwise than on just terms, and the acquisition should be invalid.

[Schedule 1, item 71, section 192 of the CCA]

Taxation

7.80 For the sake of clarity the Bill also provides that a fee under new Part IVA must not amount to taxation.

[Schedule 1, item 35, section 51ABZZT of the CCA]

New reporting requirements

7.81 The amendments extend the existing annual reporting requirements for the Commission to include information relevant to the new acquisitions system. For annual reports covering periods ending on or after 30 June 2026, the Commission must now report on:

•

the number of notification waiver applications made during the period and a general summary of the kinds of acquisitions to which the applications related;

•

the number of notifications of acquisitions made during the period, and a general description of the kinds of acquisitions notified;

•

the number of notifications that the Commission decided during the period were to be subject to phase 2 review, and a general summary of the circumstances in which the Commission made such decisions;

•

the number of acquisition determinations that the Commission made during the period that included conditions, and a general description of the kinds of conditions included;

•

a general summary of the kinds of goodwill protection provisions specified in notifications of acquisitions during the period (see subsection 51ABY(6)); and

•

the number of declarations the Commission included under subsection 51ABZG(1) during the period, and a general summary of the circumstances in which the Commission included such declarations.

7.82 These new reporting requirements complement the existing reporting obligations of the Commission, which include information on matters such as notices issued, search warrants, complaints received and major investigations.

7.83 The addition of specific reporting on the new system will enhance transparency and provide valuable insights into the operation and impact of these new provisions.

[Schedule 1, items 70 and 71, paragraph 171(3)(ab) and section 190 of the CCA]

Chapter 8: Consequential, commencement and transitional amendments

Consequential amendments

Creation of chapters for the CCA

8.1 To improve the CCA's readability, Part 2 to Schedule 1 to the Bill makes a number of minor, consequential amendments to the CCA, including to insert chapter and division headings that group the existing and new Parts of the CCA:

•

Chapter 1-Preliminary

-

Encompasses Parts I to IIIAB of the CCA

•

Chapter 2-Access to services

-

Encompasses Part IIIA of the CCA

•

Chapter 3-Restrictive trade practices

-

Encompasses Parts IV and IVA of the CCA

•

Chapter 4-Provisions relating to particular industries, payment surcharges etc.

-

Encompasses Parts IVB to V of the CCA

•

Chapter 5-Enforcement and remedies

-

Encompasses Part VI of the CCA

•

Chapter 6-Other provisions

-

Encompasses Parts VII to XIA of the CCA

•

Chapter 7-Further provisions relating to particular industries etc.

-

Encompasses Parts XIB and XIC of the CCA

•

Chapter 8-Miscellaneous

-

Encompasses Parts XID to XIII of the CCA

[Schedule 1, items 2, 21, 22, 23, 24, 35, 36, 37, 38, 40, 41, 45, 60 to 65]

Ministerial directions

8.2 The Minister may give the Commission directions connected with the performance of its functions or the exercise of its powers under the CCA subject to express limitations including Part IV of the CCA. Schedule 1 to the Bill extends the limitations such that the Minister must not give directions relating to the new system.

[Schedule 1, item 19, paragraph 29(1A)(a) of the CCA]

Consequential amendments to undertakings provisions

8.3 Sections 10.49, 10.60 and 10.65 of the CCA require parties to a registered conference agreement and ocean carriers to abide by an undertaking given under the relevant provisions. A contravention of such an undertaking is deemed to be a contravention of a Part IV provision.

8.4 The amendments exclude the new system (Division 1A of Part IV) from this deeming provision. As a result, a contravention of an undertaking given under the relevant provisions is not considered a contravention of the new system.

[Schedule 1, item 57, subsections 10.49A(2), 10.60(2) and 10.65(2) of the CCA]

Consequential amendments to section 51

8.5 Section 51 of the CCA provides exceptions to Part IV of the CCA. A number of consequential amendments to section 51 are made to:

•

disapply certain exceptions in deciding whether a person has contravened new Division 1A of Part IV, including anything authorised by regulations under the CCA and anything does in a State or Territory which is specifically authorised by a State or Territory Act or regulations;

•

disregard any provision of a contract for the sale of a business or of shares in the capital of a body corporate carrying on a business if the contract is solely for the protection of the purchaser in respect of the goodwill of the business and it is not declared under subsection 51ABZG(1).

[Schedule 1, items 33 and 34, paragraphs 51(1C)(b) and 51(2)(e) of the CCA]

Consequential amendments related to the Competition Code

8.6 The Competition Code includes the Schedule version of Part IV and certain other provisions in the CCA. Provisions in the CCA that are part of the Competition Code are required to be read in a way that fits with the Schedule version of Part IV.

8.7 The amendments to subsection 150C(2) exclude paragraphs 51ABB(1)(d) to (f) and subparagraph 51ABC(2)(a)(iii) from the Competition Code.

[Schedule 1, item 58, subsection 150C(2) of the CCA]

8.8 Paragraphs 51ABB(1)(d) to (f) refer to the acquisition of shares in the capital of a corporation, any assets of a corporation, or anything relating to a corporation as determined. These paragraphs are linked to the corporations power in section 51(xx) of the Commonwealth Constitution and are not needed in the Competition Code version of the acquisitions provisions applied by the States and Territories under the Conduct Code Agreement 1995. Paragraphs 51ABB(1)(a) to (c) cover acquisitions of shares in the capital of a body corporate, acquisitions of assets of a person, and acquisitions by a corporation of anything determined.

8.9 The amendments add determinations made by the Commission to the list in section 150J of the CCA. This ensures that the validity of determinations made by the Commission is not affected solely because they were made for the purposes of the Competition Code.

[Schedule 1, item 59, section 150J of the CCA]

8.10 Section 151AI of the CCA provides that in determining the meaning of a provision of Part IV or VII, Part XIB (relating to anti-competitive conduct in the Telecommunications industry) is to be ignored. The amendments add Part IVA to this provision and heading, such that Part XIB is to be ignored when considering provisions in Part IVA.

[Schedule 1, items 61 and 62, section 151AI of the CCA]

8.11 Similarly, the amendments add Part IVA to section 152AK and its heading. The effect of this is that Part IVA joins Parts IV and VII in not being affected by the operation of Part XIC (the Telecommunications access regime).

[Schedule 1, items 63 and 64, section 152AK of the CCA]

Schedule version of Part IV

8.12 Parallel amendments are made to the Scheduled version of Part IV (as set out in Schedule 1 to the CCA) which States and Territories apply via their own legislation, to mirror the amendments to Part IV.

[Schedule 1, items 72 to 79, sections 45AMA, 45AT(3) and (4), 45AV, 45AW, 45AX, 45AY, 45AZ, 45AZA, 45AZB, 45(7), (8B)-(8C), 50(5B), 51(1C)(b) and 51(2)(e) of Schedule 1 of the CCA]

Consequential amendments to other legislation

8.13 Consequential amendments are made to other Acts to update references and support the new system.

Airports Act 1996

8.14 The amendments align the Airports Act with the new system and clarify that acquisitions involving the Sydney (Kingsford Smith) and Sydney West Airport lessee companies becoming subsidiaries of the same company do not, when considered in isolation, substantially lessen competition for the purposes of section 50 of the CCA and the acquisitions provisions. These acquisitions are also exempt from the notification requirements under Division 2 of Part IVA of the CCA.

[Schedule 1, items 81 and 82, section 241, subsections 248(2)-(2B) of the Airports Act 1996]

Corporations Act 2001

8.15 The amendments to the Corporations Act relate to the transfer of shares or business of a licensed clearing and settlement (CS) facility under Division 4 to Part 7.3B of Chapter 7 of that Act ('Division 4').

Consultation

8.16 The Reserve Bank must consult with the Commission before making a determination on such transfers unless the Commission has notified the Reserve Bank in writing that it does not wish to be consulted about the specific transfer or the class of transfers to which the transfer belongs.

[Schedule 1, item 83, section 837G of the Corporations Act 2001]

8.17 Amendments are made to preserve the application of the CCA to these transfers subject to the exception to the notification requirements under the new system for such transfers.

[Schedule 1, items 84 and 85, paragraph 839J(3)(b) and subsection 839J(4) of the Corporations Act 2001]

8.18 For the purposes of section 50 and related provisions of the CCA, as well as the new acquisitions provisions, a transfer of shares or business under Division 4:

•

to the extent the transfer is of shares in the capital of a body corporate - is taken to be an acquisition of the shares by the receiving body, and

•

to the extent the transfer is of other assets - is taken to be an acquisition of those assets by the receiving body.

[Schedule 1, item 85, subsection 839J(5) of the Corporations Act 2001]

8.19 However, such an acquisition resulting from a transfer under Division 4 is not required to be notified under the new acquisitions provisions. In addition, for the purposes of subsection 51(1) of the CCA, a transfer of shares or business under Division 4 (and anything done to enable or facilitate such a transfer) are specified and specifically authorised for the purposes of subsection 51(1) of the CCA, which provides that in deciding whether a person has contravened Part IV, anything specified in, and specifically authorised by an Act must be disregarded.

[Schedule 1, item 85, subsection 839J(6) of the Corporations Act 2001]

Financial Sector (Transfer and Restructure) Act 1999

8.20 The FSTR Act is amended to provide that for the purposes of the acquisitions provisions a transfer of business (whether voluntary or compulsory), a transfer of shares, or a transfer pursuant to an internal transfer certificate under the FSTR Act are taken to be acquisitions of shares or assets as applicable. This is consistent with how such transfers are regarded for the purposes of section 50 of the CCA under subsection 43(9) of the FSTR Act. For the purposes of the acquisitions provisions the 'transferring body' within the meaning of the FSTR Act is a 'party' to the acquisition; it is also noted that the 'receiving body' within the meaning of the FSTR Act is the 'principal party' to the acquisition.

8.21 An acquisition that is a compulsory transfer under Part 4 of the FSTR Act is not required to be notified under the new system. This buttresses the existing position under subsection 43(9A) of the FSTR Act that a transfer of business or transfer of shares under Part 4 and anything done to enable or facilitate such a transfer are specified and specifically authorised for the purposes of subsection 51(1) of the CCA.

8.22 Subject to the special arrangements for certain voluntary transfers under the FSTR Act in section 51ABZZQ, acquisitions that are voluntary transfers under Part 3 of the FSTR Act will be subject to the new system if they are required to be notified, for example because the notification thresholds are met.

[Schedule 1, item 86, subsection 43(9AA) of the Financial Sector (Transfer and Restructure) Act 1999]

Radiocommunications Act 1992

8.23 The amendments extend provisions that deem certain radiocommunications licence allocations and authorisations as acquisitions of assets and conduct (for the purposes of section 50 and other relevant provisions of the CCA) to the new acquisitions provisions.

8.24 Specifically, the authorisation to operate radiocommunications devices under a spectrum licence, the issue of a spectrum licence, the issue of an apparatus licence and the authorisation to operate radiocommunications devices under an apparatus licence are now treated as acquisitions of assets and conduct under section 50 and other relevant provisions of the CCA and the acquisitions provisions.

[Schedule 1, items 87, 88, 89, 90, 92 and 94, paragraph 51(2)(d), subsection 68A(2), subsection 71A(2), subsection 106A(2) and subsection 114A(2) of the Radiocommunications Act 1992]

8.25 However, acquisitions that are the issue of a spectrum licence and the issue an apparatus licence) are not required to be notified under Division 2 of Part IVA of the CCA.

[Schedule 1, items 91 and 93, subsection 71A(4) and subsection 106A(5) of the Radiocommunications Act 1992]

8.26 Further, changes are made to the reflect the interaction between the Commission's review of acquisitions under the new system and ACMA's obligations to update the Register of Radiocommunications Licences and transfer apparatus licences. ACMA need not update the Register for spectrum licence assignments or variations related to assignments if the acquisition is a notified acquisition under the CCA and the notification has not been finally considered and the Commission has not decided to cease considering it (see meaning above).

[Schedule 1, item 95, subsection 146(3) of the Radiocommunications Act 1992]

8.27 Similarly, for transfers of apparatus licences (under section 131AB of the Act), the timeline for ACMA's decision on licence transfers excludes any day when the transfer is a notified acquisition, the day occurs on or after the effective notification date of the latest notification of the acquisition, and the notification has not been finally considered and the Commission has not decided to cease considering it.

[Schedule 1, item 96, subsection 286(9) of the Radiocommunications Act 1992]

Commencement, application and transitional amendments

Amendments made by Schedule 1

8.28 The amendments made by Schedule 1 to the Bill commence in three stages:

•

Part 1 of Schedule 1 to the Bill commences the day after the Bill receives Royal Assent. This part includes amendments to allow merger authorisation applications to be made only until 30 June 2025.

[Schedule 1, item 1, subsection 88(1A) of the CCA]

•

Part 2 of Schedule 1 to the Bill commences on 1 July 2025. This part introduces the new Part IVA, including provisions for voluntary notification of acquisitions and the substantive changes establishing the mandatory notification requirements.

[Schedule 1, Part 2]

•

Part 3 of Schedule 1 to the Bill commences on 1 January 2026. This part amends section 50 of the CCA to clarify the meaning of substantially lessening competition in the context of acquisitions.

-

To ensure consistency with and support the broader amendments, the merger factors in subsection 50(3) will be repealed and the 'substantial lessening of competition' test in section 50 will also be amended to align with the substantially lessening competition test, so that for the purposes of section 50, acquisition may have the effect or be likely to have the effect of substantially lessening competition in a market if the acquisition would, in all the circumstances, have the effect, or be likely to have the effect, of creating, strengthening or entrenching a substantial degree of power in the market. This will promote consistency in competition assessments for both acquisitions considered in the new system and under section 50. This amendment does not affect the meaning of substantially lessening competition outside of section 50.

-

Subsections 46(3) to (8), which contain matters relevant to working out whether a corporation has a substantial degree of power in a market have effect as if those subsections included a reference to section 50.

•

Section 191 has the effect that the amendments do not apply to acquisitions put into effect before 1 January 2026. As such, the amendments do not affect the operation of the CCA in relation to pre-1 January 2026 acquisitions.

[Schedule 1, Part 3, items 97 to 99, subsections 50(3), (3A) and (3B) of the CCA]

Amendments made by Schedule 2

8.29 The amendments made by Schedule 2 to the Bill commence as follows:

•

Part 1 of Schedule 2 to the Bill commences on 1 January 2026. This part introduces a civil penalty for providing false or misleading information in response to section 155 notices. The penalty applies to contraventions occurring on or after that date, regardless of when the notice was given.

[Schedule 2, Part 1, items 1 to 4, subparagraph 76(1)(a)(iiic), subsections 76(1A) and 155(5) of the CCA]

•

Parts 2 to 5 to Schedule 2 to the Bill commence the day after the Bill receives Royal Assent. These parts make miscellaneous amendments to the CCA, as detailed below:

-

Part 2 clarifies the duties imposed by the Competition Code. It inserts new provisions to address the application of duties to Commonwealth entities under both Commonwealth law and State or Territory law.

[Schedule 2, Part 2, items 5 and 6, sections 150FA(5A) and 150FAA of the CCA]

-

Part 3 amends provisions relating to the Divisions of the Commission and allows for more flexible composition of Divisions. To support efficient administration of the new system, the amendments allow Divisions of the Commission to make decisions without requiring the Chair of the Commission to be part of the Division.

[Schedule 2, Part 3, items 7 to 9, section 19 of the CCA]

-

Part 4 updates the Commission's delegation powers. It repeals existing delegation provisions in section 155 and introduces a new section 155AAAA, which provides for more comprehensive delegation arrangements for the Commission's information-gathering powers.

[Schedule 2, Part 4, items 10 to 12, sections 155 and 155AAAA of the CCA]

-

Part 5 makes a technical amendment to correct a cross-reference in subsection 6(2A) of the CCA.

[Schedule 2, Part 5, item 13, subsection 6(2A) of the CCA]

Transition to the new system (1 July 2025 to 31 December 2025)

Voluntary notification

8.30 To facilitate a smooth transition to the new system, parties can voluntarily notify proposed acquisitions to the Commission under the new Part IVA from 1 July 2025.

[Schedule 1, item 71, section 188 of the CCA]

Continuation of merger authorisation

8.1 The merger authorisation process under Part VII of the CCA is retained until 31 December 2025.

8.2 However, applications for merger authorisation can only be made until 30 June 2025.

8.3 From 1 January 2026 onwards, the Commission must not grant a merger authorisation.

[Schedule 1, Part 1, item 1 and Part 2, items 46 and 47, subsections 88(1), (1A) and (2), and 90(16) of the CCA]

Acquisitions authorised before 1 January 2026

8.4 The mandatory notification requirements do not apply to an acquisition if, between 1 July 2025 and 31 December 2025, the Commission either:

•

grants a merger authorisation for the acquisition under section 88, or

•

advises a party to the acquisition, in writing, that the Commission does not intend to take action under the CCA in relation to section 50 in relation to the acquisition, and

•

the acquisition is put into effect during the 12 months starting on the day the Commission grants the authorisation or gives the advice.

[Schedule 1, item 71, subsection 189(2) of the CCA]

8.5 This transitional arrangement provides certainty for parties who have sought and obtained clearance or authorisation before the commencement of the new system. The 12-month period allows sufficient time for parties to complete their transactions while ensuring a timely transition to the new system.

8.6 The amendments clarify that the transitional provision relating to the Commission's written advice does not:

•

confer any additional powers or functions on the Commission, including the power to provide such advice or make decisions about providing it, or

•

limit the Commission's ability to take action in relation to a contravention, or possible contravention, of section 50 of the CCA, or

•

affect the operation of any law other than Division 2 of Part IVA (Acquisitions that are required to be notified).

[Schedule 1, item 71, subsection 189(3) of the CCA]

Start of the new acquisitions system (from 1 January 2026)

Mandatory notification

8.7 Division 2 of Part IVA, which contains the mandatory notification requirements, applies to acquisitions put into effect on or after 1 January 2026, subject to certain exceptions discussed above.

[Schedule 1, item 71, subsection 189(1) of the CCA]

8.8 Notification waiver applications under the new system may be made on or after 1 January 2026.

[Schedule 1, item 71, subsection 189(4) of the CCA]

Amendments to existing merger provisions

8.9 Section 50, as amended, continues to apply to acquisitions put into effect on or after 1 January 2026 that are not subject to the new system. The existing merger prohibition in section 50 of the CCA continues to operate alongside the new Part IVA but does not apply to notified acquisitions under Part IVA.

[Schedule 1, Part 3, item 30, subsection 50(5B) of the CCA]

8.10 This maintains legal continuity and a familiar framework for acquisitions, as well as allowing the Commission to take enforcement action against anti-competitive acquisitions that are not notifiable under Part IVA. This supports transition to the new system, and its status can be considered as part of the review of the operation of Part IVA.

[Schedule 1, item 35, subsections 51ABZZU(1) and (2) of the CCA]

8.11 Section 50A, which relates to acquisitions that occur outside Australia, is amended to provide that the prohibition does not apply to notified acquisitions or acquisitions that are put into effect on or after 1 January 2026.

[Schedule 1, items 31 and 32, section 50A and subsection 50A(7A) of the CCA]

Chapter 9: Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

9.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

9.2 The Bill overhauls the existing framework for merger review under the Competition and Consumer Act 2010 (CCA) and replaces it with a mandatory and suspensory administrative merger control system, with the Commission as the first instance administrative decision-maker.

9.3 A streamlined merger control system will enhance efficiency, predictability and transparency for businesses, stakeholders and the community, and remove the scope for strategic behaviour by merger parties. It will ensure the Commission is significantly better equipped to detect, review and act against those mergers that substantially lessen competition.

Human rights implications

9.4 Consideration has been specifically given to the guidance in the Parliamentary Joint Committee on Human Rights' Guidance Note 2: Offence provisions, civil penalties and human rights and to the Attorney General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.

9.5 The Bill engages the following human rights:

•

the right to a fair trial under articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR);

•

the right against self-incrimination under article 14(3) of the ICCPR;

•

the right to protection from arbitrary or unlawful interference with privacy under article 17 of the ICCPR;

•

the right to access information held by public bodies under article 19(2) of the ICCPR.

The Right to a Fair Trial

9.6 The Bill engages the right to a fair trial, as well as the presumption of innocence in Articles 14 and 15 of the ICCPR. Article 14(2) of the ICCPR recognises that all people have the right to be presumed innocent until proven guilty according to the law. Articles 14 and 15 apply only in relation to the rights of natural persons, not legal persons, such as companies.

Civil Penalties

9.7 Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR. Although there is a domestic law distinction between criminal and civil penalties, 'criminal' is separately defined in international human rights law. Therefore, when a provision imposes a civil penalty, it is necessary to determine whether the penalty amounts to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.

9.8 The Bill introduces the following civil penalties:

•

failure to notify the Commission of acquisitions (section 45AW of the Bill)

•

failure to notify the Commission of material changes of fact in relation to a notified acquisition (section 45AX of the Bill)

•

providing false or misleading information (section 45AZB of the Bill)

•

contravention of the 'suspension rule' by putting into effect a stayed acquisition (section 45AY of the Bill)

•

failure to comply with conditions when a putting a notified acquisition into effect is subject to conditions (section 45AZ of the Bill).

9.9 The civil penalty provisions contained in the Bill are not 'criminal' for the purposes of human rights law. While a criminal penalty is deterrent or punitive, these provisions are regulatory and disciplinary, and they aim to encourage compliance with the Bill. Further, the provisions do not apply to the general public, but to a sector or class of people - those undertaking certain acquisitions - who should reasonably be aware of their notification obligations under the CCA. Therefore, imposing these civil penalties will enable an effective disciplinary response to non-compliance.

9.10 While these civil penalties are large, they are appropriate in size. The Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers outlines that larger penalties are more appropriate for bigger companies, as they provide an adequate deterrent. The size of these penalties ensures that the price of misconduct is high enough to deter harmful, anti-competitive activities and thereby improve competition in Australia for the benefit of consumers and small businesses, an important objective of the Bill.

9.11 Further, the judiciary continues to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The civil courts are experienced in making civil penalty orders at appropriate levels having regard to the maximum penalty amount, taking into account a range of factors including the nature of the contravening conduct and the size of the organisation involved.

9.12 Therefore, a relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance with the Bill. These maximum penalties are explicitly outlined in the Bill itself.

9.13 The Bill can impose maximum civil penalty amounts which are intentionally significant and are in line with the penalties for other provisions in the CCA, following changes made to its penalty system in the Treasury Laws Amendment (More Competition, Better Prices) Act 2022.

9.14 Finally, there is no sanction of imprisonment for non-payment of these civil penalties.

Criminal Penalties

9.15 The Bill includes criminal offences for breaching the requirement to cease to hold shares in certain circumstances more than 12 months after the Tribunal has made a determination that an acquisition must not be put into effect (or imposes a condition that was not complied with) (section 51ABZZP of the Bill).

9.16 The offence of continuing to hold shares is a strict liability offence. Strict liability is appropriate in this circumstance, as it is necessary to strongly deter the holding of shares relating to an acquisition after the Tribunal has determined that the relevant acquisition must not be put into effect or where conditions were not complied with. The nature of the offence means that it is appropriate for a person to be penalised if they do not cease to hold the shares in question.

9.17 Strict liability reduces non-compliance, which bolsters the integrity of the new system and is appropriate as in this case where there is a need to ensure offences are dealt with expeditiously to maintain public confidence in the system. The strict liability offence meets the conditions listed in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers. For example, the penalty does not exceed 60 penalty units. The application of strict liability, as opposed to absolute liability, preserves the defence of honest and reasonable mistake of fact.

9.18 Consistent with Article 14(1) of the ICCPR, an independent, impartial court will preside over all criminal proceedings brought under the Bill, which will be subject to established Australian court processes and procedures that protect the right to a fair trial including requirements relating to procedural fairness, evidence and sentencing.

9.19 Given that the offence is appropriately designed to ensure integrity of Australia's acquisition control system and will be administered in accordance with Australia's standards for criminal law proceedings, the offence is consistent with Article 14 of the ICCPR.

Merits Review

9.20 Article 14 establishes rights to judicial due process and procedural fairness. These rights apply in both civil and criminal proceedings, and in matters before both courts and tribunals.^[2]

9.21 Schedule 1, excluding Division 1A, of the Bill limits merits review by adopting the existing limited merits review process for determinations made by the Commission under the merger authorisation process.

9.22 The Tribunal's limited merits review means, broadly, that it can only consider the information before the Commission when making its determination (unless otherwise permitted), information the Tribunal requests from the Commission, new information, documents or evidence not in existence when the Commission made its determination but only in specified circumstances. The Tribunal may also consult consumer associations or consumer interest groups or other persons and ask questions or seek information from a technical expert as part of their review.

9.23 The adoption of limited merits review for the new system is reasonable, given its use in relation to the review of merger authorisation determinations, and necessary for ensuring the efficiency of the merits review process. Further, the limited merits review is proportionate as it balances the need for efficiency with a review process which is comprehensive even with the limitations.

9.24 A limited merits review balances the need for efficiency and timeliness, preserving the regulator's expertise and the avoidance of strategic delays or over litigation. Parties to the acquisition benefit from greater certainty and timeliness, reduced risk of re-litigation and a less resource-intensive process.

9.25 Therefore, the Bill does not unreasonably limit the right to a fair trial or fair hearing with respect to administrative decisions and judicial review.

Information gathering

9.26 The new information-gathering powers engage the right against self-incrimination under Article 14(3)(g) of the ICCPR because they provide that the Commission's existing information-gathering powers under section 155 of the CCA may apply to the new system.

9.27 The Bill balances the Commission's need to access information with a natural person's right against self-incrimination by limiting the use of incriminating material supplied by the individual. Information obtained using the powers cannot be used as evidence against the individual in criminal proceedings or in proceedings where the person may be liable to a criminal penalty unless those proceedings are for an offence under section 155 or for an offence against certain sections of the Criminal Code relating to section 155.

9.28 Engaging the right against self-incrimination in this way is necessary and justified as the public benefit in removing the liberty outweighs the loss to the individual. The information which would be obtained by the Commission is critical in it performing its regulatory functions, specifically seeking to prevent anti-competitive acquisitions that would harm the competitiveness of Australian markets.

9.29 The material and evidence necessary for the Commission to perform its regulatory function is likely to only be available from certain individuals in an entity. The new information gathering powers in the Bill are therefore consistent with the right against self-incrimination under Article 14(3)(g) of the ICCPR.

Right to Privacy

9.30 Schedule 1 of the Bill engages the right to protection from unlawful or arbitrary interference with privacy under Article 17 of the ICCPR because it requires parties to notify the Commission of acquisitions and of material changes of fact in relation to acquisitions. Some of the information provided in such a notification may be personal information. The Bill also requires the Commission to keep a public register of notified acquisitions, the contents of which will be prescribed by a legislative instrument. It is intended that the register will only include sufficient information to achieve the legitimate transparency objective of the Commission maintaining the register.

9.31 The right in Article 17 may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. In order for an interference with the right to privacy to be permissible, the interference must be authorised by law, be for a reason consistent with the ICCPR and be reasonable in the particular circumstances. The UN Human Rights Committee has interpreted the requirement of 'reasonableness' to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances of any given case.

9.32 The amendments are necessary as they help ensure the Commission has the required information to undertake its functions and powers under the new system to determine whether acquisitions would, or be likely to, substantially lessen competition in Australian markets.

9.33 These new provisions are appropriate as to the extent the Commission receives personal information as part of their functions and powers, it will handle that information in accordance with its obligations under the Privacy Act 1998 including under Australian Privacy Principle 3 to not collect personal information unless it is reasonably necessary for, or directly related to, one or more of the Commission's functions or activities.

Conclusion

9.34 The Bill is compatible with human rights as to the extent human rights issues are engaged, such engagement is necessary and proportionate to the intended policy outcome.

Chapter 10: Impact Analysis

Executive Summary

The problem

Mergers and acquisitions are important for building a more productive and dynamic economy. They allow businesses to achieve greater economies of scale, and to access new resources, technology and expertise.

A merger or acquisition can occur when there is an acquisition of a business or asset. Merger control is about maintaining competitive market structures that lead to better outcomes for consumers. While most mergers and acquisitions are unlikely to raise competition concerns, some can harm competition, allowing businesses to raise prices and not pass on economic gains to consumers. Australia's merger control system plays a crucial gatekeeper role in preventing these mergers from harming consumers and the wider economy.

Against this backdrop, new analysis shows that competition in Australia has been declining since the 2000s. There is evidence emerging that the intensity of competition has weakened across many parts of the economy, accompanied by increasing market concentration and markups in many industries. Discouraging anti-competitive mergers and acquisitions, and stopping those that try to proceed, is crucial for maintaining downward pressure on the cost of living and creating a stronger, more competitive and more productive economy.

On 23 August 2023, the Government announced a Competition Review to provide advice on how to improve competition across the economy, with a focus on reforms that would increase productivity, reduce the cost of living and/or lift wages. In particular, the Government asked the Competition Taskforce established within the Department of the Treasury (Treasury) to assess whether Australia's current approach to merger control was effective. That is, whether it readily enables beneficial mergers and acquisitions to proceed while ensuring that mergers and acquisitions which may pose substantial competition risks are stopped and, to the extent that Australia's approach to merger control could be improved, the options available for reform and their benefits and risks.

Consultation

Between 20 November 2023 and 19 January 2024, Treasury undertook public consultation on potential options to reform Australia's approach to merger control (2023-24 Merger Reform Consultation).^[3] In response, the Competition Review received 46 non-confidential written submissions, and held 9 roundtables attended by 42 organisations across Sydney, Melbourne, Brisbane and online. An Expert Advisory Panel - members of which are Kerry Schott, David Gonski, John Asker, Sharon Henrick, John Fingleton, Danielle Wood and Rod Sims - also contributed their views.

Feedback from stakeholders was clear: Australia's current ad hoc approach to merger control is unfit for a modern economy and is lagging behind best practice in comparable countries. For business, some uncontentious mergers are subject to delays, uncertainty, and added costs - with only limited guidance provided on the ACCC's views. For the wider community, the current approach is not transparent nor accessible. For the Australian Competition and Consumer Commission (ACCC), the current merger approval process can impede its ability to effectively and efficiently detect and prevent anti-competitive mergers. The ACCC often has to deal with inadequate notification of mergers, insufficient information, and a reactive, adversarial approach from some businesses, with limited capacity for economic evidence to be presented in court.

Reform options considered

Taking into account the feedback received, 4 options for reform were considered, including the status quo. Three of these options (Options 2, 3, and 4) introduce a mandatory and suspensory system, and 2 of these options replace the existing model of judicial enforcement with an administrative system (Options 2 and 3):

•

Option 1 (status quo) - Australia currently has a prohibition on acquisitions of shares or assets that would have the effect, or be likely to have the effect, of substantially lessening competition (SLC) in any market. These are reviewed through one of three pathways: voluntary informal merger review; voluntary merger authorisation; or Federal Court of Australia (Federal Court) proceedings.

•

Option 2 (mandatory and suspensory administrative system with an extended SLC test) - introduces a single mandatory and suspensory administrative merger control system that will replace the multiple voluntary pathways of the status quo. A merger will be permitted to proceed, unless the ACCC is satisfied that it is likely to SLC, including if it creates, strengthens, or entrenches substantial market power. Merger parties may also, following the competition assessment, seek the merger to be approved if the ACCC is satisfied the merger would result, or be likely to result, in a benefit to the public that outweighs the anti-competitive detriment of the merger.

•

Option 3 (mandatory and suspensory administrative system with a satisfaction test) - this is an alternative version of Option 2 in that it also introduces a mandatory and suspensory administrative merger control system. It differs from Option 2 in that mergers and acquisitions can only proceed if the ACCC is satisfied a merger is not likely to SLC including if it creates, strengthens, or entrenches substantial market power. Like Option 2, merger parties may also seek approval on public benefit grounds.

•

Option 4 (mandatory and suspensory judicial enforcement system with an SLC test) - this is an alternative version of Option 1 that would replace the voluntary informal merger review with a mandatory and suspensory system, and retain the existing model of judicial enforcement with the SLC test. Option 4 would retain a separate merger authorisation process.

Preferred option

Option 2 is the recommended option. This option strengthens Australia's merger control approach by improving the ACCC's ability to effectively and efficiently detect, review and act against anticompetitive mergers and acquisitions. Mandatory notification requirements would mean that mergers and acquisitions more likely to impose risks for the economy must be notified to the ACCC. Suspensory timeframes for review and upfront information requirements will enhance predictability and certainty for stakeholders.

Option 2 is the recommended option. This option strengthens Australia's merger control approach by improving the ACCC's ability to effectively and efficiently detect, review and act against anticompetitive mergers and acquisitions. Mandatory notification requirements would mean that mergers and acquisitions more likely to impose risks for the economy must be notified to the ACCC. Suspensory timeframes for review and upfront information requirements will enhance predictability and certainty for stakeholders.

As the administrative decision-maker, the ACCC will maintain a public register of all merger reviews, undertake the legal, data and economic analysis required to assess a merger and publish reasons for its determinations. The improved transparency around the economic objectives of merger control enhances community understanding, improving effectiveness in the longer term.

The benefits of an efficient and effective merger control system are significant. Applying analysis from overseas to Australia would imply benefits of between $340-732 million per year.^[4] Greater certainty and speed will reduce costs and facilitate valuable investment in pro-competitive and benign mergers. Consumers and businesses, along with the broader community, will be better informed and more confident that the ACCC has the toolkit to perform its gatekeeper role, prevent anti-competitive mergers and maintain competitive markets in Australia.

While it is not possible to precisely quantify the benefit of increased competition, illustrative modelling undertaken jointly by the Reserve Bank of Australia (RBA) and Treasury highlights the potential value, suggesting that Australia's Gross Domestic Product (GDP) could be 1-3 per cent higher if we returned to the level of competition that prevailed in the early 2000s.^[5] In today's dollars, that is approximately $30-80 billion each and every year.

Background on merger control

A merger or acquisition can occur when there is an acquisition of a business or asset. Mergers and acquisitions can provide an important way for firms to achieve economies of scale and scope, diversify risk and exit businesses. They can enhance competition if these efficiencies are passed onto consumers via lower prices, improved product quality, range, or service. Mergers and acquisitions can also be a key means for assisting the economy to structurally adjust to economic challenges, such as the rise of the care economy, rapid transformation to net zero and the growth of the digital economy.

The overarching policy objective of Australia's merger control system is to promote competition that enhances the welfare of Australians, consistent with the object of the Competition and Consumer Act 2010 (Cth) (CCA).

Merger control is the legal system and underlying process that enables a competition authority to consider mergers that could be harmful to competition and, if necessary, amend or prevent harmful mergers.

Merger control thus plays a critical gatekeeper function, maintaining competitive market structures that lead to better outcomes for consumers. Ideally, merger control regimes would target those mergers that are anti-competitive and allow mergers and acquisitions that are pro-competitive or benign to proceed.

Australia's merger control system

Merger control has been in place in Australia since 1974. Currently, there are 3 voluntary processes by which proposed mergers may be subject to a competition assessment in Australia.^[6]

•

ACCC informal merger review - a non-legislative process that enables merger parties to manage regulatory risk and seek the ACCC's non-binding view on whether a merger is likely to SLC. The ACCC's informal view provides an assurance that the ACCC -does not intend to take court action to stop a proposed merger from proceeding (based on the information available at the time of the decision).

•

ACCC merger authorisation - a formal legislative process that allows the ACCC, and the Australian Competition Tribunal (Tribunal) on review, to provide businesses with immunity from court action under competition law for a proposed merger if it is satisfied that the merger would not be likely to SLC or that it is likely to result in a net public benefit.

•

Federal Court proceedings - a process in which the ACCC, merger parties or third parties can seek orders relating to the merger. The ACCC can seek an injunction to restrain the merger prior to completion, divestiture post-completion, an order that a completed merger is void where the vendor is involved in contravening section 50, and impose penalties. Merger parties may seek a declaration that a merger does not SLC. Third parties may seek a declaration and/or damages. Such relief is at the discretion of the Federal Court and the evidentiary burden of proving the case is usually on the party seeking the orders.

Most mergers that are notified to the ACCC are considered through the ACCC's informal merger review process (99% in the 2022-23 financial year).^[7] Informal merger reviews are either undertaken through a confidential pre-assessment or public review process. In the past 5 years, 93 per cent of ACCC informal merger reviews were pre-assessed, with the length of reviews ranging from 2 to 16 weeks and an average of slightly more than 3 weeks.^[8]

A public informal review involves market inquiries and submissions from affected parties such as competitors and customers. The ACCC will issue a Statement of Issues and extend the review if it considers the merger may raise competition concerns. Timelines depend on the complexity of the review. However, indicative ACCC timeframes are approximately 6-12 weeks for mergers that do not require further consideration (Phase 1), with an additional 6-12 weeks where a Statement of Issues is published (Phase 2).^[9]

In practice, in the 2023 calendar year, Phase 1 reviews took on average 59 business days (or under 12 weeks) and Phase 2 reviews took on average 133 business days (or over 26 weeks).^[10] These timeframes exclude any periods where the ACCC suspended the review while waiting for information from the merger parties and any confidential pre-assessment review time.

If the ACCC opposes the merger and it is not voluntarily abandoned, the ACCC must commence proceedings in the Federal Court to stop the merger.

1. What is the problem you are trying to solve and what data are available?

What is the problem?

The Government asked the Competition Taskforce, established within Treasury, to assess whether Australia's merger control system is fit for purpose.^[11] This was in response to the ACCC raising concerns about Australia's approach to merger control^[12] and evidence that the intensity of competition has weakened across many parts of the economy, accompanied by increasing market concentration and markups in many industries,^[13] and the rate of entry of new companies falling.^[14]

Treasury consulted a diverse range of stakeholders seeking information and views about the current approach to merger control and the assessment of whether a merger is likely to be anticompetitive.^[15] As noted above, the feedback from stakeholders^[16] was clear: Australia's current 'ad hoc', voluntary merger process is unfit for a modern economy. It lags behind best practice recommendations from the Organisation for Economic Co-operation and Development (OECD) and International Competition Network, and processes in comparable countries.

Concerns with the current approach to merger control in Australia included:

•

For business, some uncontentious mergers are subject to delays, uncertainty, and added costs - with only limited guidance provided by the ACCC.

•

For the wider community, it is often difficult to engage with the ACCC's merger reviews. The current approach is not transparent nor accessible.

•

For the ACCC, the current approach can impede its ability to effectively and efficiently detect and prevent anti-competitive mergers.

These problems are described further below.

Australia's approach to merger control is unfit for a modern economy

Limited ability to detect and prevent anti-competitive mergers

The current voluntary approach to merger control can impede the ACCC's ability to effectively and efficiently detect and prevent anti-competitive mergers. The ACCC often has to deal with inadequate notification of mergers, insufficient information, and a reactive, adversarial approach from some businesses, with limited capacity for economic evidence to be presented in court.

The ACCC submitted that increasingly it is not directly notified of all the mergers that require scrutiny. While the identity and effect of these non-notified mergers is unknown, the examples provided by the ACCC demonstrate that there are unscrutinised mergers occurring that raise serious competition concerns.^[17] These include Petstock (the second largest speciality pet retail chain in Australia), which completed a large number of acquisitions between 2017 and 2022 without directly notifying the ACCC, Qantas' acquiring 19.9 per cent of Alliance Airlines in 2019, Primary Health Care acquiring Healthscope's pathology business in Queensland without notifying the ACCC in 2015.1^[18]

Petstock

During the ACCC's review of Woolworths' proposed acquisition of a 55 per cent interest in Petstock, the second largest specialty pet retail chain in Australia, ACCC became aware of a large number of acquisitions completed between 2017-2022 by Petstock. After investigation, the ACCC identified significant concerns that 4 transactions (involving over 50 retail stores) have had an impact on national and state-wide chain-on-chain competition, as well as competition in multiple local areas. In December 2023, the ACCC accepted proposed divestiture undertakings that were offered by Petstock to address the competition concern.

Primary Health Care

In February 2015, the ACCC received complaints about the completed acquisition of Healthscope pathology assets. The ACCC considered that the acquisition removed a significant third player in Queensland, leaving just two major full-service pathology providers in that state. The change in market structure would be likely to result in increased prices and reduced service levels for pathology services in Queensland. The ACCC investigated the completed acquisition and in June 2016 accepted an undertaking for divestiture of the pathology assets to restore a competitive market structure in Queensland.

The Competition Taskforce has developed new data assets including Australia's first economy-wide database for tracking the impact of mergers and acquisitions. The database uses comprehensive Australian Bureau of Statistics (ABS) administrative microdata on worker flows between all Australian businesses to estimate the number of mergers and acquisitions each year. Preliminary results from this data indicate there are around 1,500 mergers annually.^[19] This means that only around one-fifth of all mergers and acquisitions in the economy are notified to the ACCC. It also shows that most target firms are medium-sized businesses, while mergers and acquisitions are disproportionately made by very large firms (the largest 1% of firms make around half of all acquisitions).^[20]

The current approach relies on businesses voluntarily notifying proposed mergers to the ACCC. Consequently, the mergers considered by the ACCC are determined by the commercial risk appetite of merger parties, rather than a whole-of-economy risk-based approach to assess mergers posing the greatest competitive risks or harm to competition and the economy.

The data available shows that the ACCC has considered 330 mergers each year on average over the past 10 years.^[21] Data provided by the ACCC shows that for merger assessments commenced in the 2022-23 financial year, 233 of the 366 mergers considered by the ACCC were also subject to approval from the Foreign Investment Review Board (FIRB). The ACCC became aware of 186 of these 233 mergers exclusively via FIRB referral.^[22] Of those referred by FIRB, 6 per cent were returned to FIRB on the basis that the ACCC did not view the referral as necessary, only a very small proportion of mergers progressed to a public review, and the remainder raised no competition issues.^[23] This suggests the ACCC is reviewing a significant number of low-risk mergers.

The ACCC's ability to effectively and efficiently assess mergers relies on the willing compliance of the merger parties and their advisors, which the ACCC submitted has diminished significantly in recent years.^[24]

There is no legislative basis for the ACCC to prescribe information requirements for merger parties seeking informal merger review. Merger parties may therefore be selective about what and how much information they provide to the ACCC. The ACCC submitted this creates information gaps, which impacts its ability to accurately and efficiently form a view on whether or not to approve a proposed merger.^[25] There is also no restriction on merger parties introducing new information or evidence later in the ACCC's review or if the matter proceeds to court. Consequently, merger parties may only provide limited information upfront that suggests there are no, or limited, competition issues and only provide further information once requested to do so.

The voluntary nature means that merger parties can proceed to complete, or threaten to complete, the merger before the ACCC has finalised its review. The ACCC cited three instances where this has occurred in recent years - Virtus' proposed acquisition of Adora (2021); Qube's acquisition of Newcastle Agri Terminal (2021), and an example of an unnamed large retailer (year not specified).^[26]

There is also limited capacity to use and present economic evidence in court. For example, Dr Rhonda Smith and Professor Deborah Healey submitted in relation to the cause of the problem with the current approach that the primary issues are 'the requirement for evidence to conform with the Evidence Act 1995 when it is alleged that a merger will substantially lessen competition, and the approach of courts to the reception of economic evidence in merger cases. Providing evidence of the alleged substantial lessening of competition resulting from a merger, and particularly a digital merger, to a standard that satisfies the Evidence Act is extremely difficult, if not impossible. The merger is yet to occur so there is no direct factual evidence concerning the effect of the merger.'^[27]

The challenges faced by the ACCC to effectively and efficiently detect and prevent anti-competitive mergers and acquisitions have significant consequences, including flow on costs for consumers (which can include end-consumers as well as other businesses) from higher prices, reduced quality or service, and decreased levels of innovation. Even small increases in prices resulting from anti-competitive mergers can be harmful for consumers. For example, the ACCC's ex-post review of Caltex's acquisition of Milemaker found that petrol prices in local areas near the Milemaker sites had increased by around 0.8 cents per litre (or around 0.5%) costing motorists around $6 million per annum.^[28]

Ex-post review of Caltex's acquisition of Milemaker

Caltex acquired the Milemaker retail petrol business in 2017. This involved Caltex taking over the operation of 46 retail petrol sites, 33 of which were in Melbourne. Prior to the acquisition, Caltex operated around 7 per cent of the sites in Melbourne and Milemaker operated around 4 per cent.

The ACCC did not oppose the acquisition, concluding "... that there are a number of other vigorous and effective price competitors in fuel retailing in Melbourne who are larger than Milemaker and who compete more directly with Caltex on a local site basis".

In 2021, the ACCC undertook an ex-post review of the acquisition focusing on the effect on retail petrol prices. This involved comparing retail petrol prices observed prior to the acquisition with petrol prices observed after the acquisition.

The ACCC's analysis indicated that Caltex changed the pricing approach at the Milemaker sites from aggressive price discounting to a less aggressive and more accommodating strategy. This reduced the competitive influence that the Milemaker sites had on other retail petrol sites in the vicinity. The ACCC estimated that the acquisition had the effect of increasing petrol prices in local areas near the Milemaker sites by around 0.8 cents per litre, costing motorists around $6 million per annum.

Dr Graeme Woodbridge (former ACCC chief economist) contends that changes to merger control that make it more or less permissive will mostly affect mergers that are 'close calls' or are on the enforcement margin.^[29] Dr Woodbridge's analysis estimated this is around 7 mergers a year in Australia, based on the market characteristics of mergers considered by the ACCC between 2020 and 2023.^[30]

Dr Woodbridge observed that erroneously allowing anti-competitive mergers comes at an economic cost. He stated 'under most circumstances, competition enhances welfare through driving productivity growth and economic efficiency more broadly. Competition ensures the pursuit of profits works in favour of the many, including consumers and workers, rather than the few. Allowing anticompetitive mergers foregoes these gains'.^[31]

Dr Woodbridge contends that the most valuable and the most reliable evidence of the effects of mergers on the enforcement margin comes from published studies that examine the effects of completed mergers. While Dr Woodbridge acknowledges these studies suggest that mergers can have significant effects on prices in both directions, the majority of mergers analysed resulted in higher prices. Dr Woodbridge observed that price increases are more likely in concentrated markets.^[32]

Uncertainty, delay and added costs

For business, some uncontentious mergers are subject to delays, uncertainty, and added costs. The current informal review process does not have a legislative basis, and the ACCC is not bound by legislated timelines and processes.

Business stakeholders raised concerns that this created considerable uncertainty, with the Business Council of Australia (BCA) identifying this as a key issue. The BCA submitted 'The absence of time limits for considering a merger clearance application is one of the most challenging aspects of the current regime. A lengthy clearance process can delay commercial decisions, time parties out from deals and impose significant costs on business, including small and family businesses on the sell-side of a transaction'.^[33] The opportunity cost of this uncertainty and delay can be significant and impact on financing requirements for businesses.

As well as being uncertain, the timelines for merger reviews have increased over recent years as shown in Figure 1 below. The time taken for Phase 1 public reviews has increased from 22 days in 2006 to 59 days in 2023. Similarly, the time taken for public reviews has increased from 57 days in 2006 to 133 days in 2023 (which exceeds the ACCC's stated performance measure of 120 business days for Phase 2 reviews as outlined in the ACCC's Annual Report 2022-23).^[34] This does not include periods when the timeline was suspended while the ACCC waited for information from the parties.

Figure 1. Average length of ACCC informal reviews

Note: Calendar year. The duration is in business days, excluding any timeline suspensions while the ACCC awaits information from the merger parties. Timeline suspensions were not recorded for confidential reviews prior to 2018. For the purposes of this analysis, merger assessments include matters that are withdrawn or where no decision is reached. Source: ACCC.

Lack of transparency and difficult to engage

For businesses, suppliers, consumers, and interested members of the public, the current approach provides limited guidance or precedent and lacks transparency. Only 10 per cent of mergers reviewed by the ACCC are conducted publicly, with the remaining 90 per cent being confidentially pre-assessed (see Figure 2).

Figure 2. Number of ACCC merger reviews per year since 2009-10

Note: Financial year. Source: ACCC. Merger Authorisations are limited to applications made to the ACCC after 2017 where the ACCC became the first instance decision maker.

The ACCC has also not substantively updated its guidance on the assessment of merger reviews since 2008. Consequently, there can be a lack of clarity around the ACCC's substantive approach to merger assessments, including on new or novel competition issues. The lack of clarity makes it difficult for merger parties to self-assess when notification is required, and if they do notify, to understand the type of information the ACCC will need to undertake its assessment. This may result in merger parties gathering and supplying unnecessary information (which increases costs) or delays to the review while they compile information the ACCC requires. There is also limited transparency about the information the ACCC considers in making its decision, and the process for assessing a merger. This is a result of the limited number of mergers that are made public each year, and is a feature of a judicial enforcement regime.

The adversarial nature of the judicial enforcement model means that all interactions between the ACCC and merger parties are under the spectre of potential litigation. This imposes additional cost and procedural requirements, and can disincentivise engagement with affected market participants, including the merger parties, customers and suppliers. The Council of Small Business Organisations Australia submitted that 'In any judicial enforcement model, including the current model, COSBOA agrees that court proceedings are time and resource intensive.'^[35]

The ACCC noted that the '...required level of admissible evidence needed to prove that the transaction would breach section 50 if it proceeds may not exist due to the uncertainty about the future or is difficult to obtain because of the information asymmetry that exists between the merger parties and the ACCC and/or the reluctance of third-party witnesses (such as customers) to appear in court.'^[36] Public communication by the ACCC may also be impeded, reducing community understanding of the purpose and goals of merger policy.

Court proceedings can also be difficult and resource intensive particularly for parties who are comparatively under-resourced, such as consumer groups, small businesses, and third-party witnesses. As a result, third parties who may be affected by a merger may be deterred from participation due to a reluctance to appear in court, fear of retribution, and/or costs.^[37] CHOICE and Consumers Federation of Australia noted that 'Consumers and consumer advocates are even more resource constrained than regulators, and there will inevitably be a limit to their capacity to engage with merger control processes...Consumer advocates typically cannot engage with Tribunal or court based processes without funding support.'^[38]

Treasury also heard from stakeholders (including consumer and small business groups) that the ACCC's practice of reviewing most mergers confidentially compromises their ability to meaningfully engage with the ACCC's merger reviews, as these matters do not appear on the public register. These stakeholders advocated for increased transparency to ensure third parties affected by a merger are aware the ACCC is undertaking a review and provide them the ability to make submissions to the ACCC.^[39]

The Australian Small Business and Family Enterprise Ombudsman submitted that 'a pertinent example is the Woolworths' purchase of PDF Food Services. Most small businesses would have been unaware of the proposal, and many may not have appreciated future secondary impacts of this acquisition, notably the limiting of supplier options outside the already-concentrated major supermarket sector'.

The ACCC also publishes limited reasoning for its merger assessments. In the past 10 years, there have been 67 instances where the ACCC has released a public competition assessment setting out its views. This is only 2 per cent of all reviews, and 17 per cent of all public reviews.^[40] For mergers which the ACCC had indicated it would oppose, this may be because the ACCC was concerned about prejudice to later enforcement action.^[41]

The lack of transparency means prospective merger parties do not have a good understanding of the likely substantive analysis the ACCC may undertake, the process, and ultimately the likely outcomes. In turn, this limits the capacity for anti-competitive mergers to be deterred before they are proposed. A lack of transparency also hampers accountability and decreases confidence in the merger control system for stakeholders and the broader community.

Lack of cost recovery

The operational cost of merger control is currently funded by the public and not based on cost recovery. The ACCC's informal merger reviews do not require the payment of fees. Each merger authorisation application requires payment of a $25,000 fee (not based on cost recovery) and there have only been 7 such applications since November 2017.

To ensure efficient resource use across the economy, subject to the ACCC operating an efficient merger control system, mergers and acquisitions should pay the costs they individually impose on the community for assessing that risk. This also means the current approach may not meet the requirements of the Australian Government Charging Framework and the cost recovery principles that stipulate that an identifiable group or individual creating a specific demand for a specific regulatory activity should pay fees.^[42] Under the current voluntary system, any cost recovery fee may disincentivise notification. These incentives change under a mandatory notification and cost recovery system.

The total cost to the ACCC and Australian taxpayers to administer the merger control system are significant. For example, the ACCC estimates the average cost to undertake an informal public review is below $500,000, and in the 2022-23 financial year there were 23 reviews of this nature, equating to a total cost of $11.5 million. The costs for litigated mergers are much larger, which the ACCC estimated costs more than $5 million per merger.

Evidence is emerging that competition is declining in Australia

There is evidence that the intensity of competition has weakened across many parts of the economy, accompanied by increasing market concentration and markups in many industries.^[43] This reduction in competition is likely to have contributed to Australia's declining productivity performance over a long period. The OECD in its recent economic survey of Australia has also noted evidence that 'a growing body of evidence links excessive concentration and market power with a range of poor economic outcomes'.^[44] In Australia, stakeholders have also raised concerns about serial acquisitions, particularly by large retailers.^[45]

In response to the 2023-24 Merger Reform Consultation, CHOICE and the Consumers' Federation of Australia noted that 'Australia has many markets that are highly concentrated; supermarkets, airlines, banking, telecommunications, energy and insurance are all markets where a few dominant companies provide most Australians with essential products and services... Consumers pay the price of highly concentrated markets, including through higher prices, poor customer service and lower product and service quality'.^[46]

Similarly, the Master Grocers Australia noted that '10 of the 20 largest industry classes in Australia are highly concentrated' and that 'the Australian economy has become more concentrated over time, with the average four-firm concentration ratio increasing by 2.2 percentage points from 2001-2 to 2018-19'.^[47]

The Office of the Australian Information Commissioner (OAIC) observed that lack of choice can have negative impacts on non-price factors of competition such as privacy.^[48] For example, studies by the OAIC have shown that privacy is the third most important factor among Australians when choosing a product or service, coming only after quality and price.^[49]

Evidence from overseas suggests that too many anti-competitive mergers have been allowed to proceed in those countries and that 'merger enforcement has been too lax over the past 25 years'.^[50] There is also evidence that declining firm entry rates have contributed to a reduced rate of convergence to the productivity frontier within industries, and that the rate of convergence is slower within industries that have experienced the largest increases in markups.^[51]

Despite evidence of falling competition in Australia and the views of some stakeholders, there is a lack of evidence attributing mergers to the decline. A key benefit of the proposed reforms is to provide the information and incentives for data analysis to develop such evidence, along with the flexibility to adjust regulatory settings to respond to high-risk mergers over time.

2. What are the objectives, why is government intervention needed to achieve them, and how will success be measured?

What are the objectives?

The overarching policy objective of Australia's merger control regime is to promote competition that enhances the welfare of Australians, consistent with the object of the CCA.^[52] An efficient and effective merger control regime should seek to achieve its policy objective at the lowest cost possible and in a timely manner, with appropriate powers and resources for the ACCC.^[53]

Ideally, mergers and acquisitions that are pro-competitive (or do little or no competitive harm) should proceed, while anti-competitive mergers and acquisitions should be blocked. In practice, this goal is challenging to achieve, given it is hard to predict the future effects of a proposed merger or acquisitions. A merger control system must balance risk tolerance to maintain market conditions that promote investment, innovation and growth to advance the interests of consumers, businesses and our economy.

In modernising Australia's merger control system, the objectives are to promote competition, protect consumers and provide greater predictability by increasing transparency and a single streamlined system. The new system should simplify and speed up the process for mergers, consistent with the national interest, and give the ACCC stronger powers to identify and scrutinise mergers and acquisitions that pose the greatest risk to competition, consumers and the economy. To achieve this, the new system needs to be faster, stronger, simpler, more targeted and more transparent.

Why is government intervention needed to achieve them?

Critical to Australia's merger control system is the adequate scrutiny of potentially anti-competitive mergers and acquisitions before they take place. Once an anti-competitive merger or acquisition occurs, the market structure changes and the effects can be long-lasting. The risk of anti-competitive mergers and acquisitions proceeding is an ongoing intrinsic risk to consumers and the economy that necessitates a merger control system.

This risk is not unique to the Australian economy. All OECD and G7 members have systems to control mergers and acquisitions, recognising that the maintenance of competition is important to the functioning of an economy.

As discussed in Question 1, the current approach to merger control in Australia is not fit for purpose. Reforming the key elements of Australia's system of merger control - notification, assessment, decision making and review - requires legislative change to the CCA.

Constraints and barriers to achieving the objectives

There are several potential constraints and barriers to reforming Australia's merger rules to promote competition, protect consumers and provide greater certainty by streamlining the approvals process.

Predicting the likely outcomes of an acquisition and its effect on competition poses a significant challenge given the uncertainty about the future. This can be further exacerbated by information asymmetry between the ACCC and the merger parties, which may lead to an incorrect decision by the ACCC. To this end, the system is designed to strengthen integrity and incentivise compliance with notification and review requirements, ensuring the ACCC has sufficient information to conduct reviews efficiently and effectively.

Further, to assist the ACCC in its role as an administrative decision-maker and ensure explicit emphasis is placed on economic methodology and analysis of competitive effects, the ACCC will set out its findings on material facts, with reference to the evidence or other material on which those findings were based, and the reasons for all determinations, commensurate with the substantive review undertaken.

While the ACCC will not be bound by previous determinations, this will facilitate transparency and predictability in the administrative system. It will also shape the boundaries of merger control over time as a body of previous determinations, including the economic and legal reasoning, will develop over time to guide stakeholders. The ACCC will be expected to consult on, issue and periodically update substantive guidance on its assessment of mergers and acquisitions.

The new, streamlined merger system will involve significant change, including for business, advisors, the ACCC and the Tribunal. In particular, a shift in capabilities and practice by the ACCC will be required to support the change from enforcement action in court to more data- and economics-led administrative decision-making.

To facilitate this change, new performance standards will be set for the ACCC for merger assessments, including timeliness, guidance and reasons for determinations. In addition, an independent expert adviser will advise Treasury and the ACCC on implementing the new merger control system effectively, including advice on ACCC capabilities, practice, systems and resourcing.

The level of scrutiny required to maintain an efficient and effective check to prevent anti-competitive mergers may also be subject to contest by businesses given the strengthening of ACCC's powers. It is expected that, in the early years of the new system, there may be more contested decisions as the boundaries of the system are tested and novel issues are explored. This may impact on the ACCC's ability to continue to process merger reviews, requiring flexibility and adaptability.

As noted above, the new system introduces a mandatory obligation on parties to acquisitions above certain thresholds to notify proposed acquisitions before putting them into effect. To ensure the notification thresholds are set with respect to evidence of the risk of potential harms to the community over time, they will be regularly reviewed and set out in subordinate legislation, with additional targeted notification requirements set by a Treasury Minister, providing flexibility to update or calibrate them over time. This ensures that the new system is risk-based, and targets mergers and acquisitions most likely to result in harm to competition and consumers, while reducing the overall compliance burden on businesses.

Further, the ACCC will utilise data to investigate and take action for non-notified anti-competitive mergers and acquisitions, alongside its broader enforcement mandate. Accordingly, the notification thresholds may need to be recalibrated. Treasury will also undertake a statutory review to evaluate the functioning of the system 3 years after commencement, which will include a review of the notification thresholds.

How will success be measured?

The Government has outlined its expectations for how the ACCC will promote a competitive, dynamic and inclusive economy and modern, well-functioning markets that work for consumers.^[54] The Government's expectation is that the ACCC will deliver the Government's merger reforms through:

•

a risk-based approach with resources prioritised to managing or stopping mergers most likely to harm the community

•

making use of data and economic analysis to enhance merger review and to identify risks to the community, and

•

increased transparency and guidance to the community on merger activity and areas of ACCC concern to enhance community understanding and administrative predictability.

The key metrics to track the success of the reform are the number of mergers that go ahead that have anti-competitive effects (reflecting the quality of the ACCC's assessments) and the speed of ACCC assessments. Evaluating the success of this reform will be measured through:

•

analysis of ACCC reporting on acquisition activities (linked to the new mergers and acquisition database) and ex-post review of decisions to evaluate whether ACCC determinations, supported by robust legal and economic analysis, correctly identify acquisitions that would have the effect, or be likely to have the effect, of SLC, including if they create, strengthen or entrench a position of substantial market power in any market

•

mandatory notifications to capture mergers and acquisitions of concern through notification thresholds that are appropriately calibrated to capture mergers which would have greatest impact on consumers and the economy if anti-competitive, and

•

timeliness for ACCC determinations (including reasonable pre-notification periods and properly justified extensions to time periods).

-

All (100%) acquisitions considered by the ACCC will be disclosed to the public compared to less than 10 per cent under the status quo. Further, the ACCC will provide reasons for 100 per cent of decisions, compared to only 2 per cent of all mergers assessed or 17 per cent of public reviews under the status quo.

-

Reduction of Phase 1 review times from an average of 75 days to 30 days for the anticipated majority of notified acquisitions (60% reduction). And reduction of the total of Phase 1 and Phase 2 review times from an average of 192 days in the status quo to 120 days (37% reduction).

Detailed implementation and evaluation approach, activities and associated data points are outlined in Question 7.

3. What policy options are you considering?

Treasury has considered a range of options for reforming Australia's approach to merger control, which includes the options presented below as part of the net benefit analysis and a number of other general options, including a non-regulatory option. These options take into account the information and views Treasury received from the consultation process undertaken between November 2023 and January 2024.

•

Option 1 - the status quo.

•

Option 2 - a mandatory and suspensory administrative system with an extended SLC test.

•

Option 3 - a mandatory and suspensory administrative system with a satisfaction test.

•

Option 4 - a mandatory judicial enforcement system with a SLC test.

Option 1 - Status Quo

Option 1 makes no change to the existing approach to merger control with the Federal Court as the first-instance decision maker, and the ACCC providing a view as to whether it intends to commence proceedings. This would retain the 3 voluntary processes by which proposed mergers may be subject to a competition assessment described under the heading 'Background to merger control' above.^[55]

Option 2 - Mandatory and suspensory administrative system with an extended SLC test

Option 2 would introduce a single mandatory and suspensory administrative merger control system. Under this option, the ACCC will be the first-instance administrative decision-maker. Option 2 brings Australia in line with members of the G7 and the OECD. Six members of the G7 (France, Germany, Italy, Japan, United Kingdom and the European Union) and around three quarters of OECD members have administrative merger control systems (including other advanced economies such as Spain, Norway, Denmark, Sweden and South Korea).

Notification requirements

A corporation or person that is a party to acquisitions above certain thresholds (monetary, market concentration or additional targeted notification requirements) will be required to notify the ACCC of the proposed acquisition.^[56] An acquisition must not be put into effect until the ACCC has determined that it may be (with or without conditions).

Monetary thresholds are set by reference to typical business metrics such as turnover (sales revenue), transaction value or the value of assets. Market concentration thresholds would ensure mergers below the monetary thresholds but which otherwise present risks to competition will be notified to the ACCC.

Over time, the notification thresholds are expected to average an overall volume of mandatory notifications similar to current volumes, with around 300 to 500 annual notifications projected using existing available data (based on the proposed notification thresholds outlined in the Merger Notification Thresholds consultation paper).^[57] In setting these notification thresholds, regard will be given to confidential data from the ACCC about its historical public reviews, early insights from the Government's merger database (based on the ABS Business Longitudinal and Analysis Data Environment (BLADE)), the Foreign Acquisitions and Takeovers Act 1975 (Cth) application data, other public mergers data and the approach of other jurisdictions. The notification thresholds will be set in subordinate legislation and subject to periodic review with respect to the risk of potential harm to the community over time.

In addition, a Treasury Minister will be given the power to introduce additional targeted notification requirements, if there are evidence-based concerns about high-risk acquisitions, avoiding the need to lower the economy-wide notification thresholds and reducing the incidental capture of benign mergers within the notification thresholds. The ACCC may also investigate mergers and acquisitions which are not required to be notified for breach of any other relevant provisions of the CCA.

Option 2 would introduce calibrated upfront information requirements to ensure merger parties provide relevant information to the ACCC and mitigate the need for subsequent requests and possible delays. Merger parties will be required to submit a 'simple' shorter notification form for mergers unlikely to raise competition concerns, and a more detailed longer notification form for others.

All merger and acquisition notifications will be accompanied by a fee, based on cost recovery principles.^[58] Indicatively, Treasury expects this to be around $50,000-100,000 for most mergers and acquisitions (further detailed in Question 4 and Attachment A ). An exemption from fees will be available for small business so that the fees are not a disproportionate burden for those businesses.

Process

All mergers and acquisitions considered by the ACCC will be listed on an ACCC public register, with brief information including the names of the merger parties, a short description of the merger and affected products and/or services, review timeline and ACCC's determination and reasons. Subordinate legislation will set out what other information or documents are to be included, and the time they are to be included, on the register.

The system will set timelines for the ACCC's merger and acquisition review. Review timelines, broadly consistent with international best practice, are: a 'Phase 1' review period of 30 working days, with the option of a fast-track determination after at least 15 working days if no concerns are identified by the ACCC; and a more in-depth 'Phase 2' review period of 90 working days. It is expected that the ACCC will determine that the vast majority of mergers (80-90%) may be put into effect within 20 working days.

These time periods may be extended by the ACCC in appropriate circumstances and subject to procedural safeguards, for example if false or misleading information are provided, remedies are offered by the merger parties, by mutual agreement or if requested information is not promptly provided.

The substantive test

Under Option 2, the ACCC must determine that an acquisition may be put into effect unless the ACCC is satisfied that the merger or acquisition would have the effect, or be likely to have the effect, of SLC in any market, including if the merger or acquisition creates, strengthens or entrenches a position of substantial market power in a market.

To respond to concerns regarding serial or creeping acquisitions and roll up strategies, the cumulative effect of all mergers within the previous 3 years by the merger parties may be considered as part of the assessment of the notified merger, regardless of whether those mergers were themselves individually notifiable.

Merger parties may, following the ACCC's Phase 2 determination, seek approval from the ACCC on public benefit grounds. The ACCC may approve the acquisition if it is satisfied the merger would result, or be likely to result, in a benefit to the public which outweighs the anti-competitive detriment of the merger.

Review of decisions

ACCC determinations setting out the outcome of its competition assessment and/or public benefits assessment will be subject to limited merits review by the Tribunal upon application by merger parties or interested parties (if the Tribunal is satisfied that the interested party has a sufficient interest).

In its review, the Tribunal cannot have regard to material that was not before the ACCC when it was making its determination. However, there are some exceptions, including information the Tribunal requests from the ACCC, information that was not in existence at the time of the ACCC's determination, and information for the sole purpose of clarifying existing information.

Certain administrative decisions made by the ACCC during its merger review and/or public benefits assessment will be subject to review, either internally or by the Tribunal (depending on the nature of the primary decision-maker).

Judicial review of Tribunal decisions will be available in the Federal Court.

Option 3 - Mandatory and suspensory administrative system with a satisfaction test

Option 3 is a variation to Option 2. Like Option 2, Option 3 would also introduce mandatory notification of acquisitions above certain thresholds (as for Option 2).

However, the ACCC would only grant clearance if it is satisfied the merger is not likely to SLC. Internationally, the only other jurisdiction that has this type of satisfaction test is New Zealand, where the New Zealand Commerce Commission must, if voluntarily notified of a merger, be satisfied that a merger is not likely to SLC.

Like Option 2, merger parties may also, following the competition assessment, seek approval from the ACCC for the merger on public benefit grounds. Option 3 would be subject to the same process for the review of decisions as Option 2.

Option 4 - Mandatory and suspensory judicial enforcement system with a SLC test

Option 4 would introduce a mandatory notification and suspensory system which requires mandatory notification to the ACCC of mergers and acquisitions above certain thresholds (as for Option 2). In addition, the ACCC would have the ability to call-in mergers which are below the thresholds. Option 4 would retain merger authorisation and the judicial enforcement model (as exists under the status quo) with the Federal Court as the first-instance decision-maker. Option 4 would be broadly based on the approach taken in the United States and Canada.

At the end of the formal assessment process following notification to the ACCC, if the ACCC believes the merger is likely to SLC and parties do not voluntarily abandon their proposal, the ACCC would need to commence court action to prevent the merger proceeding. In those court proceedings, to stop the merger proceeding, the ACCC would need to prove to the Federal Court on the balance of probabilities that the proposed merger is likely to SLC.

Unlike the status quo, there would not be an ability for parties to seek an informal merger review.

Other options considered

Voluntary formal clearance

A voluntary formal clearance system was also considered. It would allow businesses to voluntarily notify an acquisition and the ACCC could grant legal immunity from court action under the prohibition against anti-competitive mergers in section 50 of the CCA if it is satisfied the acquisition would not be likely to SLC. If the ACCC had concerns, it would need to commence Federal Court proceedings to prevent the merger.

Treasury does not consider that a voluntary formal clearance system, or a variation of this, meets the objectives of the proposed reform. This is because it is unclear that it would address concerns about the non-notification of acquisitions, and merger parties would have minimal incentives to cooperate with the ACCC's review, particularly in circumstances where the ACCC commenced proceedings in the Federal Court to stop the acquisition.

Non-regulatory option

Treasury also considered options which would not require legislative reform. One option was that the ACCC maintain a more extensive, proactive intelligence gathering function to detect and prevent anti-competitive acquisitions before they occur. Another option considered was requiring the ACCC to publish a (voluntary) notification form on its website to better articulate the information the ACCC considers is necessary to facilitate the efficient and effective review of an acquisition.

Treasury considers that these non-regulatory options would, at best, be a partial solution. This is because these options would only result in marginal improvements over the status quo as they are unlikely to materially address the concerns identified by stakeholders in response to the 2023-24 Merger Reform Consultation, particularly as the ACCC already has a proactive intelligence gathering function.

The ACCC would still need to seek an injunction in the Federal Court if it is to prevent the acquisition going ahead, which can be challenging with possibly limited information about the proposed acquisition. If the acquisition has completed, the ACCC must seek an order for divestment in the Federal Court - and it may not be possible to restore competition to its pre-completion state. A voluntary notification form would not sufficiently address the issues of inadequate notification outlined above.

4. What is the likely net benefit of each option?

Option 1 - Status Quo

The status quo, including the current challenges with the approach to merger control, is described in Question 1. This is the baseline against which benefits for the other options are measured.

Number of mergers

As set out in Question 1, the number of mergers and acquisitions considered by ACCC is on average 330 a year. The total number of mergers and acquisitions in the Australian economy is estimated to be around 1,500 a year.

Of the mergers and acquisitions not considered by the ACCC, there is no method to measure the quantum of how many of these mergers and acquisitions raise substantial competition concerns. This is due to the current voluntary notification system and lack of a comprehensive database of merger and acquisition activity in Australia.

However, examples from the ACCC show there are multiple instances of non-notified mergers that raised competition concerns. The ACCC identified 6 examples over the past 8 years (some of these examples involve multiple mergers),^[59] so Treasury estimates that there is at least one meaningful merger each year that is not notified. However, as the number of mergers not notified is unknown, this number could be higher.

Harm from mergers not considered

The direct detriment to the Australian economy from non-notified mergers and acquisitions is not possible to measure, as the identity, number and effect of these mergers and acquisitions is unknown. If the mergers and acquisitions could be identified, the OECD recommends that the direct static consumer harm from a SLC could be calculated by multiplying the size of the ex-ante turnover of all the firms in the affected market by an expected price increase, and the number of years it is likely to endure.^[60] Treasury has estimated a range of the direct static consumer harm on an assumption of a 5 per cent price increase enduring for 2 years, and then on the basis of a 10 per cent price increase enduring for 5 years in Table 1 below. The lower bound of 2 years reflects the conservative assumptions adopted by overseas agencies such as the US Federal Trade Commission and the UK Competition and Markets Authority in undertaking similar exercises.^[61] The upper bound of 5 years reflects that mergers result in changes to market structures that can have long lasting effects. The range of 5-10 per cent is indicative of a level of concern that a merger or acquisition may substantially lessen competition, noting that the precise threshold between a lessening of competition and a substantial lessening of competition is a matter of judgement and in some markets an increase in price that is very small in magnitude may nonetheless be substantial.

Table 1. Estimated harm from mergers and acquisitions

The most prominent example of non-notification raised by the ACCC (Petstock's acquisition of a large number of pet stores) took place in a market with revenue in Australia of $3.7 billion in 2023.^[62] As an illustration, using the assumptions above, this could result in harm of $370 million to $1.8 billion if this type of merger proceeds undetected and results in a SLC that leads to a price increase of 5 to 10 per cent enduring for between 2 and 5 years.

Time taken to assess a merger

Under the status quo, the average duration of Phase 1 in 2023 was 59 working days (with the minimum being 33 and the maximum being 100). The average duration of Phase 2 in 2023 was 133 working days (with the minimum being 118 and the maximum being 148), not including periods where the timeline was suspended while the ACCC waited for information from the merger parties and any confidential pre-assessment review time.

The average duration of Federal Court proceedings is 316 calendar days.^[63]

Cost for businesses

The estimated costs for businesses under the status quo are detailed in Tables 2a and 2b below. The methodology and assumptions for these estimates are set out in Attachment A.

Table 2a. Estimated direct costs to business under the status quo (informal review)

Table 2b. Estimated direct costs to business under the status quo (merger authorisation)

The total annual direct cost to business of informal review and merger authorisation under the status quo (assuming 300 informal review notifications and one merger authorisation application per year) is estimated to be $160.2 million.

There is no data that informs the average dollar cost of delay for business. However, submissions suggest it is significant. For example, as noted above, the BCA submitted that: 'A lengthy clearance process can delay commercial decisions, time parties out from deals and impose significant costs on business, including small and family businesses on the sell-side of a transaction.'^[65] Indicatively, every ten basis points of additional financing costs on the total value of mergers over the time taken for ACCC assessment of public reviews in 2023 suggests such costs of the current system could be around $19 million.^[66]

Cost for the ACCC

The average cost to the ACCC to conduct an informal public review is under $500,000.^[67] In the past 10 years, the ACCC has averaged 32 informal public reviews per year. The average cost for the ACCC for Federal Court proceedings is typically above $5 million per merger.^[68]

Transparency

In the past 10 years, on average only 10 per cent of ACCC informal reviews have been made public (with 90 per cent of reviews made using the pre-assessment process, where no information is publicly released identifying the acquisition or the basis for the assessment).

In the past 10 years, there have been 67 instances where the ACCC has released a public competition assessment setting out its views. This is only 2 per cent of all reviews, and 17 per cent of all public reviews.^[69]

The largely confidential nature of the process, the lack of reasons for ACCC assessments, and the fact that the merger guidelines have not been substantively updated since 2008, provides little guidance for merger parties in preparing their applications. In turn this increases the costs of notification because merger parties do not readily understand the type of information the ACCC will need to undertake its assessment, and may expend time and money gathering and supplying unnecessary information to the ACCC. The absence of broader guidance also means businesses may commit time and money towards acquisitions that the ACCC are likely to block - better guidance helps businesses to make informed choices at an earlier stage of buying or selling a business or asset.

Advantages

Notwithstanding the problems described in Question 1, there are some advantages to the current approach that can be considered when comparing an alternative system. These include that voluntary notification permits a business to self-assess whether the merger is likely to SLC, and choose whether to notify the merger to the ACCC (reducing direct incurred costs by not notifying) or seek a declaration in the Federal Court.

The informal merger review also has the advantage of being flexible, it does not prescribe information requirements and has no filing fee. Additionally, some businesses value the ability to obtain a confidential informal view from the ACCC.^[70]

The status quo also has the advantage of retaining a judicial enforcement model that provides consistency with the approach taken for the enforcement of other provisions of the CCA.

Option 2 - Mandatory and suspensory administrative system with an extended SLC test

Benefits

Preventing competition from being eroded and providing better outcomes for consumers, businesses and the economy

For consumers and businesses of all sizes, an effective merger control system prevents anti-competitive mergers and supports competition, putting downward pressure on prices and delivering more choice.

This benefit arises from Option 2 by improving the ACCC's ability to effectively and efficiently detect and prevent anti-competitive mergers. Mandatory notification requirements mean that merger parties cannot choose to avoid scrutiny of mergers above certain thresholds, applying a risk-based approach to review. Under this option, identifying and assessing the potential impact of mergers would become more routine given the need for such data in setting the notification thresholds and other regulatory instruments mitigating risks to the community.

The suspensory nature of the new system coupled with the upfront information requirements reduces the ability for businesses to engage in strategic behaviour and prevents businesses threatening to complete mergers and acquisitions before the ACCC has undertaken its assessment. This will make the ACCC a more effective decision-maker, putting it in a stronger position to detect and prevent anti-competitive mergers.

The robustness and quality of decision making will also be improved through making the ACCC the expert, first-instance decision-maker. As an administrative decision-maker, the ACCC will gather all relevant information and evidence, analyse this material, weigh up relevant considerations and set out objective, factual findings and other considerations in its reasons for decision. Necessary economic rigour will be applied to the assessment of mergers, supported by information and evidence without being limited by the rules of admissibility under the Evidence Act 1995 (Cth). This, in conjunction with review by the Tribunal, will improve merger outcomes, in that it will mitigate the risk of harmful mergers and acquisitions being cleared and benign mergers not proceeding.

The quantum of the benefit of preventing anti-competitive mergers is difficult to estimate in dollar terms. Evidence from overseas shows that the order of magnitude of these benefits may be in the hundreds of millions or billions of dollars per year. For example, the UK Competition and Markets Authority (CMA) estimates that in the financial years 2020-21 to 2022-23, the UK merger control system saved consumers GBP 2 billion in total, at an average of GBP 652.2 million per year (this does not include the significant but difficult to measure benefits of deterrence).^[71] The United States Federal Trade Commission (FTC) estimates its merger and conduct enforcement activities saved consumers US$3.1 billion (five-year rolling average) alone, which does not account for merger enforcement activity undertaken by the US Department of Justice who also shares jurisdiction on mergers and acquisitions.^[72]

In the Australian context, such estimates would need to be adjusted to reflect the smaller size of the Australian economy. The US and UK estimates represent 0.013 per cent and 0.028 per cent of their respective GDP. Applying this range to Australia would imply benefits of between $340-732 million,^[73] although some measure of this benefit is already achieved under the status quo.

As outlined in Question 1, there is evidence that the intensity of competition has weakened across many parts of the economy, accompanied by increasing market concentration and markups in many industries. Illustrative modelling undertaken jointly by the RBA and Treasury highlights the potential value of competition, suggesting that Australia's GDP could be 1-3 per cent higher if we returned to the level of competition that prevailed in the early 2000s. In today's dollars, that is approximately $30-80 billion each and every year.^[74] While merger control is not the only variable that affects competition, a significant number of mergers and acquisitions do take place each year.^[75]

Reducing cost of delays through shorter and more certain timelines

Shorter timeframes for merger assessments will bring significant direct and indirect benefits for merger parties, but these are difficult to estimate in dollar terms as they are merger specific. Indirect benefits include reduced finance (funding/holding) costs, and deterioration in asset or business value due to uncertainty and delays (e.g., key staff leaving). Submissions to the 2023-24 Merger Reform Consultation make clear that a lengthy clearance process can delay commercial decision-making and impose significant costs on business.^[76] For example, the Tech Council of Australia submitted that: 'Delays in regulatory approval for mergers has [sic] enormous commercial implications, with delays or the expectation of long regulatory delays capable of killing deals.'^[77]

As merger and acquisitions are time-sensitive, prompt decision-making is critical. To support prompt reviews, statutory timelines will be set for ACCC reviews. Option 2 reduces Phase 1 from an average of 75 days to 30 days (a 60% reduction). It also reduces the total of Phase 1 and Phase 2 from an average of 192 days in the status quo to 120 days (a 37% reduction). Legislating these timeframes increases certainty for business and reduces transaction costs, which will assist merger parties' planning.

Increasing transparency

Merger parties, interested stakeholders and the community will benefit from increased transparency. All mergers considered by the ACCC under Option 2 will be disclosed to the public (in comparison to less than 10% under the status quo). The ACCC will need to provide reasons for 100 per cent of decisions under Option 2. This is compared to the status quo where the ACCC has released a public competition assessment setting out its reasons for only 2 per cent of all mergers assessed or 17 per cent of public reviews.^[78]

Greater transparency improves prospective merger parties' understanding of the merger control processes and likely outcomes. By doing so it may have a deterrence effect whereby fewer anti-competitive mergers are proposed. Overseas analysis shows that the effects of deterrence can be significant albeit very difficult to measure precisely.^[79] For merger parties, transparency also increases confidence in the process.

For interested stakeholders, transparency ensures confidence in the ACCC's decision making and broader community awareness. By disclosing all mergers under Option 2, this will provide interested stakeholders with the opportunity to engage by making submissions to the ACCC or providing information, documents, data or other evidence that facilitates more informed and rigorous decision making by the ACCC.

Risk-based

The ACCC will be notified of those mergers most likely to impact Australian consumers if they are anti-competitive. This will ensure regulatory resources (and cost) are appropriately targeted based on risk to competition and consumers. This will be achieved by the application of monetary and market concentration thresholds to determine whether an acquisition must be notified. A Treasury Minister will also be given the power to introduce additional targeted notification requirements, avoiding the need to lower the economy-wide thresholds and reducing the incidental capture of benign mergers within the thresholds. These notification thresholds will be subject to consultation before being set in subordinate legislation, and will be regularly reviewed with respect to evidence of the risk of potential harms to the community over time. A statutory review of the new merger system, including the notification thresholds, will take place 3 years from commencement of the new system, supported by annual ACCC reporting on merger activity, ex post merger analysis and data analytics (please refer to further details in Question 7).

Cost recovery

The fees imposed will be based on cost recovery principles, reflecting the resources required by the ACCC to efficiently carry out the review of a merger or acquisition and scaled to reflect the complexity and risk of the merger. The fees will be paid into consolidated revenue, rather than accruing directly to the ACCC. These costs are a transfer as they shift costs from the public to the merger parties. Under the status quo, the ACCC estimates the average cost to undertake an informal public review is under $500,000 and in the 2022-23 financial year, there were 23 reviews of this nature. The total cost for the ACCC to consider these mergers is $11.5 million, which does not include pre-assessment matters or litigated matters. The cost for litigated mergers is larger, which the ACCC estimated costs more than $5 million per merger.

Costs

Compared to the status quo, Option 2 will impose some one-off establishment costs on businesses. Businesses undertaking a merger and competition lawyers and economists will have to familiarise themselves with the new system. To minimise this burden, the Government has adopted an approach that allows businesses and practitioners sufficient transition time.

Legislation is expected to be introduced into Parliament in 2024, with the ACCC expected to consult on guidelines and notification forms in 2025, ahead of the new system becoming mandatory from 1 January 2026. This sequential approach will afford businesses, advisors and the community a longer period over which to incur the time cost of familiarisation and have some discretion about when to incur these costs, mitigating some of the burden. The familiarisation costs are estimated to be around $235,000 for relevant businesses, law firms and other specialist advisors.

Option 2 will also impose ongoing regulatory costs on businesses in the form of administrative (labour costs for business) and substantive costs (purchase costs for legal and economic consultant fees).

These costs per merger are summarised in Table 3 below, with further detail on the costed activities and costs per merger, including total costs, detailed in Attachment A.

Table 3. Estimated direct costs to business under Option 2

The annual cost under Option 2 (assuming 300 notifications per year) is estimated to be $10.8 million above the status quo (which Treasury estimates to have a total annual cost of $171 million).

A significant proportion of these costs are already incurred in the status quo (93% based on Treasury estimates). In some instances, some of these individual costs may be lower than the status quo. This is because some businesses may have been unnecessarily seeking ACCC views under the status quo (due to lack of certainty) and for these businesses' costs will decrease. The increased efficiency of the streamlined Tribunal process will also reduce costs for businesses seeking review of decisions.

Unlike the status quo, fees would be imposed on businesses (with an exception for small businesses so that the fees are not a disproportionate burden for those businesses) for notifiable mergers and acquisitions. The fees will reflect the resources required by the ACCC to efficiently carry out the review of a merger or acquisition. Indicatively, Treasury anticipates this would be around $50,000-100,000 for most mergers.^[80] Assuming 300 notifications per year, this amounts to $15-30 million per annum (not including Phase 2).

Budget Paper No. 2 of the 2024-25 Budget outlines that future cost recovery fee arrangements with estimated fees of $90.5 million over 3 years from the 2025-26 financial year have been held in the Contingency Reserve pending the finalisation of the policy and implementation details of the new merger system. In the absence of fees these costs would be borne by the ACCC and ultimately the public.^[81] The fees will be set in subordinate legislationto enable them to be updated as necessary to reflect changes in the economy and be more responsive to the experience of businesses subject to the fees. Treasury will undertake consultation on the proposed fees.

The regulatory burden of Option 2 (compared to the status quo) is set out in Table 4 below. The underlying methodology for these calculations is provided at Attachment A .

Table 4. Regulatory cost estimate - Option 2

The regulatory cost estimate is sensitive to the number of mergers reviewed. As outlined in Question 3 above, the notification thresholds are expected to average an overall volume of mandatory notifications similar to current volumes, with around 300 to 500 annual notifications projected using existing available data. However, these projected number of notifications are subject to a substantial margin of error. This reflects limitations in the available historical data, which is partly the result of the limited visibility of merger activity that Australia's voluntary notification system has provided to date. In particular, the data relied upon in our projected notifications are incomplete, and do not fully cover acquisitions of, for example, patents, land or minority interests. The substantial margin of error in projected notifications also reflects the uncertainty in future merger activity in Australia, which will depend greatly on underlying market conditions that are difficult to predict even a year in advance. Moreover, there may be additional transactions that parties choose to voluntarily notify even when not required to do so by the notification thresholds.

Taking the above limitations with projected number of notifications into account, if the assumed number of mergers are 500 notifications per year, the estimated total cost would be $267 million (an increase of $96 million from the estimated total cost of $171 million for 300 notifications).

Treasury has given consideration to non-regulatory costs (such as impacts merger control may have on cost of funds or finance options for merger parties). However, it is considered that they will not have meaningful detrimental impacts compared to the status quo.

Net Benefit

Option 2 generates significant benefits by preventing competition from being eroded and providing better outcomes for consumers and businesses; reducing the cost of delays through shorter and more certain timelines; making the system more risk-based; and increasing transparency.

These benefits are not able to be quantified in dollar terms, but are significant, with estimates that Australia's GDP could be 1-3 per cent higher from stronger levels of competition. In today's dollars, that is approximately $30-80 billion each and every year (although as noted above, merger control is not the only variable which affects competition).^[82] Applying overseas estimates of the benefits gained from effective and efficient merger control (adjusted for the size of the Australian economy) implies benefits of $340-732 million per year (although, as noted above, some measure of this benefit is already achieved under the status quo). Both measures are well in excess of the estimated total cost of Option 2 of $171 million.

Additionally, compared to the status quo (which Treasury estimates to have a total annual cost of $160.2 million), the incremental benefits will also outweigh the incremental costs, which Treasury estimates to be $10.8 million per annum. For a net benefit to occur, the system under Option 2 only needs to prevent one additional merger that results in a 5 per cent price rise in a market the size of $200 million that endures for a year (which Treasury estimates would be associated with harm of $10 million).^[83] Treasury considers there to be significant net benefits in Treasury's estimation.

Option 3 - Mandatory and suspensory administrative system with a satisfaction test

Option 3 shares many of the same features, benefits and costs as Option 2. The principal difference between the options is the standard for which mergers and acquisitions are permitted or opposed.

Benefits

Option 3 is likely to achieve benefits similar to Option 2 by preventing competition from being eroded and providing better outcomes for consumers and businesses; reducing the cost of delays through shorter and more certain timelines; making the system more risk based and increasing transparency. Further, it could encourage merger parties to invest more in outlining the likely impact on competition, potentially resulting in even less anti-competitive mergers to proceed.

Costs

However, Option 3 alters the calculus for the benefits as it imposes a more onerous and restrictive standard of review, increasing the risk of a chilling effect where more pro-competitive or benign mergers are deterred or blocked. This would increase the costs of moving to an administrative decision-making model.

In response to the 2023-24 Merger Reform Consultation, many stakeholders objected to the perception that the requirement to satisfy the ACCC that a merger is not likely to SLC before approving a merger 'reversed the onus of proof'; effectively introducing a presumptive 'ban' on mergers. AustralianSuper noted 'It would also create the rebuttable presumption that the merger is negative, unlawful and should not be approved.'^[84] Treasury heard from stakeholders that this element could introduce systematic bias, increasing the number of rejected mergers every year. The Law Council of Australia submitted that 'In circumstances where the vast majority of mergers do not raise competition concerns, it is not appropriate to require the ACCC to be 'satisfied' as a mandatory requirement that transactions are not anti-competitive.'^[85] The Tech Council of Australia further noted that 'If the onus of proof is reversed, it is much more likely that transactions with any uncertainty about the future will be rejected as they cannot show that the transaction will not SLC.' ^[86]

Treasury also heard concerns that 'reversing the onus' may reduce the need for detailed legal and economic analysis required to assess the inherent risks and uncertainty associated with a merger. The Business Council of Australia submitted 'A subjective 'satisfaction' standard is out of step with approaches in overseas jurisdictions which consider whether a transaction raises competition concerns by applying objective tests.'^[87] The Tech Council of Australia further noted 'The ACCC has compulsory information gathering powers which it uses in the course of its reviews to gather information from both merger parties and a range of third parties. The ACCC uses this material to build its case that the acquisition will result in an SLC, where that is relevant. Reversing the onus of proof will require merger parties to provide evidence to the ACCC that the acquisition will not SLC, but merger parties do not have the same ability to procure evidence from third parties (either other industry participants, or third parties who may hold key data relevant to the assessment of the acquisition).'^[88] In addition, the Law Council of Australia submitted that 'This combination of features would be likely to make any Australian model based on an 'administrative' standard more uncertain, costly, less flexible and more time consuming for global and local business.'^[89]

Under Option 3, mergers and acquisitions in some new and emerging markets (such as new technologies) may also find it more difficult to satisfy such a test. The Tech Council of Australia submitted that 'If the onus of proof is reversed, it is much more likely that transactions with any uncertainty about the future will be rejected as they cannot show that the transaction will not SLC'.^[90] As indicated above, Dr Rhonda Smith and Professor Deborah Healey submitted that 'Providing evidence of the alleged substantial lessening of competition resulting from a merger, and particularly a digital merger, to a standard that satisfies the Evidence Act is extremely difficult, if not impossible. The merger is yet to occur so there is no direct factual evidence concerning the effect of the merger.' ^[91] It could send a 'chilling effect' on business investment and innovation, particularly in such new and emerging markets, and negatively impact growth. Australia would also be a global outlier - the only mandatory and suspensory jurisdiction in the world with this more onerous and restrictive standard for merger control.^[92]

Compared with Option 2, it likely imposes additional costs on businesses in expending resources to meet the more onerous standard of satisfying the ACCC. These costs are borne by all merger parties in satisfying the ACCC, and disproportionately so for benign or pro-competitive mergers and acquisitions.

These costs per merger are summarised in Table 5 below, with further detail on the costed activities and costs per merger, including total costs, detailed in Attachment A.

Table 5. Estimated direct costs to business under Option 3

The annual cost under Option 3 (assuming 300 notifications per year) is estimated to be $83.7 million above the status quo.

The key driver of the cost differences between Option 2 and Option 3 are the assumptions on the cost of notification, the number of mergers that will proceed to Phase 2, the number of mergers that will be considered on public benefits grounds, and the number of mergers that will be reviewed by the Tribunal, cumulating in higher indirect costs to businesses from longer timeframes. This is because disproving the existence of a SLC is more difficult for businesses to satisfy.^[93]

The effect of this is that it is likely less mergers would be resolved in Phase 1 (Treasury estimates 30 mergers moving to Phase 2, compared with 15 mergers under Option 2), more merger parties seeking approval on public benefits grounds in situations where the ACCC was not able to be satisfied that a merger would not SLC (Treasury estimates 4 mergers per year considering public benefits, compared with 2 mergers under Option 2), and more applications for review by the Tribunal (Treasury estimates 6 reviews per year, compared with 4 reviews under Option 2).

The regulatory burden of Option 3 (compared to the status quo) is set out in Table 6 below. The underlying methodology for these calculations is provided at Attachment A .

Table 6. Regulatory cost estimate - Option 3

Net Benefit

Option 3 is a mandatory, suspensory and administrative system and will achieve some of the same benefits as discussed in Option 2 through effective and efficient merger control bringing about stronger levels of competition. However, compared to Option 2, it imposes a more onerous and restrictive standard of review increasing the risk of a chilling effect where pro-competitive or benign mergers are deterred or blocked, which may mitigate some of these benefits. It will also increase the costs of notification, and result in longer timeframes.

Compared to the status quo (which Treasury estimates to have a total annual cost of $160.2 million), the incremental costs is estimated to be $83.7 million per annum more than the status quo. For a net benefit to occur, the system under Option 3 would need to prevent one additional merger that results in a 5 per cent price rise in a market the size of $2 billion that endures for a year (which Treasury estimates would be associated with harm of $100 million).^[94]

Option 4 - Mandatory and suspensory judicial enforcement system with a SLC test

Benefits

Option 4 will achieve some of the same benefits discussed under Option 2, to the extent they relate to the introduction of a mandatory and suspensory merger system.

The benefits from retaining a judicial enforcement model includes more rigorous legal analysis and consistency with the approach taken for the enforcement of other provisions of the CCA, and an objective and independent judicial forum where the ACCC has to establish in court that the merger is likely to SLC to stop a merger.

Another benefit is that businesses and advisors are familiar with the Federal Court and established practice.

Costs

Compared to Option 2, these benefits are likely to be diminished due to the longer timeframes along with significant additional cost. As occurs in the status quo, a first instance decision from the Federal Court would result in businesses incurring costs in the range of $11 million for each merger.

Additionally, there may be less scope for economic evidence to be presented in the Federal Court as submitted by Dr Rhonda Smith and Professor Deborah ^[95] and voiced by the ACCC. At the same time, there will be higher participation barriers for affected third parties - competitors, suppliers or ^[96] - because of the expense of participating in judicial proceedings, which will likely necessitate incurring the cost of legal representation.

There will also be less transparency due to the lack of published reasons for each merger. For mergers the ACCC had indicated it would oppose, the lack of published reasons may be because the ACCC was concerned about prejudice to later enforcement action. Transparency in merger control is desirable because it helps business and advisors understand the boundaries of permissible mergers, shaping business behaviour over time. Under Option 2, all mergers assessed by the ACCC would have reasons provided for each decision. Under Option 4, only a very small number of mergers (less than 1%) would have detailed reasons in the form of a court judgment.

These direct costs per merger are summarised in Table 7 below, with further detail on the costed activities and costs per merger, including total costs, detailed in Attachment A.

Table 7. Estimated direct cost to business under Option 4

The annual direct cost under Option 4 (assuming 300 notifications per year, and 1 merger authorisation) is estimated to be $22.1 million above the status quo.

A key driver of the total costs under Option 4 is that both business and the ACCC will need to expend additional costs on litigation, which are likely to be higher than costs in an administrative system.

The regulatory burden of Option 4 (compared to the status quo) is set out in Table 8 below. The underlying methodology for these calculations is provided at Attachment A .

Table 8. Regulatory cost estimate - Option 4

Net Benefit

Option 4 is a judicial enforcement model that requires mandatory notification. Option 4 will partially achieve the benefits of more effective merger control described in Option 2 to the extent that they relate to the mandatory notification of mergers. These benefits are expected to exceed the costs of $182.3 million.

Compared to the status quo (which Treasury estimates to have a total annual cost of $160.2 million), the incremental benefits will also outweigh the incremental costs, which Treasury estimates to be $22.1 million per annum more than the status quo. For a net benefit to occur, the system under Option 4 would need to prevent one additional merger that results in a 5 per cent price rise in a market the size of $400 million that endures for a year (which Treasury estimates would be associated with harm of $20 million).^[97]

5. Who did you consult and how did you incorporate their feedback?

Consultation paper

Between 20 November 2023 and 19 January 2024, the Competition Taskforce publicly consulted on options for modernising Australia's approach to merger control.^[98]

The 3 broad options outlined in the consultation paper draws from experience globally.^[99] A range of stakeholders representing small and large business, farmers, consumer groups, legal profession, and academics, were invited to suggest alternative options or variations of these options and outline their benefits and risks, as well as provide views on whether the existing approach should be retained.

•

Option 1 - a voluntary formal clearance regime could be introduced, where businesses could choose to notify a merger and the ACCC could grant legal immunity from court action under the prohibition against anti-competitive mergers in section 50 of the CCA if satisfied the merger would not be likely to SLC.

•

Option 2 - a mandatory and suspensory regime could be introduced, with compulsory notification of mergers above a threshold. Transactions would be suspended for a period while the ACCC conducts its assessment. To prevent an anti-competitive merger, the ACCC would need to prove to the court that the merger would be likely to SLC.

•

Option 3 - a mandatory formal clearance regime could be introduced, with compulsory notification of mergers above a threshold and allowing the ACCC to 'call-in' transactions below the threshold where there are competition concerns. The ACCC would only grant clearance if it was satisfied the merger was not likely to SLC. Clearance would provide formal immunity from court action under section 50 of the CCA.

Options to reform the merger control test were also consulted on. These were:

•

Option A - modernise the list of matters that the ACCC may, and the court must, consider when assessing the impact of mergers on competition (known as the 'merger factors' in section 50(3) of the CCA). Alternatively, the test could be simplified by removing the merger factors from the legislation.

•

Option B - the SLC test could be expanded to include mergers that 'entrench, materially increase or materially extend a position of substantial market power'.

•

Option C - related agreements between merger parties (such as non-compete agreements or agreements concerning supply of goods or services post-merger) could also be considered as part of the consideration of the effect of the merger on competition.

Each of the options to reform the merger control test could be implemented alone, together, or along with the options to reform the merger control process.

The public consultation included 9 roundtables attended by 42 organisations across Sydney, Melbourne, Brisbane and online, and 46 non-confidential written submissions.^[100]

An Expert Advisory Panel - members of which are Kerry Schott, David Gonski, John Asker, Sharon Henrick, John Fingleton, Danielle Wood and Rod Sims - also contributed their views.

How feedback was incorporated

The consultation indicated that there was support from a range of stakeholders for reform of Australia's approach to merger control.^[101]

•

Consumer groups,^[102] agribusinesses,^[103] small businesses,^[104] retail^[105] and grocery industry groups^[106] and academics^[107] support a mandatory and suspensory administrative merger control system to give the ACCC the tools it needs, and reform to capture mergers that create, strengthen or entrench substantial market power.

•

Consumer groups highlighted adverse consumer outcomes in highly concentrated sectors - grocery, banking, telecommunications, energy, insurance, and the digital economy.^[108] Consumer groups and small business also strongly supported giving the ACCC the tools it needs to efficiently prevent harmful mergers and advocated for increased transparency to facilitate engagement with ACCC merger reviews.^[109]

•

Farming groups raised concerns about market concentration in supply chains, with limited options for buying inputs and selling products impacting their ability to sell produce at competitive prices.^[110] Farming groups advocated for increased transparency to facilitate engagement with ACCC merger reviews.^[111]

•

Academics highlighted the significant evidentiary challenges for the ACCC to prevent anti-competitive mergers in court and lack of economic analysis.^[112]

•

Retail and grocery industry groups suggested reform focused on targeting concentrated markets, the dominant supermarkets, serial acquisitions and greater analysis of both price and non-price effects of anti-competitive mergers.^[113] They also noted that any reform should minimise regulatory burden.

•

Large businesses and the legal profession generally preferred the flexibility and voluntary nature of the existing approach with the Federal Court as the decision-maker^[114] but acknowledged improvements could be made, ^[115] in particular to timeliness, transparency and certainty.^[116]

As noted above, there was significant stakeholder opposition to the satisfaction test included in Option 3 above.

The stakeholder feedback was used to inform the development of the options considered in this analysis, with the Government's response outlined in more detail in Attachment B.

Exposure draft and other consultation

Exposure draft of Treasury Laws Amendment Bill 2024: Acquisitions was released for public comment on 24 July 2024. The exposure draft sets out the framework of the new system including:

•

notification and timelines

•

definition of acquisitions

•

test to be applied for considering competition impacts and public benefits

•

procedural safeguards.

Consultation on the proposed amendments to the CCA also occurred with states and territories, with a vote conducted with states and territories on the proposed reforms, as required by intergovernmental competition agreements (1995 Intergovernmental Conduct Code Agreement).

Subordinate legislation will be implemented for some elements of the proposed system following the passage of the legislation. These elements include setting the mandatory notification thresholds and fees, which will be subject to separate consultations. Once consultations are completed and stakeholder feedback is considered, Treasury will prepare the necessary supporting subordinate legislation.

As outlined above, there will be an appropriate transition period between legislation passing and commencement to allow for businesses to adjust and for new systems and guidance to be developed.

Status of the Impact Analysis at each major decision point

Table 9. Impact Analysis (IA) at each major decision point

6. What is the best option from those you have considered and how will it be implemented?

What is the best option from those you have considered?

Option 2 is the recommended option - a mandatory and suspensory administrative merger control system. A single, streamlined merger control system will enhance efficiency, predictability and transparency for businesses, stakeholders and the community, and removes the scope for strategic behaviour by merger parties. It will ensure the ACCC is significantly better equipped to detect, review and act against those mergers that SLC.

Treasury considered the impact of allowing the status quo (Option 1) to continue. However, retaining the status quo would not address the feedback received from stakeholders that the current 'ad hoc' merger process is unfit for a modern economy. Further, Option 1 does not meet community expectations that the ACCC can detect and stop anti-competitive mergers.

Compared to the Option 2 (preferred), Option 3 also strengthens Australia's merger control system by introducing a mandatory and suspensory administrative merger system. However, requiring merger parties to satisfy the ACCC that the merger is not likely to SLC introduces a restrictive and onerous standard, significantly increasing the cost on all merger parties. With a stronger, better-equipped ACCC under Option 2, there are currently insufficient grounds for adopting Option 3.

Option 4 (mandatory and suspensory judicial enforcement system with a SLC test) will achieve some of the same benefits as under Option 2 (preferred). However, risks include uncertain and lengthy timeframes due to the nature of the judicial process, lack of transparency, less scope for economic analysis, along with significant additional costs (as compared to both Option 1 and Option 2).

How will it be implemented?

The Government recognises a new merger control system involves significant change, including for business, advisors, the ACCC and the Tribunal.

Legislative change

The merger reform will be principally implemented through amendments to the CCA and associated subordinate legislation, following public consultation on the draft legislation.^[117]

Subject to the Government's legislation prioritisation process and available drafting resources, legislation is expected to be introduced into the Parliament in the 2024 Spring sittings, ahead of commencement on 1 January 2026. Subordinate legislation will also be implemented for key elements of the proposed system following the passage of the legislation. These elements include setting the mandatory notification thresholds and fees.

Prior to parliamentary consideration, pursuant to the 1995 Intergovernmental Conduct Code Agreement ('the Agreement'), the Commonwealth is required to consult with States and Territories for a 3month period on the proposed changes to the CCA, followed by a 35-day voting period. Amendments to the CCA are subject to the approval of a majority of votes of the Commonwealth, States and Territories. The Commonwealth has 2 votes and each State and Territory has one vote. The Commonwealth also has a casting vote. Any jurisdiction that does not vote within the 35-day voting period will be taken to have voted in favour of the amendment.

Prior to parliamentary consideration, pursuant to the 1995 Intergovernmental Conduct Code Agreement ('the Agreement'), the Commonwealth is required to consult with States and Territories for a 3month period on the proposed changes to the CCA, followed by a 35-day voting period. Amendments to the CCA are subject to the approval of a majority of votes of the Commonwealth, States and Territories. The Commonwealth has 2 votes and each State and Territory has one vote. The Commonwealth also has a casting vote. Any jurisdiction that does not vote within the 35-day voting period will be taken to have voted in favour of the amendment.

g period will be taken to have voted in The ACCC The ACCC will be given the resources and mandate to act as the merger system steward to promote and maintain competitive markets in Australia. A shift in capabilities and practice will be required to support the change from enforcement action in court to more data- and economics-led administrative decision-making. To facilitate this change, new performance standards will be set for the ACCC for merger assessments, including timeliness, guidance and reasons for determinations. The Government also released a Statement of Expectations (SOE) to the ACCC that outlines the Government's expectations for how the ACCC will promote a competitive, dynamic and inclusive economy and modern, well-functioning markets that work for consumers.^[118]

As part of the ACCC's Statement of Intent in response to the SOE,^[119] the ACCC has committed to support the delivery of merger reform, including through a risk-based approach, making use of data and economic analysis, and increased transparency and guidance.

An independent expert adviser has been appointed to provide advice to Treasury and the ACCC on effective implementation of the new system, specifically the mandatory notification thresholds and statutory assessment timelines, as well as ACCC capability, culture, practice, systems and resourcing. This will include advice on delivering the Government's merger reforms through a risk-based approach to merger review, supporting the change from enforcement action in court to more data- and economics-led administrative decision making and increased transparency and guidance to the community to enhance community understanding and administrative predictability.

The Treasury

Treasury has been provided additional resourcing to facilitate development of the legislation and implement the new system. This included the appointment of an independent expert adviser on the implementation of the merger reforms. The adviser will provide advice to both the Treasury and the ACCC to assist effective implementation of the new system as indicated above.

The Australian Competition Tribunal

ACCC determinations under the new merger review system will be subject to review by the Tribunal upon application by the merger parties or third parties (subject to sufficient interest). Judicial review of decisions by the ACCC and Tribunal will be available in the Federal Court.

Implementation challenges and risks

Implementation of the new system has the following challenges and risks.

•

The notification thresholds over-capture or under-capture (false positives and negatives).

•

Anti-competitive mergers that have an appreciable effect on competition are not captured or action is taken by the ACCC under the Part IV of the CCA.

•

Acquisitions are voided due to businesses not being aware of the new requirements.

•

Systems and processes are not in place (for example, IT, forms, policies, procedures, and guidance is not developed and consulted on) prior to commencement of the new system, leading to the ACCC not being able to receive and efficiently assess notifiable mergers at the commencement of its new regulatory powers.

•

ACCC staffing complement, resourcing, capability not sufficient to meet the needs of the new system.

To mitigate risk, a merger or acquisition that is required to be notified will be set out in subordinate legislation with additional targeted notification requirements set by a Treasury Minister. This provides the flexibility to calibrate and update them over time, ensuring that the system is risk-based and targeted at those mergers most likely to result in harm to competition and consumers, while reducing the overall compliance burden on businesses. Setting notification thresholds in subordinate legislation and a Ministerial power (following consultation, which may include advice from the ACCC) to specify additional mergers and acquisitions that must be notified offers flexibility to achieve these objectives over time.

Up until now, Australia has lacked a comprehensive database of merger and acquisition activity in Australia. This gap has made it difficult to understand trends in merger activity and evaluate the impact of mergers and merger policy on the economy. At present, the ACCC has only patchy visibility of mergers and acquisitions, based on whether companies voluntarily report such activities to the ACCC or the ACCC is informed by FIRB referrals. As noted in Question 1 above, the new comprehensive database of merger and acquisition activity will facilitate the evaluation of broader competition policies, including the calibration of the notification thresholds.

As outlined in Question 4 above, legislation is expected to be introduced into Parliament in 2024, and substantive and procedural guidance will be consulted on and published in 2025 by the ACCC, ahead of the new system being mandatory on 1 January 2026. This will facilitate transition for businesses, advisors and the community, affording a longer period over which to incur the time cost of familiarisation and have some discretion about when to incur these costs, which mitigates some of the burden.

The proposed reform would involve considerable change for the ACCC as it moves from a law enforcement approach to an administrative decision-making role. This change will require additional resources and a change in ACCC culture, capability and practice. To support this change, as outlined above, an independent expert adviser to the chair of the ACCC and Secretary of the Treasury will be appointed, to be supported by a Treasury secretariat. The independent expert adviser will provide advice to Treasury and the ACCC on effective implementation of the new system, including the ACCC's capabilities, culture and practice.

7. How will you evaluate your chosen option against the success metrics?

Treasury will undertake a statutory review to evaluate the functioning of the system 3 years after commencement. The design of the review will be supported by the Australian Centre for Evaluation. It will be informed by evidence of the new system in practice, including a better understanding of how mergers and acquisitions affect the economy and the performance of the ACCC.

This will be supported by post-implementation monitoring of the impact of the reform on an ongoing basis through annual ACCC reporting on merger activity^[120], ex-post merger analysis and data analytics.^[121] Annual ACCC reporting on merger activity will provide transparency on merger activity to raise community awareness of this activity, which will be particularly important during the early years of the new system. Ex-post merger analysis on selected matters (based on availability of information and data, the time elapsed since the merger, the unique issues raised, and the potential relevance to future ACCC investigations) will permit insights into the impacts of mergers, helping to refine and improve merger assessments and decision-making by the ACCC.

Further, as noted in Question 1 above, a merger tracking methodology will be created to build the capability to examine microdata-based methodology to track mergers and their impacts. Specifically, a new comprehensive database of merger and acquisition activity in Australia, based on the existing ABS BLADE and linked to ABS Consumer Price Index and wholesale price data, will facilitate analysis of the impact of mergers on prices, as well as wages, employment, productivity, market share, and profitability across industries.

Annual ACCC reporting on merger activity will provide transparency on key metrics associated with the new system and support integration into broader ABS administrative datasets once implementation begins. Evaluations undertaken using this comprehensive merger database will also help inform the 3-year statutory review of the effectiveness of the new merger control system.

Stakeholder consultation, interviews and surveys may be conducted to inform and supplement the quantitative analysis.

Evaluative measures

As outlined in Question 2, the key metrics to track the effectiveness of the reforms are the number of mergers that go ahead that have anti-competitive effects (reflecting the quality of the ACCC's assessments) and the speed of ACCC assessments. Both metrics would be expected to improve significantly following the implementation of the new merger system. To this end, the above data points will inform analysis of the extent to which the new merger control system has been effective in correctly capturing and identifying anti-competitive mergers (notification thresholds set at the appropriate level, and the ACCC correctly identifying and stopping mergers of concern as verified through ex-post merger reviews).

Evaluating the success of this reform will be measured through analysis of:

•

ACCC reporting on acquisition activities and ex-post review of decisions

•

mandatory notifications to capture mergers and acquisitions of concern, and

•

timeliness of ACCC determinations.

This data will also inform analysis of whether the ACCC has been effective in improving the process for merger reviews and reducing assessment timeframes (review process is streamlined, mergers are triaged to quickly differentiate those of concern from benign mergers, vast majority or 80-90 per cent^[122] of mergers cleared within 20 working days).

Further, success will be measured against the degree to which merger parties and the wider community can engage with the merger control process, including assessing whether upfront information requirements are appropriately calibrated and not overburdensome.

Additionally, evaluating the measure of success will be based on the Government's SOE^[123] to the ACCC, through evidence of ACCC taking a risk-based approach with resources prioritised to managing or stopping mergers most likely to harm the community, making use of data and economic analysis to enhance merger reviews and identify risks to the community, and increased transparency and guidance to the community on merger activity and areas of ACCC concern to enhance community understanding and administrative predictability.

These outcomes will be measured based on the:

•

qualitative and quantitative competition (and public benefits) analysis in ACCC determinations, Tribunal reviews and judicial reviews of ACCC determinations

•

improvements in timeframes (including pre-notification periods) for considering a merger against current timeframes and process for merger review. This will also consider the proportion of mergers and acquisitions cleared through fast track, compared to Phase 1 or 2, and the use of timeline extensions on merger reviews

•

evidence of greater transparency for the wider community with increased third-party engagement with the merger control system and the quality and transparency of the decision making as evidenced by the success of the public register

•

evidence of improved outcomes for competition by preventing or remedying with commitments of anti-competitive mergers, and

•

better engagement with the merger control system in terms of provision of calibrated upfront information and responsiveness to information requests that need to be made.

As outlined above, a framework for recording ACCC merger data to support BLADE analysis will be developed. The new comprehensive database of mergers and acquisition activity in Australia, as well as the integration of ABS prices data, will be critical to the assessment of harm (impact on prices and welfare, and the community), adjustments to the ACCC's regulatory focus/approach, and building relevant evidence on the effectiveness and efficiency of the new system (including calibration and updates to the notification thresholds).

Finally, the ACCC will continue to be subject to the Regulator Performance Guide.^[124] The ACCC has also agreed to reinvigorate the ACCC Performance Consultative Committee, which consists of business, legal and consumer representatives, to review and promote regulatory best practice as part of the reforms (including metrics relating to timeliness, transparency, guidance, and quality of engagement with merger parties and third parties).

Attachment A: Regulatory burden estimate

Methodology

The regulatory burden estimates (RBE) for each option presented capture the administrative (labour costs) and substantive compliance costs (purchased costs) for businesses for each stage of the proposed merger system, including:

•

familiarisation costs

•

labour and legal costs to determine whether a merger notification needs to be made

•

labour and legal costs to notify a merger

•

labour and legal costs as part of a Phase 1 merger review

•

labour, legal and economic costs as part of a Phase 2 merger review

•

labour and legal costs for any remedies or commitments

•

labour, legal and economic costs as for a public benefit assessment, and

•

labour and legal costs for Tribunal and other post-merger review.

The administrative costs are labour costs for businesses and include additional costs of making, keeping and providing records, costs of making and being involved in a notification and compliance costs associated with financial costs. The substantive compliance costs are generally purchased costs by business and predominately includes the costs of professional services needed to meet the regulatory requirements of the proposed options, such as legal and economic consultant fees.

The RBE does not capture the proposed merger fees and other impacts and costs outlined under each option. These activities have been represented separately and quantified as indicated.

Data and Assumptions

The administrative costs for businesses (labour costs) are based on the standard formula of Price × Quantity, being (Time required × Labour cost) × (Times performed × Number of businesses or community organisations × Number of staff).

Treasury has used a A$150 hourly rate for labour costs, which is a Treasury estimate and takes into account senior executive involvement in merger transactions.

The formula used to calculate the substantive compliance costs (namely legal and economic consultant costs) is based on number of businesses × number of time services purchased (based on hour) x service cost per activity (hour).

Treasury has used a A$800 hourly rate for legal costs, which is a Treasury estimate and is also broadly aligned with the hourly rate used by the United Kingdom's Competition and Markets Authority (CMA) of GBP 512 in their recent Impact Analysis for Reforms to Merger Control in 2023.^[125]

Treasury has used a A$600 hourly rate for economic consultant costs, which is a Treasury estimate and is also broadly aligned with the hourly rate used by the CMA of GBP 350 in their recent Impact Analysis for Reforms to Merger Control in 2023.^[126]

The total number of notifications and number of merger parties is based on the anticipated overall volume of notifications to the ACCC being similar to current volumes (approximately 300 a year).

Treasury considers that each of Options 2, 3 and 4 will not impose additional regulatory burden on individuals or consumer groups, when compared to the status quo.

It is anticipated that 5 per cent of all mergers would proceed to an in-depth Phase 2 review, consistent with the current experience, and 2-4 mergers per year would raise public benefit considerations.

There are around 1,000 to 1,500 mergers annually with larger firms tending to acquire smaller firms, based on preliminary results from Treasury's 'Tracking mergers in Australia using worker flows' modelling.^[127] The midpoint of 1,250 has been used in Treasury's assumptions.

Costs in the status quo

The total annual cost of informal review and merger authorisation under the status quo (assuming 300 informal review notifications and one merger authorisation application per year) is estimated to be $160.2 million (refer to Table 1 below). This estimate is based on:

•

Labour and legal costs to determine whether to voluntarily notify a merger to the ACCC. It is estimated that approximately 1,250 businesses will be impacted, which is the middle point of the 1,000 to 1,500 mergers preliminary Treasury modelling indicated occur annually. The total annual cost for business being approximately $36.9 million, with the estimated cost per business being $29,500 (informal review) and $30,250 (merger authorisation).

•

Labour and legal costs to prepare and make a notification. These costs include the cost to prepare a submission with all relevant information, any early engagement with the ACCC, and any legal or economic advice. These costs assume 285 'simple' notifications will be made each year that are likely to be cleared at Phase 1. They assume 10 notifications of moderate complexity and 5 complex notifications per year. The total annual cost for business being approximately $16.3 million, with the estimated cost per merger (informal review) to be $38,100 for simple notifications, $166,000 for moderately complex notifications and $487,500 for complex notifications. And the estimated cost per merger (merger authorisation) to be $286,000 for moderately complex notifications and $2.4 million for complex notifications.

•

Labour and legal costs for a Phase 1 merger review. These include costs to engage with the ACCC, respond to any information requests, respond to any ACCC feedback, and preparation and engagement on any simple remedies (if applicable). These costs assume 285 merger notifications will be completed at Phase 1 per year, based on the above total number of expected merger notification of around 300. The total cost for business being $71.3 million, with the estimated cost per merger to be $247,500.

•

Labour, legal and economic costs as part of a Phase 2 merger review. These include costs to gather and submit additional information, any additional legal and economic advice, compliance with statutory information, data and document requests, preparation and attendance at compulsory examinations, and a response to a notice of competition concerns. These costs assume 15 matters per year (informal review), being 5 per cent of all notifications. The total cost for business being $16.7 million, with the estimated cost per merger to be $987,000 (informal review) and $1.9 million (merger authorisation).

•

Labour and legal costs associated with any remedies as part of a merger review. These costs include costs associated with developing, proposing and modifying proposed remedies to increase the likelihood of clearance during both phases of the review process and include any legal and economic advice regarding the remedy, engagement with the ACCC and implementation costs for the remedy. These costs assume 5 matters per year (informal review), based on there being 27 mergers subject to an enforceable undertaking to remedy competition concerns since the 2015-16 financial year. The total cost for business being $1.2 million, with the estimated cost per merger to be $167,500 (informal review) and $407,500 (merger authorisation).

•

Labour, legal and economic costs for Federal Court proceedings. This includes costs for the preparation of an application, preparation for proceedings, filing submissions and evidence, and attendance at proceedings. This assumes 1.5 matters per year (informal review plus merger authorisation) may be subject to Federal Court proceedings, which will cost merger parties $14 million.

Table 1. Estimated total cost to businesses under the status quo

Common costs across Options 2, 3 and 4 associated with a mandatory system

Each of the options present an overall increase in regulatory burden as a result of the mandatory and suspensory proposed system for mergers, which has been considered against the broader benefits and impacts of each option as outlined in Question 4.

An assumption is that if the thresholds are set such that the total number of assessments by the ACCC would be similar to the number of assessments currently occurring under Option 1, the net difference in the aggregate cost to business of preparing for and being involved in a review will not increase significantly overall. For example, a business that notifies either voluntarily (Option 1, status quo) or mandatorily under mandatory systems (Options 2, 3 and 4) must still incur the cost of the assessment process prior to any judicial enforcement if required.

Of the new options presented, Option 2 represents the overall lowest RBE with the total increased cost for business being $10.8 million. The regulatory burden costs for Option 2 are mostly common across the other mandatory merger system options. However, there are some divergent costs with Options 3 and 4 as outlined in the 'Regulatory burden estimates that vary under Options 3 and 4' section below.

The RBE for Option 2 includes:

•

One-off familiarisation costs for law firms with specialist competition practices, as well as for medium and large businesses with the intention of pursuing a merger or acquisition. The one-off familiarisation costs are common to each of the Options 2, 3 and 4, but are not applicable to Option 1.

-

Treasury estimates the total one-off familiarisation costs for business and law firms to be around $235,000, with the estimated cost per business to be around $750 and around $16,000 per law firm.

•

Labour and legal costs to determine whether a notification needs to be made. This includes costs to consider the new notification thresholds, gather initial information, including on substantial market power and the 3-year cumulative effect, and decide whether a merger meets the relevant thresholds. These additional costs are common to each of the options noting that higher costs are incurred in the status quo for businesses to assess whether they should voluntarily notify the ACCC of any proposed merger.

-

It is estimated that approximately 1,250 businesses will be impacted, which is the middle point of the 1,000 to 1,500 mergers preliminary Treasury modelling indicated occur annually. The total annual cost for business being $26.9 million, compared to the status quo of $36.9 million, with the estimated cost per business to be $21,500.

•

Labour and legal costs to prepare and make a notification. These costs include the cost to prepare a submission with all relevant information, any early engagement with the ACCC, and any legal or economic advice. These costs are common to each of the options and are higher than the status quo due to the additional upfront information requirements, with higher total costs as part of Option 3 as outlined below.

-

These costs assume 285 'simple' notifications will be made each year which are likely to be cleared at Phase 1. They assume 10 notifications of moderate complexity and 5 complex notifications per year. The total annual cost for business being $28.4 million, compared to the status quo of $16.3 million, with the estimated cost per merger to be $68,500 for simple notifications; $286,000 for moderately complex notifications and $1.2 million for complex notifications.

•

Labour and legal costs for a Phase 1 merger review:

-

These include costs to engage with the ACCC, respond to any information requests, respond to any ACCC feedback, and preparation and engagement on any simple remedies (if applicable). These costs are common to each of the options, with higher total costs as part of Option 3 as outlined below, but lower overall costs compared to the status quo due to the status quo requiring further follow up as part of the Phase 1 review process currently.

-

These costs assume 285 merger notifications will be completed at Phase 1 per year, based on the above total number of expected merger notifications of around 300. The total cost for business being $59.1 million, compared to the status quo of $71.3 million, with the estimated cost per merger to be $207,500.

•

Labour, legal and economic costs as part of a Phase 2 merger review:

-

These include costs to gather and submit additional information, any additional legal and economic advice, compliance with statutory information, data and document requests, preparation and attendance at compulsory examinations, and a response to a notice of competition concerns. These costs are common to each of the options, with higher total costs as part of Option 3 as outlined below.

-

These costs assume 15 notifications per year, being 5 per cent of notifications that are expected to raise competition concerns. The total cost for business being $28 million, compared to the status quo of $16.7 million, with the estimated cost per merger to be $1.9 million.

•

Labour and legal costs associated with any remedies as part of a merger review:

-

These costs include costs associated with developing, proposing and modifying proposed remedies to increase the likelihood of clearance during both phases of the review process and include any legal and economic advice regarding the remedy, engagement with the ACCC and implementation costs for the remedy. These costs are common to each of the options, with higher total costs as part of Option 3 and Option 4 as outlined below.

-

These costs assume 5 notifications per year, based on there being 27 mergers subject to an enforceable undertaking to remedy competition concerns since the 2015-16 financial year. The total cost for business being $2 million compared to the status quo of $1.2 million, with the estimated cost per merger to be $407,500.

•

Labour, legal and economic costs as for a public benefit assessment:

-

This includes additional costs associated with seeking a public benefit assessment, such as gathering additional information, additional legal and economic advice and responding to competition concerns. These costs are common to each of the options, with higher total costs as part of Option 3 as outlined below.

-

These costs assume 2 notifications per year. The total cost for business being $3.7 million, which is the same as the status quo as part of the merger authorisation process, with the estimated cost per merger to be $1.9 million.

•

Labour and legal costs for Tribunal and other post-merger review:

-

This includes costs for the preparation of an application, preparation for proceedings, filing submissions and any permitted new material, and attendance at proceedings, for the limited number of estimated cases that may be subject to an adverse decision by the ACCC. These costs vary across the options, with higher total costs as part of Option 3 as outlined below.

-

These costs assume 4 notifications per year will seek Tribunal review, based on ACCC and Treasury estimates. The total cost for business being $22.6 million, compared to the status quo of $14 million for the single average notification that seeks judicial review each year, with the estimated cost per merger to be $5.6 million.

Table 2. Estimated total cost to businesses under Option 2

Regulatory burden estimates that vary under Options 3 and 4

Options 3 and 4 are estimated to have higher regulatory costs compared to Option 2 and the status quo.

Option 3 represents the overall highest RBE due to the additional regulatory burden created from the satisfaction element as part of the merger control test.

In particular, the RBE for Option 3 reflects an increase in the number of notifications that proceed to Phase 2, remedies, public benefits and review stages due to the satisfaction test. The RBE for Option 3 also reflects an increase in the costs of preparing a notification, engaging in Phase 1 and Phase 2 reviews and settling remedies, due to the increased time required to satisfy the ACCC at each of these steps. In all cases, Treasury has assumed the number of notifications that would reach each stage is double that of Options 2 and 4 (except the review stage), leading to significantly higher costs overall for this option.

•

The total increased cost for business from Option 3 being $83.7 million, compared to Option 2 of $10.8 million, with:

-

the cost to prepare simple notifications being $102,750, moderately complex notifications being $429,000, and complex notifications being around $1.8 million

-

the cost for Phase 1 to be $247,500 per merger, which is higher than Option 2

-

the cost for Phase 2 to be $2.1 million per merger, which is higher than Option 2

-

the cost for any proposed remedies to be $407,500 per merger, which is the same as Option 2, and

-

the cost for review by the Tribunal to be $5.6 million per merger, which is the same as Option 2.

Table 3. Estimated total cost to businesses under Option 3

Option 4 represents a modest increase in the RBE compared to the status quo and Option 2 due to the additional regulatory burden costs associated with seeking judicial review of an ACCC determination.

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In particular, the RBE for Option 4 reflects a change in the costs of post-merger reviews from no avenue to seeking review by the Tribunal, leading to an overall increase in costs from legal fees and process related to seeking a review of a decision by the merger parties in the Federal Court, as well as slightly higher costs for the other stages due to the retention of the merger authorisation process.

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The total increased cost for business from Option 4 being $22.1 million, compared to Option 2 of $10.8 million, with the cost for review by the Federal Court to be $11.2 million per merger, which is higher than Option 2 and Option 3.

Table 4. Estimated total cost to businesses under Option 4

ACCC resourcing and merger review fees

ACCC resourcing

Under Options 2 and 3, the ACCC will be the expert first instance administrative decision-maker. Additional funding and staffing are required by the ACCC to support the operation of the new merger system, including the additional ongoing administrative elements attached and greater economic expertise in decision making. These administrative elements include making formal merger decisions within set timelines, maintaining a public register of notified mergers and publishing reasons for decisions.

Merger review fees

Under Options 2, 3 and 4, fees on merger notifications will offset the ACCC's costs. Currently informal merger reviews do not have fees imposed and a $25,000 fee applies for merger authorisation applications.

Therefore, with each of the proposed options, except for the status quo, all merger notifications will be accompanied by a cost-recovery fee. Indicatively, Treasury expects this to be around $50,000-100,000 for most mergers, with an exemption for small business.

The fees will ensure the ACCC is properly resourced to undertake its expert administrative decision-making role.

Impacts of ACCC resourcing and merger review fees

Fees would impose a direct financial cost on businesses notifying a merger to the ACCC (except small businesses, which will be exempt).

Benefits of ACCC resourcing and merger review fees

The shift to administrative decision-making, rather than judicial enforcement, will ensure the ACCC is better placed to protect consumers and competition in our economy.

Attachment B: Merger reform consultation - stakeholder feedback and Australian Government response