Significant reforms announced by Treasurer to merger laws
The Federal Treasurer has announced sweeping reforms to the merger laws following persistent pressure from the Australian Competition and Consumer Commission (ACCC) for reform.
The reforms seek to implement a new mandatory merger control system which will replace the existing voluntary merger regime and is being described as the most significant changes to merger laws in 50 years.
Background
Following a call for reform by the ACCC, the Government established a ‘Competition Taskforce’ in 2023 to conduct a review of competition policy settings. One of the primary concerns of the review was whether Australia’s merger control system is fit for purpose.
The reforms announced by the Treasurer yesterday respond to the feedback the Government received from stakeholders (including the ACCC) that Australia’s current ‘ad hoc’ and voluntary merger process is unfit for a modern economy.
What are the key aspects of the proposed reform package?
The most notable changes relate to:
Mandatory disclosure: All mergers above a certain threshold will be required to notify the ACCC and obtain approval before they can proceed or complete. Mergers will be approved to proceed within 30 business days where the ACCC has determined there are no competition concerns (with the option of a fast-track determination after 15 working days, if no concerns are identified).
Onus of proof: The ACCC proposed a reversal of the onus of proof, requiring merger parties to demonstrate that there will not be a substantial lessening of competition as a result of a proposed transaction. Treasury will not adopt this proposal and mergers will be able to proceed unless the ACCC reasonably believes it is likely to substantially lessen competition, including if it creates, strengthens or entrenches a position of substantial market power in any market.
Notification Threshold: The notification threshold will be subject to further consultation and periodic review, however Treasury has indicated it will be both monetary and share of supply or market share-based. The ACCC has previously indicated that an acquirer or target turnover threshold of $400 million or global transaction value threshold of $35 million would be appropriate, however Treasury has not indicated whether it will adopt this threshold.
Creeping acquisitions: In response to concerns regarding ‘serial’ or ‘creeping’ acquisitions and roll up strategies, the ACCC will be able to consider the cumulative effect of all mergers within the previous 3 years by the merger parties as part of its assessment of the notified merger, irrespective of whether those mergers were notifiable in isolation.
Fees: Mergers that are subject to review by the ACCC will be charged cost recovery fees. Whilst the fees are subject to further consultation, Treasury has indicated the fees will be scaled to reflect the complexity and risk of the merger and likely to be in the range of $50,000-100,000 with an exemption for small businesses.
Penalties: Failure to notify the ACCC of a notifiable merger or completing a merger prior to the ACCC’s decision will result in significant civil and criminal penalties, including director disqualification.
When will the changes come into effect?
The new merger control system is set to come into effect on 1 January 2026, subject to further consultation and legislation being passed through Parliament.
What you need to know - next steps and implications for M&A deals
The Treasurer insists the changes are necessary to “boost competition and productivity in our economy”, however there is no doubt the reforms will have implications on deals in Australia, including:
an increase in cost, time and resources required in providing information and material to the ACCC;
uncertainty as to the timeframe merger parties can expect to receive a decision from the ACCC, noting the ACCC will be able to extend time periods in appropriate circumstances;
the potential increase in the number of deals captured by the new system, depending on the outcome of the consultation on the notification thresholds; and
potential challenges with determining whether the combined market share is in excess of a particular threshold, given complexities around the definition of ‘market’, which provides uncertainty as to whether mandatory notification is required.
The new system will be subject to further consultation in 2024, including in relation to mandatory notification thresholds and what constitutes a notifiable merger, fees, merger review timelines, procedural safeguards and penalties. Treasury will then consult on exposure draft legislation to implement the reforms.
We anticipate there will be more certainty once the consultation process has been completed and the reforms have been further fleshed out.
Briget O’Callaghan
Principal Lawyer
T 03 5225 5244 | M 0436 456 144
E bocallaghan@ha.legal
Evelyn Zeglinas
Associate
T 03 5225 5245
E ezeglinas@ha.legal
