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As discussed recently by Broker Daily, the Australian Competition and Consumer Commission (ACCC) merger reform goals were outlined before Parliament on 10 October.
In his statement, Treasurer Jim Chalmers claimed that the changes are “the biggest reforms to Australia’s merger settings in almost 50 years”.
The changes will reportedly allow for:
- Faster time frames.
- Greater transparency.
- Clear notification requirements for parties.
- Risk-based approach underpinned by enhanced data and economic analysis.
- Economy-wide competition research and ACCC accountability.
- New analytical and process guidelines.
- Clear path to transition.
- Improved internal capacity and streamlined processes.
Now, experts are reacting to the announcement. Jacqueline Downes, partner and competition, consumer and regulatory practice lead at Allens, believes the introductions could stand to disadvantage the process.
“The government has pleasingly responded to a number of issues raised by businesses and the legal community during the consultation process, but there is no doubt that this reform will make the merger clearance process more challenging and possibly introduce inefficiencies that will hamper business transactions unnecessarily. We will need to see how it is implemented in practice,” she said.
“Under the proposed legislation, the merger approval process remains very complex and is likely to capture a large number of transactions. The revised test for control, exempting acquisitions of less than 20 per cent of publicly listed companies and aligning more closely to the control test in the Corporations Act, is welcome.”
Downes continued: “It will, however, still capture a significant number of transactions unnecessarily. While the thresholds are yet to be released, according to the Treasurer’s statement, the government does not appear to have moved much on the financial thresholds although it has removed the uncertainty of market share thresholds and has introduced a welcome exemption for some property transactions. However, it has also indicated that all acquisitions of more than 20 per cent of a private company by corporations with greater than $200 million in revenue will be required to notify. In our view, the complexity, together with the potential volume of mergers captured, raises significant concerns about the ability of the ACCC to review mergers promptly.”
Despite Downes’ troubles with the way some of the reforms are being handled, there are some positives to take away.
“We are pleased to see the addition of the ability for the tribunal to introduce new evidence if the parties haven’t had an opportunity to put that before the commission. This is critical for procedural fairness. We also welcome the introduction of a waiver power, which allow for some flexibility that was previously lacking,” Downes said.
“The transitional arrangements indicate that voluntary notifications under the new regime will start from July next year, with a dual-track regime existing until the end of 2025. This means companies need to consider their merger timelines carefully to avoid having to restart the process under the new regime.”
On the property side of the fence, some included reforms were praised. Chalmers said in a statement that “only mergers above monetary thresholds will need to be notified to the ACCC and be approved before proceeding … Land acquisitions involving residential property development and certain commercial property acquisitions won’t be included to avoid clogging up the system with simple land purchases unless they are captured by additional targeted notification requirements.”
This decision to exclude property development from the thresholds was welcomed by Property Council of Australia, which understands the complexity involved in the matter.
“These are complex and difficult reforms to get right. There is detail to come but so far the government has listened to industry feedback and acted to address unintended consequences for the capital-intensive but low-risk property sector,” Property Council CEO Mike Zorbas said.
“As originally proposed, the thresholds would, in effect, have put a rocket under new house prices, so we commend the government for rebalancing the framework. Equally, the exemption of land acquired for residential development or for commercial development for the primary purpose of leasing or selling, will be affected by ministerial instrument and it remains imperative that there is close industry consultation in coming months.
“Strongly supported by industry, the ambitious national target of 1.2 million homes by 2029 deserves the alignment of all government policies that affect property, and this legislation meets that challenge,” he said.
Related: ACCC merger reform goals outlined before Parliament
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