ACCC lays out new merger and acquisition “thresholds”

The Australian Competition and Consumer Commission (ACCC) has laid out proposed ‘notification thresholds’ that will form part of the new merger control system.

The competition regulator first announced reforms to merger rules and processes back in April that would create an improved merger control system.

On Friday, the ACCC said the “thresholds determine which mergers or acquisitions must be notified to the Australian Competition and Consumer Commission (ACCC) before completion.”

“Monetary and market concentration thresholds, as well as additional targeted notification requirements set by a Treasury Minister, will be used to determine which mergers are notifiable.

“The system will be risk-based and targeted at mergers that are most likely to harm competition and consumers,” the statement said.

“For acquisitions below the notification thresholds, merger parties may voluntarily notify the ACCC.”

In the consultation paper on merger thresholds [pdf], the ACCC said mergers and acquisitions are important for building a more productive and dynamic economy” however it noted that “some mergers substantially lessen competition”.

“The purpose of merger notification thresholds is to ensure the Australian Competition and Consumer Commission (ACCC) is aware of those mergers most likely to impact Australian consumers if they are anti-competitive, while keeping compliance costs low for business.

“The government’s merger reform proposal will create a legal obligation for businesses to notify acquisitions that are captured by notification thresholds, enforced by substantial penalties.”

The ACCC said the system is “designed so businesses will have strong incentives to notify such acquisitions.”

“Importantly, businesses will obtain a timely decision and certainty that the ACCC cannot take action for potential breaches of the Competition and Consumer Act 2010 (Cth) (CCA).

“Striking an appropriate balance is important to facilitate investment in Australia while ensuring that potentially problematic acquisitions can be scrutinised.”

The ACCC explained this means designing targeted, risk-based notification thresholds and ensuring expedited review of notified mergers that do not raise competition concerns.

“Businesses could also seek a ‘notification waiver’ from the ACCC, removing the obligation to notify if granted, including if there is uncertainty as to whether the notification thresholds are met,” the report stated. 

In the paper, the proposed thresholds are based on the Treasury’s analysis of the ACCC’s historical public merger review data, which recognises acquisitions that raised potential competition concerns.

According to the report, it said it captures around 90 percent “of all acquisitions that were publicly reviewed and considered by the ACCC as potentially raising competition concerns since 2018.”

“The remaining around 10 percent of historical below-the-threshold acquisitions that raised competition concerns could, under the new system, be investigated by the ACCC for breach of any other applicable provisions of the CCA.”

The report said that over time, these 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.”

“Regular reviews, including the three-year review and annual reports, will be important to consider system efficiency and the volume of notifications.”

As part of the announcement, the ACCC called for submissions to the consultations until 20 September 2024

It also said that the Competition Review Taskforce in the Treasury will engage in targeted stakeholder engagement.

Earlier this year, ACCC has said law reforms surrounding mergers and acquisitions governance are “urgently needed” and backed up its claims to the ongoing competition review.