A mandatory merger regime will come into effect in Australia on 1 January 2026 after the Australian Government’s announcement on 10 April 2024.
A single mandatory and suspensory administrative merger control system will replace sections 50 and 50A of the Competition and Consumer Act 2010 (Cth) (CCA) and the current merger authorisation process in sections 88 and 90(7) of the CCA.
mandatory merger control regime
The Australian Government hopes to reverse a long-term increase in market concentration, with Australian Treasurer Jim Chalmers commenting that whilst industry concentration needs to be curbed and the notification and assessment process is key to achieving that, the ACCC is not currently equipped to detect or stop anticompetitive mergers.
KEY REFORMS
The new Merger Regime, which is said to be the biggest competition law reform in 50 years, includes the following changes:
Nature of the Merger Regime
From January 2026, a unified, obligatory, and suspending merger control mechanism will supersede the current options of seeking a negative declaration from the Federal Court, the informal merger review process, and the merger authorisation process.
The ACCC will take charge of this singular merger control route, replacing the existing three voluntary approaches, and will act as the only first instance decision-maker.
Notification thresholds
Parties will be required to notify the ACCC if the newly prescribed notification thresholds are met. The proposed notification thresholds are subject to consultation this year, however are currently both monetary and based on share of supply of market share.
Substantive assessment and legal test
A merger will not be prohibited unless the ACCC reasonably determines that it will likely lead to a significant reduction in competition, especially if it ‘establishes, intensifies, or solidifies significant market power’.
To address issues related to continuous or incremental acquisitions and ‘roll up’ tactics, the total impact of all mergers conducted by the merging parties in the preceding three years will be taken into account when evaluating the merger, regardless of whether those individual mergers required notification.
Appeal rights
Limited appeal options will be made available to merger parties where the Australian Competition Tribunal will be the only avenue to a review of the ACCC decisions.
Penalties
Merger parties (including executives or officers) will face substantial penalties for failing to notify the ACCC of a notifiable merger or for proceeding to complete a merger ahead of the ACCC’s decision.
Furthermore, any illegally implemented merger or contract, arrangement or understanding related to it, will be void.
Fees
The fees for merger reviews are expected to fall between AUD$50,000 and AUD$100,000. Reviews conducted by the Australian Competition Tribunal will incur extra fees. However, an exemption will be provided for small businesses.
Notably, the Treasury rejected the ACCC’s proposal to move the burden of proof onto the merger parties, whereby merger parties would be required to demonstrate that there will not be a substantial lessening of competition as a result of a proposed transaction.
KEY IMPLICATIONS FOR BUSINESS
With the implementation of notification thresholds, a greater number of prospective acquisitions will be required to undergo notification and suspension, even in cases where competition issues are minimal or non-existent. Businesses will need to be prepared to expend more resources on mergers given time and expertise required in lodging merger filings and potentially appealing them.
Businesses should consider their M&A activity now as the ACCC’s analysis of any mergers post-2026 will likely consider the cumulative effect of any completed transactions in the three years prior to the review.
Further implications for businesses will be determined more precisely on the specific economic and market share thresholds set by the Australian Government in the coming months. The Treasury plans to hold consultations on the proposed legislation, which will include the thresholds for notification, in 2024.
