Corporate & Commercial 16 October 2024

Australia’s proposed New Merger Laws: Balancing Industry Concerns with Increased Regulatory Scrutiny

Make an enquiry or call us on 03 5273 5273

The Australian government is introducing sweeping reforms to merger laws, marking the most significant changes in nearly fifty years. Spearheaded by Treasurer Jim Chalmers, the new legislation aims to address concerns over market concentration, rising consumer prices, and the potential for reduced competition. By shifting from a voluntary to a mandatory notification system, the reforms grant the Australian Competition and Consumer Commission (ACCC) greater authority to scrutinise transactions that may impact competition. While the government contends that these changes will streamline merger approvals and focus on high-impact cases, industry experts and business leaders are divided. They question whether the new laws truly simplify the process or if they will burden companies—particularly private equity firms—with increased compliance and delays. Below is an overview of the key changes and the varied reactions from the business community and political landscape.

  1. Mandatory Notification of Mergers: The government will now require companies to notify the ACCC of mergers when certain financial thresholds are met, replacing the previous voluntary system. This is intended to streamline the approval process for mergers that pose no competition risk, while allowing the ACCC to block or scrutinise those that do.
  2. Increased Scrutiny on Private Markets: Transactions involving minor shareholdings will now fall under ACCC scrutiny if a company with a global turnover over $200 million acquires more than 20% of a private or unlisted company. This provision, aimed primarily at private markets/capital, was not part of the original consultation process but was added at the recommendation of ACCC Chair Gina Cass-Gottlieb to give the ACCC more oversight on acquisitions that could result in significant influence without majority ownership.
  3. Concerns from Industry Experts: Experts, argue that the added requirement to notify the ACCC about minor share acquisitions —primarily affecting private equity—contradicts Treasurer Jim Chalmers’ promise of a faster and more targeted merger review process. They warn that this measure could result in unnecessary regulatory delays for transactions unlikely to impact competition.
  4. Revised Threshold Criteria: The new thresholds will be solely based on turnover, as the government decided against market share-based thresholds, which had been criticised for complexity. This change is part of an effort to reduce industry concentration and prevent price increases for consumers by blocking certain mergers.
  5. Targeted Designation of Certain Mergers: The Treasurer has reserved the right to mandate notification for mergers below the turnover threshold, specifically in sectors like supermarkets and private markets. These types of transactions will be closely monitored to prevent undue industry concentration.
  6. ACCC Funding and Implementation: An additional $56 million in funding has been allocated to the ACCC to handle the increased workload expected under the new regime. While the Business Council of Australia expressed cautious optimism, some, such as the Australian Chamber of Commerce and Industry, criticised the reforms as adding an unnecessary compliance burden on businesses.
  7. Political and Industry Reactions: Shadow Treasurer Angus Taylor highlighted the importance of supporting consumers and small businesses, while Greens Senator Nick McKim argued that the reforms do not go far enough, advocating for stronger powers, such as forced divestiture. The business community’s response is mixed, with some viewing the reforms as a positive step, while others are concerned about increased red tape and compliance costs.

In conclusion, Australia’s newly proposed merger laws represent a significant shift in regulatory oversight, aiming to curb market concentration while providing clearer, more structured guidelines for merger approval. However, concerns remain about the potential for increased compliance costs and delays, especially in private equity transactions and smaller share acquisitions. While Treasurer Jim Chalmers and the ACCC have emphasised that these changes are designed to streamline the process and target only those mergers that impact competition, industry experts question whether the new requirements align with the government’s promises of efficiency.

The success of these reforms will ultimately depend on their implementation and whether they achieve a balance between maintaining competitive markets and avoiding excessive regulatory burdens on businesses. As the laws move forward, the government’s commitment to reviewing their impact after the first year will be crucial in refining the approach and addressing any unintended consequences.

Georgina Parisis.
Georgina Parisis Special Counsel Corporate & Commercial | Agribusiness View profile
Share this article

Find the legal expertise you need and get in touch today.

Get started with our easy online form, send us an email or simply give us a call.