Clifford Chance

The Australian Government has announced significant reforms to Australia's merger control laws that will introduce a single mandatory and suspensory administrative merger regime which are anticipated to commence on 1 January 2026.

On 10 April 2024, the Australian Treasury (Treasury) announced merger reforms promising the most significant changes to Australia's merger control laws in 50 years. From 1 January 2026, a single mandatory and suspensory administrative merger control regime will come into force, replacing the current voluntary notification and authorisation process, bringing Australian merger review closer in line with other OECD and EU jurisdictions (Merger Reforms).

Following implementation of the Merger Reforms, the Australian Competition and Consumer Commission (ACCC) will be the first-instance administrative decision-maker, determining whether a merger may be put into effect, with or without conditions.

The Merger Reforms include the following key changes:

Notification

A mandatory notification process will be triggered by transactions above a certain monetary (e.g. turnover, revenue) and supply/market share-based threshold. Further consultation on the notification thresholds is expected to occur in 2024. In determining whether a transaction meets the relevant threshold, all transactions by the merger parties within the previous three years will be aggregated. The ACCC will also have greater ability to consider the effect of such past transactions in its competitive assessment, to more effectively target "creeping" acquisitions and aggressive "roll up" strategies. Parties will be able to engage in confidential pre-notification discussions with the ACCC but will no longer receive an "informal view" on a proposed merger.

For notifiable mergers:

• Parties will be required to provide all information upfront and pay a filing fee, currently estimated to be between AUD 50,0000–100,000, with exemptions for small businesses.
• The clearance model will be suspensory, prohibiting merger parties from completing the transaction without clearance.
• The ACCC will have increased powers to gather evidence from the merger parties and relevant third parties.
• All mergers considered by the ACCC will be listed on a public "merger register" including the names of the merger parties, a short description of the transaction, affected products and/or services, and review timeline.

Assessment

There will not be a radical departure from the current substantive legal framework under which mergers are currently assessed. Limited substantive changes resulting from the Merger Reforms include:

• The "substantially lessening competition" (SLC) test will be modified to also examine whether a transaction "creates, strengthens or entrenches a position of substantial market power". This modification will also capture related agreements likely giving the ACCC a greater ability to factor in economic, rather than purely legal, principles.
• The current s.50(3) merger factors will be replaced with criteria focused on the conditions for competition and structure of relevant markets, as well as the market position of the businesses concerned and their economic and financial power.
• Indicative timelines for review will be consistent with international practice, including Phase 1 (15-30 business days) and Phase 2 (90 business days). Fast track determination process will be available if no concerns are identified by the ACCC after 15 business days. It is expected that the ACCC will determine the vast majority of mergers within the Phase 1 period. These time periods may be extended e.g., if remedies are offered by the merger parties or if requested information is not promptly provided.
• The public benefits test currently applied to merger authorisations will be maintained as a "second limb" for the ACCC's assessment of whether a merger should be allowed because it gives rise to net positive public benefits, if the ACCC disallows a merger on SLC grounds.

Notably, the Australian Government did not adopt the ACCC's proposal to require merger parties to demonstrate that a merger is not likely to SLC before approval is granted. Rather, the burden of proof will fall on the ACCC to establish that a merger is likely to SLC in order to prohibit a transaction.

Enforcement

Notifiable transactions will require ACCC approval before they can proceed (compared to the current judicial enforcement model where the ACCC would need to commence action in the Federal Court to oppose a merger it believes is likely to SLC).

Failure to notify a notifiable merger, or proceeding with the merger ahead of the ACCC’s determination, or otherwise than in accordance with the ACCC’s determination, will result in substantial penalties for the entity concerned, executives or officers, and voiding of the transaction.

The Merger Reforms will remove the option to seek a declaration from the Federal Court and will limit appeal rights to limited merits review before the Australian Competition Tribunal. This will remove existing and important checks and balances. Judicial review of decisions by the Tribunal will be available in the Federal Court.

Consultation

In 2024, Treasury will commence consulting on exposure draft legislation with key issues yet to be determined including: merger notification thresholds; merger review timelines; notification fees; procedural safeguards; and penalties. In 2025, the ACCC will consult on the form of notification/filing form. We will be following these changes closely.

Potential impact on M&A landscape

The Merger Reforms will have ramifications for businesses seeking to undertake M&A transactions with an Australian nexus. Australia's Merger Reforms are not dissimilar to the regimes in many OECD jurisdictions, and as such, do not signify a radical shift for businesses that have previously sought clearance from overseas regulators.

The ACCC had previously proposed monetary thresholds of either: (a) a turnover threshold of AUD 400 million for companies to a transaction, or (b) a global transaction value exceeding AUD 35 million. Without any additional requirements, such thresholds would be likely to trigger filings for a significant number of transactions that may not otherwise have a meaningful nexus to Australia.

If notification thresholds are set at appropriate levels, the Merger Reforms may give businesses greater certainty and alignment of review timelines where clearance is sought in multiple jurisdictions. However, smaller deals (not currently caught by the ACCC's voluntary regime) will likely face delays not currently experienced, and commercial timelines will need to be adjusted accordingly.

Businesses that undertake "roll up" strategies or that are considering undertaking multiple transactions in the same industry will need to be particularly mindful of the three-year lookback period and should consider the sequencing of transactions and the strategic implications of more in-depth reviews arising from recent deal activity.

As such, whilst the Merger Reforms may provide merger parties with greater certainty in terms of upfront information requirements and review timelines, benefits will only be realised by adopting a considered regulatory engagement strategy, particularly for multi-jurisdictional transactions or those occurring in concentrated and/or sensitive sectors.