Clifford Chance

The Australian Government has released the draft of Australia's new mandatory merger control regime – shedding light on the new regime which was announced by Treasury earlier this year.

Last week, Australian Treasury released an Exposure Draft of the Treasury Laws Amendment Bill 2024: Acquisitions, the bill which will implement Australia's new mandatory merger regime.

The exposure draft details the precise amendments to Australia's current competition laws to implement the new mandatory regime and is accompanied by a Fact Sheet and Explanatory Materials.

The Government has invited submissions and feedback on the exposure draft legislation before 13 August 2024.

The key takeaways from the exposure draft include:

(1) Some clarification around scope of notifiable transactions (but more is needed)

Both direct or indirect acquisitions of shares or assets by corporations or persons will be notifiable (subject to meeting requisite notification thresholds), where an acquisition:

• Provides control or the ability to materially influence the acquired business; or
• Is capable of affecting the competitive structure of the market.

No meaning was ascribed to what constitutes an "indirect" acquisition.

All acquisitions for 20% or more of voting rights are presumed to be a transaction which provides the purchaser with control of the target and are therefore notifiable transactions. This presumption is rebuttable, however as the new mandatory regime does not allow for pre-assessment of transactions, the parties will be required to notify the transaction and seek to rebut the presumption and have the transaction cleared during a Phase I review. This will have significant ramifications for passive investors (such as private investors and financial institutions) who previously would not have considered the requirement for Australian merger control filings for minority investments.

The new regime excludes the following acquisitions:

• acquisitions that do not give control (i.e. the capacity to directly or indirectly determine policy in respect of one or more matters);
• the temporary holding of shares as part of conducting ordinary business (under certain conditions);
• internal restructures and reorganisations; and
• acquisitions as an administrator, receiver or liquidator.

Many details around how the "control" test will operate in practice remain unanswered. If implemented, there is likely to be material inconsistences between Australia's regime and those of other major jurisdictions, such as the EU, that have higher thresholds of "control" for the purposes of determining filing requirements.

(2) (Lack of) Notification Thresholds

While the initial announcement by Treasury earlier this year confirmed that Australia's new mandatory merger regime would contain notification thresholds, the exposure draft does not set out those thresholds but confirms they will be set by regulation or Ministerial determinations. The basis for potential thresholds are significantly broader than those that were foreshadowed by Treasury earlier in the year and "may" include:

• The value of the acquisition.
• The turnover of the parties.
• A party or class of parties to the acquisition.
• A business or class of businesses.
• An asset or class of assets.
• A market or class of markets.
• Another acquisition or class of acquisition.

The exposure draft confirms that there is no limit to what threshold(s) may be set by the regulation or Minister.

Treasury will engage in further consultation later this year in respect of the thresholds to be set out in the regulations.

(3) Modified Substantial Lessening of Competition (SLC) Test

As previously announced, transactions under the new merger regime will be subject to a modified SLC test: a merger may SLC if it creates, strengthens or entrenches a position of substantial market power in any market. The exposure draft clarifies that this amendment will apply to all contraventions within the CCA which use an SLC test, including misuse of market power (abuse of dominance) and contracts, agreements or understandings that SLC. This may be an unintended consequence of the drafting, but could materially impact on unilateral decisions and actions taken by organisations that have existing market power.

The cumulative effect of transactions (in the same industry) over a preceding three-year period (from the date of notification) will be assessed for the purposes of determining whether a transaction meets the notification threshold. Transactions undertaken from 1 January 2023 will be in scope for consideration as part of notified transactions from 1 January 2026.

The substantial public benefits process is largely as foreshadowed by Treasury albeit with a somewhat higher threshold that will need to be satisfied.

The ACCC may (although there is no obligation that the ACCC must) issue a competition concerns notice during a Phase II review. A competition concerns notice must set out the material facts, material information and material evidence on which the ACCC relies on in forming its competition concerns. If the ACCC elects to issue a notice, it must do so within 25 days of commencing its Phase II review. This is a very different process to the current Statement of Issues procedure via which the ACCC articulates any concerns for parties and industry more generally to elicit feedback prior to making a decision.

(4) Non-notifiable transactions remain subject to conduct provisions of CCA

The exposure draft includes amendments to the prohibition on contracts, arrangements or understandings that restrict dealings or affect competition (Section 45, Competition and Consumer Act 2010 (Cth) (CCA)) to ensure transactions that do not meet the merger notification requirements (and therefore do not need to be notified to the ACCC) are still subject to the prohibition in s 45 CCA.

This allows the ACCC to seek remedies (including interim or permanent injunctions) in respect of transactions that do not meet the notification threshold, but otherwise contravene s 45 CCA. Parties should therefore be aware that even if a transaction does not meet the notification threshold the transaction may still be a contravention of s 45 CCA.

(5) A "Faster" System?

While the new mandatory regime is being touted as faster, there are significant caveats on how quickly the ACCC, and the Australian Competition Tribunal (Tribunal) will consider and assess a merger notification. In respect of the ACCC timelines:

• if the ACCC determines (in its sole discretion) that the notification is 'materially' incomplete, the date of notification is reset to the date when the ACCC receives what it believes to be a complete notification. 
• The statutory timelines are extended whenever the ACCC utilises its statutory information gathering power (i.e. s155 notice).

The Tribunal is required to issue its decision in respect of any review of a ACCC merger review decision within 90 days (60 days for a 'fast track review'). While this would be significantly faster than the current time taken by the Tribunal to assess ACCC decisions in respect of Merger Authorisations, the Tribunal also receives substantial control over the timing for a decision with multiple grounds for extensions, including if the Tribunal receives new information, if there is a large volume of information which the Tribunal must consider or if the merger review is complex.

Notably, if all potential extensions are taken by the Tribunal, the Tribunal would receive a total of 330 days (~11 months) to consider the ACCC decision. Recently, the Tribunal only took 179 days to consider an application by ANZ and Suncorp to review an ACCC merger authorisation decision.

(6) Keeping Transactions Fresh

Under the new mandatory regime, approvals for transactions will become "stale" after 12 months, at which time approval is voided. The Exposure Draft does not include the ability for approval to be renewed or extended - parties will be required to renotify the transaction.

(7) Transition Period

The new merger regime is set to take effect from 1 January 2026, however there are two significant dates parties should be aware of prior to that date:

•  1 July 2025: The ACCC will stop accepting formal merger authorisations, however, will continue to accept informal merger reviews until 31 December 2025.
•  1 December 2025: From this time parties may voluntarily notify under the new merger regime.