This country-specific Q&A provides an overview of the legal framework and key issues surrounding merger control law in Australia.
This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control
Australia's merger control regime is governed by the Competition and Consumer Act 2010 (Cth) (CCA) and is administered and enforced by the Australian Competition and Consumer Commission (ACCC), with a limited role undertaken by the Australian Competition Tribunal (Tribunal).
The regime prohibits a corporation or person from directly or indirectly acquiring shares or assets if it would have the effect, or be likely to have the effect, of substantially lessening competition in a market in Australia (see section 4).
It may also apply to mergers or acquisitions occurring outside Australia, which is a foreign-to-foreign merger (see section 3.5).
Merger notification or filing is not mandatory under the CCA (see section 2). However, parties involved in mergers which meet the following threshold (Notification Threshold) (or which may otherwise raise competition concerns) are encouraged by the ACCC to apply for clearance:
- the products of the merger parties are substitutes or complements; and
- the merged firm will have a post-merger market share of greater than 20 per cent of the relevant market.
There are three voluntary mechanisms for obtaining approval of a proposed transaction:
- informal clearance by the ACCC. This is an informal process in which the ACCC may pre-assess a transaction, or conduct a confidential and/or public review of a transaction. Where it has no objections, the ACCC issues a letter of comfort indicating it has no intention to intervene in the transaction. This amounts to an 'informal clearance' that is widely relied upon by Australian businesses. Informal clearance remains the most flexible and least costly option (particularly for non-controversial transactions);
- formal clearance from the ACCC. Formal clearance confers statutory immunity on the applicant. To date, this procedure has never been utilised; and
- authorisation by the Tribunal. A merger that raises competition concerns may be authorised by the Tribunal in circumstances where the applicant is able to demonstrate such public benefits that the transaction should be allowed to occur. Authorisation confers statutory immunity on the applicant and has occasionally been used successfully.
The processes are discussed further in sections 5 and 6.
This guide does not address Australia's foreign investment regime and any requirements to notify a merger to the Foreign Investment Review Board (FIRB), pursuant to the Foreign Acquisitions and Takeovers Act 1975 (Cth).
Is mandatory notification compulsory or voluntary?
Merger notification is voluntary under the CCA. The ACCC encourages merger parties to seek clearance where the Notification Threshold (see section 1) is met.
The Notification Threshold is indicative only and a merger which does not meet the Notification Threshold (for example, a vertical merger) may still raise competition concerns.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
There is no prohibition on completion or closing under the CCA. The ACCC can, and does, take action in the Federal Court of Australia to prevent completion of transactions that it considers contravene the merger control prohibition.
In order to mitigate the risk of action by the ACCC, parties can seek informal clearance and typically include a condition precedent in transaction documents with respect to applying for, and obtaining, clearance prior to closing, if required.
For foreign mergers, local completion of a merger may, if commercially practical to do so, sometimes be 'carved out' of a global completion to allow time for informal clearance to be obtained.
If merger approval is sought through formal clearance or authorisation, an undertaking prohibiting completion of the acquisition while the matter is under consideration must be given by the applicant.
What are the conditions of the test for control?
The CCA prohibits the direct or indirect acquisition of shares in a body corporate or corporation, or any assets of a person or corporation, if the acquisition would have, or be likely to have, the effect of substantially lessening competition in a market in Australia. There is no specific minimum shareholding or level of 'control' required.
What are the conditions on minority interest in your jurisdiction?
The CCA applies to any acquisition of shares or assets, even the acquisition of a minority interest. The CCA does not include a specific control test relevant to minority interests.
If the acquisition of a minority interest could give rise to a substantial lessening of competition in a market in Australia, that acquisition may require clearance by the ACCC.
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)?
The merger control prohibition outlined above applies to any acquisition where the acquirer is incorporated, carries on business or is ordinarily resident, in Australia.
Merger notification turns on a substantive assessment of whether the proposed transaction gives rise to potential competition concerns.
To assist merger parties, the ACCC uses the Notification Threshold as an indicator of transactions that the ACCC might wish to examine (see section 1).
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
No specific monetary or asset-based thresholds apply so there are no rules for calculating such thresholds.
The Notification Threshold incorporates reference to market shares. General principles apply in determining market definition (including product, geographic and functional dimensions) and market shares, having regard to the transaction and the parties operations in Australia.
Is there a particular exchange rate required to be used for turnover thresholds and asset values?
Do merger control rules apply to joint ventures (both new joint ventures and acquisitions of joint control over an existing business?
The test for assessing joint ventures in Australia is the same as for any other type of merger: if the joint venture involves the acquisition of shares or assets, it will be subject to the merger prohibitions under the CCA. If it does not, the joint venture will still need to be assessed under the general prohibition on anti-competitive agreements.
In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?
The CCA also applies to transactions occurring entirely outside Australia where a person, as a consequence of acquiring a controlling interest in a body corporate outside of Australia, acquires a controlling interest in a corporation carrying on business in a market in Australia.
As a practical matter, foreign-to-foreign transactions that may raise competition concerns in Australia should therefore be notified to the ACCC in the same way as any other merger. The same Notification Threshold applies.
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
The decision of whether or not to notify the ACCC can be influenced by factors unrelated to competition. In particular, if a transaction requires FIRB approval under Australia’s foreign investment laws, parties typically also notify the ACCC (at least as a courtesy) because it is standard practice for FIRB to seek comments from the ACCC on transactions it reviews – that is, the transaction would come to the ACCC for review regardless.
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies?
The scope of the prohibition or substantive test is set out above.
The typical approach under Australian law to assessing whether a transaction raises material competition concerns involves two limbs. First, each relevant market(s) in which the parties to the transaction compete is defined. Secondly, the potential impact on competition in that market(s) in the foreseeable future is assessed 'with' and 'without' the proposed transaction.
The CCA prohibition applies to both horizontal and vertical concentrations, and the ACCC will consider both unilateral and coordinated effects that may weaken or remove competitive pressure in the relevant market.
Certain factors, listed in the CCA and the ACCC's Merger Guidelines, are considered when assessing the potential impact on competition, including:
- the actual and potential level of import competition;
- the height of barriers to entry (considered particularly important);
- the level of concentration;
- the degree of countervailing power; and
- the nature and extent of vertical integration.
Australian courts, in contemplating the meaning of a 'substantial lessening of competition', in both merger and non-merger cases, have drawn on US and European anti-trust precedents.
Are non-competitive factors relevant?
The substantive test is focussed on assessing the impact of the proposed transaction on competition. The ACCC does not typically take into account matters such as efficiencies except to the extent that they may have an impact on competition in the relevant market.
Parties wishing to rely on efficiencies and factors unrelated to competition typically consider whether to seek authorisation from the Tribunal, rather than clearance from the ACCC.
Are there different tests that apply to particular sectors?
The substantive test under the CCA applies regardless of sector.
Are ancillary restraints covered by the authority’s clearance decision?
The ACCC, at the request of the merger parties, may consider competition issues associated with ancillary restraints with the transaction. Any letter of comfort issued by the ACCC in such circumstances would then usually also apply to any relevant ancillary restrictions properly disclosed to the ACCC as part of the application.
The CCA exempts, in the context of a merger or acquisition, an ancillary restriction imposed by the purchaser on the vendor that is solely for the purposes of protecting the goodwill of the purchased business.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
There is no filing deadline. Notification to the ACCC of a proposed transaction is voluntary.
What is the earliest time or stage in the transaction at which a notification can be made?
Filing or seeking a pre-assessment can be made at any time. The ACCC may be notified before a transaction has been signed, provided there is a real prospect of a transaction occurring. It will not review ‘speculative’ transactions.
What is the basic timetable for the authority’s review?
There is no statutory timetable, however the ACCC has published indicative timeframes. For an initial assessment or 'pre-assessment', the period is 2 weeks, but in practice can take up to 6 or 8 weeks. Where a merger is confidential and the ACCC determines a matter cannot be pre-assessed or the merger parties request a confidential review, the indicative timeframe is 2-4 weeks, but in practice can take up to 6 or 8 weeks. If (once) the proposed transaction is public and the ACCC determines it cannot be pre-assessed or confidentially cleared, the ACCC undertakes a public review, including market inquiries, with an indicative (Phase 1) timeframe of 6-12 weeks. If the ACCC is concerned the transaction may contravene the CCA, it will issue a 'Statement of Issues' and initiate a second phase of market inquiries with an indicative (Phase 2) timeframe of 6-12 weeks before a final decision.
The formal clearance process is governed by statutory timeframes. The ACCC must make a decision within 40 business days of the application, unless extended (see below).
The authorisation process is governed by statutory timeframes. The Tribunal must make a decision within 3 months of the application, unless extended (see below).
Under what circumstances the basic timetable may be extended, reset or frozen?
As the timeframes in relation to informal clearance are indicative only, there is no process for formal extensions of time. The ACCC will extend its indicative timeline for ‘clock stoppers’ such as information requests or consideration of undertakings.
The period for a decision by the ACCC can be extended by agreement with the applicant or by a further 20 business days because of the complexity of the matter or other special circumstances.
The Tribunal may extend the period for making a determination by not more than three months because of the complexity of the matter or other special circumstances.
Are there any circumstances in which the review timetable can be shortened?
There are no specific provisions for an expedited process or shortening the timetable.
Which party is responsible for submitting the filing? Who is responsible for filing in cases of acquisitions of joint control and the creation of new joint ventures?
Applications are usually made by the acquirer, though as the process is voluntary and informal, often merger parties will submit a joint application.
The acquirer must make an application for formal clearance (where a party elects to file).
The acquirer makes an authorisation application. The target or vendor may seek leave to intervene in the application as an interested party, such that the process can involve direct input from both parties.
What information is required in the filing form?
There is no prescribed form or statutory information requirements for an informal clearance application. The ACCC publishes Merger Guidelines to which parties should have regard.
Additional information may be provided voluntarily to the ACCC throughout the process, or at the request of the ACCC itself. The ACCC also has statutory information-gathering powers under the CCA and may issue a formal request for information and documents, or to interview persons, with which compliance is compulsory.
Formal clearance and authorisation
Applications for formal clearance and authorisation must be made by completing and lodging a prescribed form. The forms contain detailed information and evidence requirements including in relation to the parties, the acquisition, the market, market concentration, suppliers, competitors, customers and constraints on market power. The authorisation form contains additional categories related to net public benefits arising from the transaction. A form must be completed in its entirety for the application to be valid.
Which supporting documents, if any, must be filed with the authority?
There are no mandatory supporting documents with respect to an application for informal clearance.
The prescribed forms for formal clearance and authorisation include mandatory supporting documents, in particular annual reports and the transaction documents. There is no requirement for a power of attorney. A court enforceable undertaking must also be provided by the applicant.
Is there a filing fee? If so, please specify the amount in local currency.
There is no filing fee if filing for informal clearance. The filing fee is A$25,000 if an application is made for formal clearance or authorisation.
Is there a public announcement that a notification has been filed?
Applications are not publicly announced if the ACCC is notified on a confidential basis. Once the transaction is public, and the ACCC is undertaking a public review, the ACCC will list the transaction on its public register (available online). In the public review phase third parties may also be made aware of the transaction by direct contact from the ACCC as part of its market inquiries.
Formal clearance and authorisation
Valid applications for formal clearance or authorisation are publicly announced by way of inclusion (subject to limited claims for confidentiality) on the website and public register of the ACCC and Tribunal.
Does the authority seek or invite the views of third parties?
If pre-assessment is sought confidentially but the transaction is public, the ACCC may seek the views of targeted third parties. The ACCC will not seek the views of third parties in the market about a transaction if it is notified on a confidential basis and the transaction is not public. The ACCC will invite the views of third parties, such as competitors, suppliers and customers as well as other relevant stakeholders, as part of a public review.
Formal clearance and authorisation
The ACCC invites the views of third parties through a public consultation process notified on its website after the application is received (either directly or from the Tribunal in the case of authorisation). Under the CCA, the ACCC (and the Tribunal in the case of authorisation), may also seek any relevant information, and consult with any persons that it considers reasonable and appropriate.
What information may be published by the authority or made available to third parties?
Where clearance is sought on a confidential basis the ACCC will not publish any details regarding the clearance application or transaction.
If the transaction is public and a public review is undertaken, the ACCC will list the transaction on its public register (available online). The ACCC accepts information and submissions as confidential and commercially sensitive subject to certain permitted disclosures (for example, if compelled by law). It will not publish or disclose the contents of the application, supporting documents or third party submissions.
Formal clearance and Authorisation
Formal clearance and authorisation are generally public processes, subject to limited claims for confidentiality.
In relation to formal clearance, the CCA requires that the application and supporting material, as well as the ACCC's determination, be published on the ACCC's public register and/or website, subject to claims for confidentiality. Certain information is protected under the CCA as confidential (relating to a secret formula, cash consideration or current costs). Otherwise, determination of confidentiality is at the ACCC's discretion. The applicant has an opportunity to withdraw information (before it is published) if the ACCC determines it is not confidential.
A similar process applies in respect of the Tribunal's treatment of confidential information in the authorisation process (subject to the Tribunal's directions).
Does the authority cooperate with antitrust authorities in other jurisdictions?
The ACCC cooperates with relevant merger control authorities in other jurisdictions, including the European Union, the United States, Canada and New Zealand. Notification submitted in another jurisdiction will usually come to the attention of the ACCC if the merger is likely to affect an Australian market. International decisions do not confer statutory immunity in Australia.
What kind of remedies are acceptable to the authority? How often are behavioural remedies accepted in comparison with major merger control jurisdictions, such as the EU or US?
The ACCC may accept court enforceable undertakings to address competition concerns.
Accepting an undertaking is a matter of discretion for the ACCC. It has a preference for 'structural' undertakings (for example, divestment, where it will wish to approve a buyer as suitable (for example, independent and having expertise and resources to be an effective long-term competitor)). Divestment is not necessarily required prior to closing, although this is preferred.
While the ACCC can also accept 'behavioural' undertakings, it is generally reluctant to do so where such undertakings will require ongoing supervision after the merger, will be difficult to enforce, or are not accompanied by a structural undertaking.
What procedure applies in the event that remedies are required in order to secure clearance?
The CCA does not prescribe any formal timing requirements regarding the offering of remedies.
Court enforceable undertakings can be offered by the parties upfront (for example where material competition issues are evident) or during a review once particular competition concerns have been clearly identified by the ACCC (for example, after a 'Statement of Issues' has been published).
The ACCC is likely to take into consideration remedies agreed in other jurisdictions where they are relevant in assessing competition issues in Australia. It will ultimately need to be satisfied that the competition issues affecting Australian markets have been adequately addressed. Sometimes it will still require that court enforceable undertakings are offered by the parties with respect to Australia.
Court enforceable undertakings are (typically) market tested before acceptance by the ACCC, formally documented and executed by the parties giving the undertaking. Undertakings must be published (subject to confidentiality exemptions) on the ACCC's public register (available online).
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
There is no penalty for failing to notify as notification is voluntary.
If a transaction closes without clearance or authorisation and the ACCC forms the view that the acquisition would have the effect, or likely effect, of substantially lessening competition in a market in Australia, the ACCC may seek pecuniary penalties against the acquirer up to the greater of: A$10 million, three times the value of the benefit reasonably attributable to the contravention, or 10% of annual group turnover per contravention for a corporation, and up to A$500,000 for an individual.
The ACCC may seek an injunction to prevent the transaction completing (if it has not already completed), orders for the divestiture of acquired shares or assets, or an order that the transaction is void (if it has completed).
Any person who is knowingly concerned in, or a party to, the contravention or aided and abetted the contravention is also liable to pecuniary penalty and injunction. Accordingly, in some circumstances, ancillary liability could attach to the vendor as well as the purchaser.
Where formal clearance or authorisation has been sought, if a transaction closes before a determination is made the applicant would also be in breach of the (required) court enforceable undertaking.
In relation to a foreign-to-foreign merger, if the Tribunal (on application of the ACCC, Minister or any other person) makes a declaration that the acquisition has the effect, or likely effect, of substantially lessening competition in an Australian market and does not result in offsetting public benefits, and the affected corporation carries on business in Australia in breach of the declaration (that is, after the end of six months after declaration is made (unless extended)), the ACCC may seek orders for an injunction, divestiture of assets and/or pecuniary penalties.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
In respect of informal clearance, if the ACCC becomes aware of new information it may re-open its investigation of the transaction, even if the transaction has closed.
Formal clearance or authorisation granted on the basis of information that is false or misleading in a material particular may be revoked.
If the ACCC uses its compulsory information gathering powers to obtain information, documents or evidence from the merger parties, refusal or failure to comply with the notice issued, or knowingly furnishing false or misleading information or evidence to the ACCC, is an offence punishable on conviction by a fine up to A$3,600 or imprisonment for 12 months.
Can the authority’s decision be appealed to a court? In particular, can third parties who are not involved in the transaction appeal the decision?
There is no statutory right of appeal available to the merger parties or third parties following an informal clearance decision, as the process is informal.
The ACCC's decision can effectively be challenged in the Federal Court of Australia if a merger party proposes to proceed with a transaction. The ACCC can apply for an injunction (and other remedies) or alternatively, a merger party can issue proceedings seeking a declaration that the proposed transaction will not contravene the CCA. Third parties do not have standing to seek an injunction to prevent a merger but may seek divestiture orders or damages. Proceedings in the Federal Court can be expected to take a minimum of six months.
The applicant can apply to the Tribunal for a review of the ACCC's determination. Third parties who are not involved in the transaction cannot appeal. The application must be made within 14 days of the ACCC's determination. The Tribunal must make a decision within 30 business days after receiving the application, which the Tribunal can extend to 90 business days if it decides the matter cannot be properly dealt with either because of its complexity or other special circumstances.
A merger authorisation determination may only be subject to limited appeal to the Federal Court of Australia through administrative law mechanisms on questions of law. A merits review is not available.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
In respect of informal clearance, the ACCC is increasingly merging its pre-assessment and confidential review processes into a longer confidential pre-assessment process. If a transaction is public (or becomes public) through this process, it will sometimes engage in ‘targeted’ market inquiries as part of this process, instead of, or prior to, commencing a full public review.
The Tribunal’s recent grant of authorisation in Application by Tabcorp Holdings Limited  ACompT 1, following the authorisations granted by the Tribunal in 2016 in Application by Sea Swift Pty Limited  ACompT 9 and in 2014 in Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited  ACompT 1, has solidified authorisation as a credible alternative to informal clearance in appropriate cases.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
As part of its response to the Final Report of the Competition Policy Review, released in March 2015 (the most recent comprehensive review of Australia's competition laws and policy), the government introduced the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 and the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 to Federal Parliament. The latter Bill was passed in August 2017 and will become effective once the former Bill, which at time of writing is currently being debated in the Senate, is passed.
This legislation, which is largely in line with the draft exposure legislation released in September 2016, proposes to repeal the existing formal clearance and authorisation processes and introduce a new authorisation process. Under the proposed regime, assessment of merger authorisation will be undertaken by the ACCC, with review by the Tribunal of the ACCC's determination available on a limited basis. It is proposed that the ACCC must not grant merger authorisation unless it is satisfied in all the circumstances that the merger either would not have the effect or likely effect of substantially lessening competition, or the conduct would result or be likely to result in public benefit which would outweigh the public detriment that would result or be likely to result from the conduct.