ACCC red lights not fatal for mergers

A red light from the Australian Competition & Consumer Commission (ACCC) is not necessarily fatal when it comes to seeking approval for mergers but red light Statement of Issues (SOI) are becoming harder than ever before to resolve, according to Johnson Winter & Slattery’s latest report on recent trends in complex merger review cases by the ACCC.

The 4^th Edition of Recent trends in complex ACCC merger review cases analyses the ACCC’s merger decisions since 2006, which involved a SOI, raising serious or complex competition concerns.

This report outlines the recent trends in complex merger cases, including the likelihood of SOI transactions being cleared or opposed, with or without remedies. 

Highlights from this year’s report include:

• The ACCC continues to take a number of months to make a final decision for a SOI transaction. In 2019, the average time taken to make a final decision for a SOI transaction was almost 6 months, which is around the historic average.
• Red lights are not fatal – since 2006 nearly half have been cleared and only one quarter blocked. Since 2006, 48% of all transactions with one or more red lights have been cleared while 25% have been blocked.
• Red lights do not mean that it is necessary to offer remedies to obtain clearance. Since 2006, 42% of all cleared transactions with one or more red lights have not required a remedy.
• There has been an increasing tendency for parties to withdraw their transaction after a red light SOI but before a final ACCC decision. Between 2016-2019, the percentage of red light SOIs that were withdrawn before final ACCC decision almost quadrupled compared to the previous 4 years.
• The ACCC still prefers divestments over behavioural undertakings. The ACCC is reluctant to be tasked with monitoring compliance with undertakings and is accordingly less willing to accept behavioural undertakings.
• The large majority of orange light (no red lights) transactions have been cleared by the ACCC. 71% of all transactions with one or more orange lights (no red lights) have been cleared while 12% have been blocked.
• Almost every orange light transaction that has been cleared by the ACCC did not require a remedy. 88% of all orange light cleared transactions did not require any remedy.
• The ACCC continues to lose merger cases that proceed to the Federal Court. In addition to a spate of other decisions over the years, the ACCC lost two further cases where it had previously issued a red light SOI decision – the Vodafone/TPG merger and the Pacific National/Aurizon acquisition. The ACCC has suggested that it will use these losses to seek changes to the merger laws.