Draft legislation for new merger control regime released

The Treasurer has now released draft legislation for the new Australian merger control regime, which will come into effect on 1 January 2026, subject to the legislation’s passage through Parliament.

The key elements of the legislation include:

• a mandatory notification requirement for acquisitions that meet certain notification thresholds;
• a prohibition of completing notifiable acquisitions without ACCC approval;
• special rules for serial acquisitions;
• fixed review periods;
• administrative decision-making powers for the ACCC;
• an improved test for assessing an acquisition’s effect on competition; and
• a substantial public benefit test.

Submissions on the draft legislation can be made until 13 August 2024.

The Treasurer will separately consult on regulations covering the notification thresholds, fees and transparency rules later this year.

This article discusses the key features of the draft legislation.

Mandatory notification

The draft legislation introduces a mandatory notification requirement for all acquisitions that meet certain notification thresholds to be set by regulations. The Treasurer will consult on the notification thresholds later this year. The notification thresholds are expected to be set by reference to the merger parties’ turnover, the transaction value and market concentration (e.g. share of supply or market share thresholds).

To capture serial acquisitions, all acquisitions within the previous three years by the acquirer and/or the target will be aggregated for the purposes of determining whether the notification thresholds are met.

In addition, the Minister may determine that certain high-risk acquisitions, or classes of high-risk acquisitions, are required to be notified.  

Definition of “acquisitions”

The term “acquisition” will include any direct or indirect acquisition by a corporation of shares in the capital of a corporation or assets of a corporation or of a person.

However, there will be some exemptions for acquisitions that do not give control, temporary holdings of shares, internal restructures and reorganisations and acquisitions by administrators.

Suspensory effect

The new regime will include a prohibition on completing a notifiable acquisition until the ACCC has determined that the acquisition may be put into effect with or without conditions (“suspensory effect”). The ACCC will act as an administrative decision-maker and have the power to determine whether an acquisition may or may not be put into effect.

Acquisitions that have been put into effect prior to the ACCC’s determination are void.

Penalties

Penalties will apply for a failure to comply with the notification requirement and for a breach of the requirement to suspend completion of an acquisition prior to the ACCC’s determination. There will also be penalties for providing false or misleading information to the ACCC. The existing civil penalty provisions (section 76 of the Competition and Consumer Act 2010) will apply.

Review timelines

The merger review process will be subject to fixed review periods. The proposed timelines are set out in the table below.

Competition test

The draft legislation includes a provision that clarifies that a ‘substantial lessening of competition’ can result from creating, strengthening or entrenching a substantial degree of power in a market. The main objective of this clarification is to ensure adequate focus on the competitive structure of a market when assessing the competitive effects of an acquisition, for example in the case of “killer” acquisitions of nascent competitors by market-leading firms.

To allow a proper assessment of the competition effects of serial acquisitions, the cumulative effect of all acquisitions within the previous three years by the merger parties will be considered as part of the assessment of the notified acquisition.

Substantial public benefits test

The new regime will afford merger parties the opportunity to make an application for clearance based on substantial public benefits grounds in circumstances where the ACCC determined, following a phase II review, that an acquisition must not be put into effect because it would be likely to have the effect of substantially lessening competition in a market.

Transparency

The ACCC will be required to keep a public register of all notified acquisitions, which must include copies of all ACCC acquisition determinations and decisions to enter into a phase 2 review as well as any other information or documents prescribed by regulations.

Predictability

If an acquisition is subject to a phase 2 review, the merger parties will be provided with a ‘Notice of Competition Concerns’ (Notice) by the ACCC no later than 25 business days after the start of the phase 2 review. The Notice will set out the ACCC’s preliminary competition assessment and the grounds on which the ACCC makes that assessment, including the relevant material facts and the material information and evidence the ACCC relies on in making the assessment. The merger parties will have an opportunity to respond to the ACCC’s Notice.

Review of ACCC determinations

ACCC determinations will be subject to a limited merits review by the Australian Competition Tribunal upon application of a notifying party or a third party with a sufficient interest. The application for review will need to be made within 7 calendar days of the ACCC’s determination for a fast-track review (60 calendar days) and within 14 calendar days for a standard review (90 calendar days).

The review by the Tribunal will essentially be based on the information, material and evidence that was given to the ACCC in connection with its determination. The Tribunal may make a determination affirming, setting aside or varying the ACCC’s determination. 

Transitional arrangements

The new regime will come into effect on 1 January 2026. However, merger parties will be able to voluntarily notify their transaction to the ACCC under the new regime already from 1 December 2025 onwards.

The current voluntary informal clearance system will continue to be available until 31 December 2025. However, the merger authorisation process will become unavailable for new applications from 1 July 2025.

Next steps – notification thresholds

One of the most challenging tasks in establishing a mandatory merger notification regime is calibrating the notification thresholds such that all (or at least, the vast majority of) potentially anti-competitive acquisitions are caught while keeping the number of notifiable benign acquisitions as low as possible.

In the context of global acquisitions, it will be important to include appropriate minimum domestic turnover and/or transaction value thresholds to ensure that mergers with no or only de minimis effects in the Australian market will not be notifiable.