Will your deal need ACCC approval under the proposed thresholds?

On Friday, Treasury released a consultation paper outlining its proposed merger notification thresholds, as part of the upcoming overhaul of Australia’s merger law regime. 

In this paper, Treasury proposes a series of thresholds, both monetary and market concentration, designed to target the most potentially harmful transactions.

Under Treasury’s proposal, the acquisition of a business or asset with a 'material connection to Australia', will need to be notified to the ACCC if any of the below are met:

These thresholds are designed to capture ‘the potentially most harmful’ (and most significant) transactions in the Australian market, while allowing unproblematic transactions to progress without regulatory review. They are also designed to prevent ‘roll up’ strategies and creeping acquisitions/acquisitions of nascent competitors.

However, there are inherent uncertainties involved in market definition (and calculating market share on this basis) and the potential financial consequences for not notifying the ACCC of a transaction are significant. This is one of the most significant areas of risk for businesses under the proposed new regime; ensuring market definition, and therefore market shares, are correctly calculated. 

When considering whether a transaction falls under these thresholds, the ACCC is likely to consider markets at their narrowest / most specific, in order to fully test all possible anti-competitive effects. This will mean merger parties’ market shares will be higher, and more transactions will be caught under the thresholds.

Conversely, a wide market definition may be favoured by merger parties as this will produce lower market shares and transactions which are less likely to be caught by the notification requirements.

Merger parties who do not carefully consider market definition, or who are too broad in their approach may find themselves facing ACCC scrutiny for failure to notify – even if they do not otherwise consider the transaction raises competition concerns.

In order to address some of these uncertainties, and provide additional comfort to businesses, Treasury has proposed a waiver mechanism to allow businesses to manage this risk.

The waiver process will allow parties to apply to the ACCC for a waiver of notification, where there may be uncertainty as to whether the notification thresholds are met.

The ACCC has also indicated that it is willing to engage with merger parties in order to assist with appropriate market definition, will release guidance to businesses to assist compliance with the new laws and will periodically review the thresholds to ensure the right balance is struck.

The Government is consulting on the proposed notification thresholds until 20 September 2024.

If you require any advice on these changes, or on making submissions to the government review process please contact the JWS Competition team.