The Law
Mergers
About mergers
This page provides links to various resources available relating to mergers.
In Australia mergers are prohibited if it can be demonstrated that they will have the effect or likely effect of substantially lessening competition in a market (section 50 TPA). It is possible to obtain clearance (formal or informal) or authorisation for proposed mergers, but there is no mandatory notification process.
Clearance will be granted only if the ACCC does not believe the merger will SLC (s 95AN). Authorisation, on the other hand, may be granted by the Australian Competition Tribunal even where the merger will SLC if it can be demonstrated that the merger would lead to such a benefit to the public that it should be allowed to occur (s 95AZH).
Section 50A deals with mergers occurring outside Australia.
History of merger regulation in Australia
The original Trade Practices Act 1974 applied a substantial lessening of competition test - specifically, it prohibited the acquisition of assets and shares, which resulted in a substantial lessening of competition in a market for goods or services.
In 1977 the substantial lessening of competition test was replaced with a market dominance test by the Trade Practices Legislation Amendment Act 1977. As a result, acquisitions were only prohibited where they resulted in or substantially strengthened a ‘position to control or dominate a market’. This was (generally) considered a higher threshold so that less mergers were captured.
In 1989, the House of Representative Standing Committee on Legal and Constitutional Affairs (the Griffiths Committee) recommended retaining the dominance test in its report ‘Mergers, Takeovers and Monopolies: Profiting From Competition?’.
Shortly thereafter, however, the Senate Committee on Legal and Constitutional Affairs (the Cooney Committee). It recommended that the test in s 50 be lowered to prohibit acquisitions or mergers that substantially lessen competition in a market. This change was introduced by the Trade Practices Legislation Amendment Act 1992 which also intorduced a provision for the substantial lessening of competition test in relation to trans-Tasman mergers and introduced a non-exhaustive list of matters to be considered by the Courts when determining if a merger substantially lessened competition (s 50(3))
In 2002, numerous submissions were made to the Dawson Committee recommending that the substantive test for mergers change back to one of dominance, incorporate an ‘efficiency’ test or incorporate a public benefit test. The Dawson Committee recommended that the substantive test of ‘substantial lessening of competition’ be retained. This was accepted by the government and no legislative change has been made to the substance of the prohibition.
The Dawson Committee did, however, make recommendations relating to merger clearance and authorisation processes that were introduced by the Trade Practices Legislation Amendment Act (No 1) 2006. For more details on the Committee's discussion of mergers and the submissions made to the Committee relating to mergers see: Julie Clarke, 'The Dawson Report and Merger Regulation' (2003) 8(2) Deakin Law Review 245
There is a current push for the introduction of provisions to deal with creeping acquisitions and legislation is expected later in the year.
The Law
The Prohibitions
50 Prohibition of acquisitions that would result in a substantial lessening of competition
50A Acquisitions that occur outside Australia
Part VII Division 3—Merger clearances and authorisations
Subdivision A—Preliminary
95AA Simplified outline of this Division
[This page contains only select provisions relating to authorisation and clearance.
For full Division see the Act; see also ACCC Merger Guidelines]
This Division is about merger clearances and merger authorisations.
It relates to section 50: that section prohibits a person acquiring shares in the capital of a body corporate or assets of another person if the acquisition would have, or be likely to have, the effect of substantially lessening competition in a market. If a person has a clearance or authorisation for the acquisition, section 50 will not prevent the person from making the acquisition.
The main differences between merger clearances and authorisations are:
• different bodies decide whether they should be granted;
• different timeframes apply for when the body must make its decision;
• they have different tests that need to be satisfied for them to be granted;
• merits review is not available for decisions on authorisations.
For merger clearances (see Subdivision B):
• the Commission grants them;
• it must make its decision whether to grant within 40 businessdays (which can be extended if the applicant agrees or the Commission so decides), and if it does not, the application is taken to be refused;
• it cannot grant the clearance unless it is satisfied that the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition in a market;
• if it refuses to grant a clearance, or grants a clearance subject to conditions, then the person who applied for the clearance may apply to the Tribunal under Division 3 of Part IX for review of the Commission’s decision.
For merger authorisations (see Subdivision C):
• the Tribunal grants them;
• it must make its decision whether to grant within 3 months (which can be extended to 6 months in special circumstances), and if it does not, the application is taken to be refused;
• it cannot grant the authorisation unless it is satisfied that the acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to take place.
Subdivision D contains a prohibition on providing false or misleading information to the Commission or Tribunal under this Division or Division 3 of Part IX.
Subdivision B—Merger clearances
Section 95AC
Commission may grant clearance for a merger
(1) The Commission may grant a clearance to a person:
(a) to acquire shares in the capital of a body corporate; or
(b) to acquire assets of another person.
...
(2) If the Commission does so, then section 50 does not prevent the person from acquiring the shares or assets in accordance with the clearance.
...
(3) Without limiting subsection (2), an acquisition will not be in accordance with a clearance if any conditions of the clearance are not complied with (whether the conditions are to be complied with before, during or after the acquisition).
Section 95AN
When clearance must not be granted
(1) The Commission must not grant a clearance in relation to a proposed acquisition of shares or assets unless it is satisfied that the acquisition would not have the effect, or be likely to have the effect, of substantially lessening competition (within the meaning of section 50).
(2) To avoid doubt, a clearance cannot be granted for an acquisition that has occurred.
Subdivision C—Merger authorisations
Section 95AT
Tribunal may grant authorisation for a merger
(1) The Tribunal may grant an authorisation to a person:
(a) to acquire shares in the capital of a body corporate; or
(b) to acquire assets of another person.
...
(2) If the Tribunal does so, then section 50 does not prevent the person from acquiring the shares or assets in accordance with the authorisation.
...
(3) Without limiting subsection (2), an acquisition will not be in accordance with an authorisation if any conditions of the authorisation are not complied with (whether the conditions are to be complied with before, during or after the acquisition).
Section 95AZH
When authorisation must not be granted
(1) The Tribunal must not grant an authorisation in relation to a proposed acquisition of shares or assets unless it is satisfied in all the circumstances that the proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to occur.
(2) In determining what amounts to a benefit to the public for the purposes of subsection (1):
(a) the Tribunal must regard the following as benefits to the public (in addition to any other benefits to the public that may exist apart from this paragraph):
(i) a significant increase in the real value of exports;
(ii) a significant substitution of domestic products for imported goods; and
(b) without limiting the matters that may be taken into account, the Tribunal must take into account all other relevant matters that relate to the international competitiveness of any Australian industry.
(3) To avoid doubt, an authorisation cannot be granted for an acquisition that has occurred.
Cases relating to mergers
Australian Gas Light Company v ACCC (No 3) [2003] FCA 1525
Articles/books/thesis relating to mergers
Australia
Julie Clarke, 'The Dawson Report and Merger Regulation' (2003) 8(2) Deakin Law Review 245
International and comparative
Julie Clarke, The International Regulation of Transnational Mergers (PHD Thesis, Qld UT, 2010)
Theory, efficiencies and economics
Herbert J Hovenkamp, Mergers and Market Dominance, Research Paper, January 2008
Reports
Australia
Dawson Committee Report - Chapter on Mergers (2003)
Cooney Committey Report (1991)
Mergers, Monopolies & Acquisitions
Griffiths Committee Report (1989)
Mergers, Takeovers and Monopolies: Profiting from Competition?
Report of the House of Representatives Standing Committee on Legal and Constitutional Affairs
Canada
Innovation and Dynamic Efficiencies in Merger Review (April 2007)
New Zealand
A Best Practice Review of the New Zealand Merger Clearance Regime (August 2007)
International
OECD - Dynamic Efficiencies in Merger Analysis (2007)
OECD - Report on Notification of Transnational Mergers (1999)
Merger Guidelines and Best Practices
Click here for an overview of the merger guidelines in Australia.
ACCC Merger Guidelines (November 2008)
Final Guidelines released 21 November 2008 and replace the 1999 Guidelines
ACCC Formal Merger Process Guidelines (June 2008)
ACCC Merger Review Process Guidelines (July 2006)
New Zealand
Merger Guidelines (2004)
United Kingdom
OFT/CC Review of Merger Guidelines (initiated 2008; includes links to Guidelines)
United States
Pre-Merger/Hart-Scott-Rodino Act (resources from FTC)
Horizontal Merger Guidelines (August 2010 from DOJ site)
Horizontal Merger Guidelines (August 2010, PDF from FTC site)
Horizontal Merger Guidelines (April 1992, PDF from FTC; now replaced by 2010 Guidelines)
Horizontal Merger Guidelines (April 1992 from DOJ; now replaced by 2010 Guidelines)
Commentary on Horizontal Merger Guidelines (2006 Commentary on 1992 Guidelines - from DOJ site)
DOJ Policy Guide to Merger Remedies (2004)
Europe
Guidelines on the Assessment of Horizontal Mergers (2004)
Commission Notice on the definition of relevant market for the purpose of Community competition law (1997)
International
ICN - Merger Guidelines Workbook (2006 PDF)
ICN - Guiding Principles and Recommended Practices for Merger Notification and Review Procedures
ICN - Recommended Practices for Merger Analysis (PDF)
ICN Member Merger Templates (merger websites and templates for Member States)
Useful links
International Competition Network - Mergers Working Group
ICN Database - Merger Review Laws, Related Materials, and Templates
Merger Remedies Matrix
Concurrences (Institute of Competition law) - Cases and Reports on merger remedies in Europe
Merger Streamlining Group
Group of
multinational firms 'interested in ensuring that the merger review regimes ... operate effectively and efficiently and do not impose undue compliance burdens.'