New Australian merger regime introduced into Parliament

Updated merger reform bill makes a number of changes from Exposure Draft

What you need to know

• The Australian Government has introduced the long-awaited merger reforms into Parliament. 
• The bill introduces a new mandatory and suspensory merger regime for transactions that exceed specified monetary thresholds, with the ACCC as the decision maker.
• If passed, the regime will commence on 1 January 2026 and will become available on a voluntary basis from 1 July 2025, when the current authorisation process will be closed.
• The bill contains a number of significant changes from the Exposure Draft on which the Government consulted in August and September of this year, including a new notification waiver system, a new confidential review process for certain mergers, and some simplification.
• Parliament next sits in November and the Government will be hoping to pass the amendments before the end of the year.

What you need to do

• Review the changes and consider the impact on any potential transactions involving the acquisition of shares or assets.

On 10 October 2024 the Federal Government introduced the much-awaited merger reforms into Parliament. The bill entitled "Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024" (Bill) will introduce a new merger regime in Australia that is both mandatory and suspensory for transactions which exceed specified monetary thresholds. The changes were consulted-on in July and August this year following the release of Exposure Draft materials and proposed thresholds and, following this consultation, the Government has made a number of changes to the Bill that has been introduced. Despite the limited number of sitting days between now and the end of the year, we expect the Government will be keen to pass the Bill as soon as possible, so that it can commence on 1 January 2026, with a voluntary transition period commencing on 1 July 2025 (when the current merger authorisation system will be closed). In the article below we have summarised the key elements of the new Bill and the significant changes from the Exposure Draft materials.

Key changes from Exposure Draft materials 

The Bill makes a number of significant changes from the Exposure Draft, outlined below.

• While the Bill does not include the proposed thresholds, the Government has announced its intended thresholds, revising the monetary thresholds and confirming that it will not be proceeding with thresholds based on market concentration. 
• The monetary thresholds will include a test to capture serial acquisitions.
• "Simple" land acquisitions involving residential property development and certain commercial property acquisitions are exempt from notification, unless they are captured by additional targeted notification requirements. 
• A notification waiver system has been added, to enable parties to apply to the ACCC for a determination that an acquisition is not required to be notified.
• The Bill introduces a new confidential review process for certain acquisitions (eg of listed companies), to enable the ACCC to assess them without disclosing the notification on the acquisitions register for a specified period.
• The definitions of transactions caught by the regime has been simplified and clarified. In addition, the concept of "control" now refers to the existing meaning in the Corporations Act 2001, with some modifications. The proposed rebuttable presumptions have been removed.
• Other changes to the control test from the Exposure Draft have been flagged by the Treasurer including to require that purchases of an interest in an unlisted private company of above 20% voting power will be notifiable, if one of the merging parties has turnover of more than $200 million. 
• The timelines have been clarified, with additional limitations placed on the ACCC's ability to rely on clock-stoppers at various stages of the review process.
• Changes to the "substantial lessening of competition test" will apply only for the purposes of merger assessment, not more widely throughout the Act as originally proposed.
• The Bill provides a discretion for the Australian Competition Tribunal to consider new information, if relevant to the ACCC determination and the person was not afforded a reasonable opportunity to make submissions during the ACCC's review.
• To facilitate mergers that result in net public benefit (even if small), the Bill abandons the requirement that the public benefit be substantial.

Single mandatory and suspensory administrative regime

The Bill introduces the previously-announced single mandatory and suspensory administrative merger control regime through detailed amendments to the Competition and Consumer Act 2010 (CCA). Parties to transactions which exceed specified thresholds will be required to notify the ACCC of the transaction unless the ACCC has determined that the acquisition does not require notification, before putting it into effect. 

Acquisitions below the thresholds will not require merger notification. However, even for transactions which do not exceed the thresholds, parties will still need to consider whether they are likely to substantially lessen competition. The ACCC will be able to investigate those transactions under other provisions of the CCA, including those that prohibit anti-competitive conduct.

Notification thresholds

While the Bill does not set out the thresholds above which mandatory notification will be required (these will be set by legislative instrument), the Government has also announced its intended thresholds, including during the second reading of the Bill. The revised thresholds include a new third monetary limb (see Limb 3 below) to capture serial acquisitions (a series of small acquisitions by businesses which individually do not result in material changes to market concentration or competitive dynamics, but over time forms part of a strategy of consolidation). Notably, while the Bill still contemplates that a market share / share of supply limb could be included as a notification threshold, this has not been included by the Government in the announced monetary limbs and Treasury has confirmed that this limb has been abandoned due to the uncertainty it created. The thresholds will be reviewed after 12 months.

Under the revised monetary thresholds, mergers will trigger mandatory notification requirements if they reach any of the three monetary limbs (ie in the alternative) and there is a material connection to Australia (Jurisdictional Nexus). A target has a material connection to Australia if they are "carrying on a business in Australia" or have plans to carry on a business in Australia.

Limb 1: Economy-wide monetary threshold

An acquisition is notifiable if:

• The combined Australian turnover of the merger parties (including the acquirer group) is at least $200 million; and
• Either the Australian turnover is at least $50 million for each of at least two of the merger parties or the global transaction value is at least $250 million. 

OR:

Limb 2: Very large acquirer threshold 

An acquisition is notifiable if:

• The acquirer group’s Australian turnover is at least $500 million; and
• The Australian turnover is at least $10 million for each of at least two of the merger parties.

OR:

Limb 3: Cumulative serial acquisitions threshold

For medium to large sized mergers an acquisition will be notifiable if:

• The combined Australian turnover of the merger parties (including the acquirer group) is more than $200 million; and 
• the cumulative Australian turnover from acquisitions in the same or substitutable goods or services over a 3 year period is at least $50 million.

For very large acquirers an acquisition is notifiable if:

• The acquirer group’s Australian turnover is at least $500 million; and
• the cumulative Australian turnover from acquisitions in the same or substitutable goods or services over a 3 year period is at least $10 million.

The Limb 3 cumulative thresholds will be subject to a de minimis exception for acquisitions below $2 million Australian turnover.

Note: the precise wording of all of the limbs has not yet been released and will be refined. In particular, the application of the Jurisdictional Nexus to all three limbs or just Limb 1 is ambiguous. The Government has said that further consultation on the thresholds will take place in 2024-2025 as the Government consults on the subordinate legislation.

Targeted screening tool

The Government is also exploring a low-cost targeted screening tool to capture acquisitions below monetary thresholds in select concentrated regions and sectors. All mergers where the target business or asset operates in the designated sub-industries, sectors, goods or services or regions above a minimum turnover threshold (to be determined) would need to register with the ACCC. A Ministerial determination could require acquisitions found through the screening tool to be in high-risk or concentrated markets to notify or provide more information to the ACCC. The merger would only be notifiable if the ACCC requests notification within a short period (5 to 10 business days). This element of the regime is not included in the Bill and only limited details have been provided at this stage.

Additional notification thresholds: Class determination for "high risk mergers"

In addition to the above notification thresholds, an acquisition will be required to be notified to the ACCC if it belongs to a class of acquisitions determined by the Minister under subsection 51ABQ(1). When making a class determination, the Minister may determine the class by referring to a number of factors including a market, an industry, a business or even parties to a contract. The intention is to use this tool to capture acquisitions that are capable of affecting competition and most likely to harm competition and consumers.  The example given in the Explanatory Materials is of serial acquisitions and acquisitions of nascent competitors. Before determining a class the Minister must follow a consultation process with the ACCC and stakeholders.

Continuing its focus on the sector, the Government has announced it will use this provision to require supermarkets to notify the ACCC of every merger in the supermarket sector. Other industries that have been flagged and that may also be added to the list of high risk mergers with lower thresholds include fuel, liquor and oncology radiology. See also our notes below (under Control test) regarding acquisitions of a 20% share in a private company.

ACCC role

Under the new administrative regime, the ACCC will take on a fundamentally different role from its current one. The ACCC will become the "administrative steward", responsible for providing public guidance and meaningful engagement for merger parties. In recognition of this paradigm shift, the ACCC has released a Statement of Goals for Merger Reform Implementation (10 October 2024). These include faster timeframes; greater transparency; clear notification requirements for parties; a risk-based approach underpinned by enhanced data and economic analysis; economy-wide competition research and ACCC accountability; new analytical process guidelines; a clear path to transition; and improved internal capacity and streamlined processes. It has also released key dates, including noting that it will consult on draft process and analytical guidelines and notification forms in Q1 of 2025.

Application 

The acquisitions provisions of the Bill apply to a range of share and asset acquisitions, including:

(i) an acquisition by a corporation of:

• shares in the capital of a body corporate;
• any assets of a person;

(ii) an acquisition of shares in the capital of a corporation; and

(iii) an acquisition of any assets of a corporation.

These provisions are also extended to apply to the acquisition of units in a unit trust or an interest in a managed investment scheme. Further, a wide classification of what constitutes an asset is applied, including any kind of property, legal or equitable rights that are not property, goodwill and intangible assets.

Additionally, under a new Ministerial power, the Minister will have the power to determine, by legislative instrument, that the acquisitions provisions apply to an acquisition by a corporation of anything, and an acquisition of anything relating to a corporation. The purpose of this power is to provide flexibility to address emerging issues or transaction structures that may not be captured in the legislation. The example provided is where control is obtained via management agreements in combination with partial shareholding. 

Control test / exclusions

An acquisition by a person of shares in the capital of a body corporate is not required to be notified if (i) immediately after the acquisition is put into effect, the person does not control the body corporate (within the meaning of section 50AA of the Corporations Act 2001; or (ii) the person controlled the body corporate immediately before putting the acquisition into effect.

However, if the acquisition is in a class of acquisitions determined by the Minister under 51ABS(5) (which differs from the class notification above), this exemption does not apply and the acquisition must be notified. The Minister may determine this class by reference to the size of an interest in, or the nature of a person's control of, a body corporate. The Government has announced that it intends to ensure that purchases of an interest in an unlisted private company of above 20% will require notification, if one of the merging parties has turnover of more than $200 million. The precise formulation of this test has not been published at this time, but will be of critical significance.

The concept of "control" now refers to section 50AA of the Corporations Act 2001, a welcome change from the Exposure Draft. "Control" within the meaning of section 50AA of the Corporations Act refers to the capacity of one entity to determine the outcome of decisions about another entity’s financial and operating policies. In determining whether someone has that capacity, it is the practical influence that they can exert (rather than the rights they can enforce) that is the issue to be considered, and any practice or pattern of behaviour affecting the body corporate’s financial and operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust). Some additional rules will also apply, including that control will also arise where an acquirer and its "associates" jointly have the capacity to determine the outcome of decisions even if the acquirer does not have this capacity alone, and for special purpose vehicles. Internal restructures and reorganisations within a corporate group are carved out, so long as companies are already related. A change from joint to single ownership of shares will, however, be captured. 

For "Chapter 6" acquisitions (acquisitions of listed companies, listed schemes or unlisted companies with more than 50 members), an acquisition is not required to be notified if the acquisition does not result in any person's voting power in the body corporate increasing from 20% (or below) to above 20%, OR from a starting point that is above 20% and below 100%. This carve-out is intended to provide a safe-harbour for acquisitions involving publicly listed companies, widely held (unlisted) companies and listed registered schemes (such as managed investment trusts) that do not result in a person having voting power above 20%.  Such transactions will not need to be notified to the ACCC.

Ordinary course of business exception and the position regarding acquisitions of land

Acquisitions of assets in the ordinary course of business are excluded from the regime, so long as they are not acquisitions of land or patents. While this puts land acquisitions back into the regime, the Government has also announced that there will be an exemption from notification for "simple" land acquisitions involving residential property development or by any business that is primarily engaged in buying, selling or leasing property and which does not intend to operate a commercial business (other than leasing) on the land, unless they are captured under other additional targeted notification requirements. The precise terms of this exemption will be important for many businesses, but they have not yet been released.

Notification waivers

The Bill incorporates a new notification waiver system for businesses that are uncertain whether they meet notification thresholds / other requirements, or acquisitions that are unlikely to raise competition concerns. Under the system, parties will be able to apply to the ACCC for a determination that an acquisition is not required to be notified. The requirements for a notification waiver application will be set by legislative instrument. In making a determination the ACCC must have regard to (among other things) the notification thresholds and the likelihood that the acquisition would, if put into effect, have the effect of substantially lessening competition. The ACCC must give written notice and explanation of why it made a determination to the applicant.

The notification waiver has the potential to be a useful addition to the process, though many details are yet to be provided in relation to this aspect (including, for example the time in which it must be provided by the ACCC). It will be important that any waiver process is sufficiently streamlined for parties to take advantage of it. In addition, the fact that obtaining one will not exempt the acquisition from the operation of section 50 of the Act will be a deterrent for some parties.

Confidential review processes

The Bill introduces new confidential review processes for certain acquisitions, namely surprise hostile takeover bids involving the acquisition of shares in a body corporate, and certain acquisitions involving voluntary transfers under the Financial Sector (Transfer and Restructure) Act 1999. Various conditions apply.  The process will enable the ACCC to assess certain acquisitions without disclosing the notification on the acquisitions register for a specific period. It is not yet clear how this process interacts with the information notifying parties are required to provide to the ACCC and whether the same notification form will be required for this review.

Goodwill exemption retained but subject to ACCC scrutiny

Parties must notify the ACCC of provisions in business sale contracts to protect goodwill. The ACCC will be able to declare that the goodwill exemption does not apply, if the provision is not necessary for the protection of the purchaser in respect of the goodwill of the business (for example, if a non-compete clause covers a wider geographical area than the target business activities). This may represent a significant change, depending on the ACCC's approach to this new power. If the ACCC does not make such a declaration, this does not limit the powers of the ACCC or a court in relation to such clauses.

Timeframes for ACCC decisions

The Bill provides for a Phase 1 review period of up to 30 business days, or "fast-track" if no concerns are identified after 15 business days. If the ACCC is satisfied that the acquisition could, in all the circumstances, have the effect or be likely to have the effect of substantially lessening competition in any market, the ACCC may decide that the notification be subject to a Phase 2 review. The ACCC must give the notifying party written notice that it has decided that the notification should be subject to Phase 2 review. The notice must explain why the ACCC is so satisfied, by reference to the theories of harm being considered and the matters the ACCC intends to investigate.

The Phase 2 "in depth" review period is up to 90 business days, starting immediately after the end of the Phase 1 review.  In this case, the ACCC may give the notifying party a "notice of competition concerns" no later than the 25th business day after the start of Phase 2, or as soon as practicable thereafter. This document will set out the ACCC's preliminary assessment of the acquisition and the grounds on which the ACCC makes that assessment, including facts and evidence. The notifying party will have an opportunity to respond to the notice of competition concerns before the ACCC's determination, to ensure procedural fairness.

If the ACCC forms the view at the conclusion of its Phase 2 review that it is satisfied that that putting the acquisition into effect would, in all the circumstances, have the effect, or be likely to have the effect, of substantially lessening competition, the ACCC may make a determination that the acquisition must not be put into effect. If the ACCC makes such a determination, (or if it permits the merger but only with specified conditions), the notifying party may make a public benefit application.  

A public benefit application must be determined within 50 business days from the date of application. The ACCC may only make a determination permitting an otherwise anti-competitive acquisition if it is satisfied that the acquisition would, in all the circumstances, result or be likely to result in a benefit to the public and that benefit would, in all the circumstances, outweigh the detriment to the public that would result or be likely to result from the acquisition. Importantly, the requirement in the Exposure Draft materials that the benefit be "substantial" has been removed and only a net public benefit is required (even if small).

The ACCC will be able to ‘stop the clock’ on a Phase 1, Phase 2 and public benefit review 10 business days after issuing a section 155 notice if the parties do not respond within this period or if the parties are late to respond to an informal information request. 

Substantial lessening of competition test and public benefit test

The Government appears to have responded, in part, to concerns about changes to the substantial lessening of competition test which the Exposure Draft made apply across the CCA and to a higher bar for the public benefit test.

The ACCC will assess notifications by applying the substantial lessening of competition test. In order for the ACCC to determine that an acquisition must not be put into effect, the ACCC must be satisfied, following a Phase 2 review, that the acquisition would, in all the circumstances, have the effect or be likely to have the effect of substantially lessening competition in any market. 

For these purposes, the acquisition may have the effect or be likely to have the effect of substantially lessening competition in a market if the acquisition would, in all the circumstances, have the effect, or be likely to have the effect, of "creating, strengthening or entrenching" a substantial degree of power in the market. This does not affect the meaning of ‘substantial lessening of competition’ used elsewhere in the CCA. However, by quarantining this aspect of the test to the merger provisions, it is more likely that the test in the merger regime will deviate from the test in the rest of the CCA over time.

The controversial "relevant matters" have been removed from the CCA, and the economic factors for the competition assessment and the evidence based economic analysis are instead set out in the Explanatory Memorandum. These include the market position of the parties, whether the acquisition would result in the removal of a vigorous and effective competitor, structural and other conditions affecting competition including the level of concentration in the market, barriers to entry and expansion, commercial relationship of the parties and more. By incorporating these details, the Explanatory Memorandum has become part-Merger Guidelines. The ACCC will also consult on substantive guidelines in 2025, which will include how it will apply the "substantial lessening of competition" test.

As part of its assessment of "substantial lessening of competition", the ACCC may treat the effect of an acquisition as being the combined effect of the acquisition and certain earlier acquisitions by the parties involving the same or substitutable or competitive goods or services in the previous three years. This is intended to capture serial acquisitions which may not individually substantially lessen competition, but may do so when considered as a whole. 

To facilitate mergers that are likely to result in a net public benefit, the ACCC may approve them if it is satisfied that the acquisition would, in all the circumstances, result or be likely to result in a benefit to the public and that benefit would, in all the circumstances, outweigh the detriment to the public that would result or be likely to result from the acquisition. As noted above, this is a change from the Exposure Draft, which required the ACCC to find a "substantial public benefit" before approving a merger on this basis.

ACCC powers where a notification is incomplete or misleading / material change of facts

The Minister will determine the form for notification and/or information or documents that must be provided with the notification (by legislative instrument). If the ACCC is satisfied that a notification is materially incomplete or misleading, or contains false information in a material particular, and the notification is not yet subject to a Phase 2 review or the ACCC has not made a determination on the acquisition, the ACCC may decide that a notification does not have an effective notification date. This effectively means the review re-sets to day zero. This power is intended to incentivise parties to provide all information to the ACCC at the outset. It has been slightly curtailed from the Exposure Draft, which also permitted the ACCC to make such a decision in Phase 2.  

The ACCC will also have similar powers to change a notification date or extend the period of review where it becomes aware of a material change of fact, although these powers will apply in both Phase 1 and Phase 2. 

The notifying party is obliged to notify the ACCC of any material changes of fact in the notification until the ACCC makes a determination. This includes a major competitor exiting a market, the destruction of assets relevant to the ACCC's assessment or significant regulatory change.

Transparency

To facilitate transparency and predictability, the ACCC will publish information about notified acquisitions on a public register, including its determinations and reasons, a copy of the notice stating that a notification is subject to Phase 2 review and the notice of competition concerns. The Minister may also determine, by legislative instrument, other information or documents that are to be included on the register. Transactions that are considered confidentially will not be published on the register for a specified period. 

Penalties and other orders

Penalties will apply for failure to notify (commonly known as "failure to file") and for breach of the requirement to suspend completion of an acquisition pending the ACCC's decision (known as gun-jumping).

Maximum penalties for each of failure to notify and gun jumping will be consistent with other CCA penalties – ie, the greater of $50 million, 3 times the benefit obtained, or if that cannot be determined, 30% of the body corporate's adjusted turnover during the breach turnover period.

An acquisition that is put into effect when it must not be, will be considered void. This voiding could have significant ramifications for acquisitions that were required to be notified but which were not, if those acquisitions were put into effect. The Federal Court has discretion to order that the voiding does not apply (for example where it is necessary to ensure a just outcome or avoid a perverse one).

On application by the ACCC, the Federal Court will also have power to grant injunctions to prevent mergers from being put into effect in certain circumstances, including where the ACCC made a decision based on false or misleading information and where a person engaged or is proposing to engage in conduct in contravention of the new requirements to notify and to suspend completion.

In certain limited circumstances involving false or misleading information knowingly or recklessly provided to the ACCC, or where conditions of an acquisition determination by the ACCC have not been complied with, the Federal Court may order divestiture or declare the acquisition void.  An application for a divestiture order must be made within 3 years after the acquisition was put into effect.

The Bill also introduces a new prohibition on giving false or misleading information to the ACCC in connection with merger reviews. The prohibition applies where a person gives information to the ACCC or the Tribunal that is false or misleading in a material particular and the person knows or is reckless as to whether the information is false or misleading in a material particular. The same maximum penalties outlined above will also apply to this prohibition, to act as a significant deterrent.  Different (lower) penalties will apply for providing false or misleading information in response to a section 155 notice (200 penalty units for individuals and 1000 penalty units per contravention for corporations).  A penalty unit is currently valued at $330.

Limited merits review of ACCC decisions by Tribunal

ACCC determinations on acquisitions will be subject to limited merits review by the Australian Competition Tribunal, similar to the current process applicable to merger authorisations, with some modifications. The Tribunal process is not a re-hearing of the matter. Rather, the Tribunal will stand in the shoes of the ACCC and re-make the original decision.

The Bill makes a number of changes from the Exposure Draft, to address concerns regarding the limitations on information that could be put before the Tribunal for the purpose of its review. These include permitting the Tribunal to seek information, documents or evidence from, or ask questions of, a technical expert (such as economic or industry experts) and to allow participants in the proceedings or the ACCC to ask questions of the technical expert, as well as consulting with consumer associations. The Tribunal may also allow a person to provide new information, documents or evidence that the Tribunal is satisfied was not in existence at the time the ACCC made the determination. This will allow the Tribunal to take account of change in circumstances since the ACCC determination. Further, the Tribunal may also permit the notifying party to provide new information if satisfied that it is relevant and the person was not given a reasonable opportunity to make submissions to the ACCC on those grounds before the ACCC made the determination. This recognises the challenges that parties in authorisation processes faced in the past in seeking to ensure that information that was not necessarily front and centre of the ACCC process is able to be introduced at the Tribunal level.

In addition to review by the notifying parties, the Bill retains the ability of third parties to apply to the Tribunal for limited merits review of an ACCC determination on a merger, on certain conditions. Third parties will first need to seek leave of the Tribunal to apply. Considerations the Tribunal must have regard to when considering whether a non-notifying party can make an application include the person’s interest in the matter, the efficient administration of the acquisitions provisions, whether there are any reasonable prospects of success, and any other matter that the Tribunal considers relevant.

In terms of timing, a fast track review contemplated by the Exposure Draft has been removed and will not be available. A standard Tribunal review must be completed within 90 days, or longer if the Tribunal allows new information or documents, or the matter is extended due to complexity or special circumstances.

If they consider an error of law has been made, participants to a proceeding and the ACCC may seek judicial review of a Tribunal determination.

Transitional matters / Commencement

Subject to the passage of the legislation, the new regime will come into effect from 1 January 2026 but will also allow for merger parties to start using the new merger regime on a voluntary basis from 1 July 2025 (earlier than previously contemplated). Additionally, businesses that have received informal clearance or been granted merger authorisation under the current system between 1 July 2025 and 31 December 2025 will be exempt from notification, provided the acquisition is put into effect within one year.

The existing merger authorisation process will be retained until 31 December 2025, but applications for merger authorisation may only be made until 30 June 2025.

Our brief conclusions on the Bill

The Bill reflects a number of important changes following a short yet genuinely consultative period of engagement by Treasury with interested stakeholders. Notably, the removal of market concentration as a limb of the proposed threshold is a significant step forward, as is the inclusion of a confidential review process for some acquisitions, and the tightening of some of the drafting. Given that an increasing amount of detail has been transferred to the subordinate legislation, drafts of which have not yet been published, there is more important detail to come about how the new merger regime will operate in practice. 

Authors: Alyssa Phillips, Partner; Angie Ng, Partner; Justin Jones, Partner; Melissa Fraser, Partner; and Amanda Tesvic, Expertise Counsel.