2017 Merger Control Survey: Australia
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2017 Merger Control Survey: Australia

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Patrick Gay and Matthew Bull, Herbert Smith Freehills

Regulatory framework

1.1 What is the applicable legislation and who enforces it?

Section 50 of the Competition and Consumer Act 2010 (CCA) prohibits the acquisition of shares or assets that would have the effect, or be likely to have the effect, of substantially lessening competition in an Australian market.

The Australian Competition and Consumer Commission (ACCC) enforces the CCA, including section 50.

Jurisdictional test

2.1 What types of mergers and joint ventures (JVs) are caught?


Any direct or indirect acquisition of shares or assets, including the acquisition of a minority interest, will be subject to section 50 of the CCA. Joint venture arrangements will be subject to section 50 to the extent that they involve an acquisition of shares or assets.

2.2 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?


Australia has a voluntary notification regime and, as such, there are no compulsory thresholds for notification.

The ACCC has published Merger Review Guidelines (Guidelines) which encourage parties to notify the ACCC well in advance of completing a merger where the products of the merger parties are substitutes or complements and the merged firm will have a post-merger market share of 20% of more in any relevant market(s).

The ACCC can and does investigate any merger which it believes would have the effect, or be likely to have the effect, of substantially lessening competition in an Australian market. It can do so either before or after the transaction has completed. If the ACCC identifies substantial competition issues, it may bring legal proceedings seeking to prevent completion of a transaction or unwind a merged entity (as well as seek penalties and other potential remedies).

As a result, it is general practice in Australia for merger parties to engage with the ACCC before completing the transaction. This will usually be done through the informal merger clearance process.

2.3 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?


There is no competition law requirement in Australia to notify any merger.

Foreign mergers will be subject to either sections 50 or 50A of the CCA. Section 50 applies to foreign-to-foreign mergers if they involve parties incorporated in Australia or carrying on business within Australia.

Section 50A will apply where an overseas acquisition results in the acquisition of a controlling interest in a corporation carrying on business in Australia (for example in an Australian subsidiary of a holding company).

Both sections 50 and 50A of the CCA require a consideration as to whether a merger has an effect or likely effect of substantially lessening competition in a market in Australia. As such, a local effect is required before the ACCC can seek to block a merger.

Pre-notification and filing

3.1 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?


Filing is voluntary in Australia, however, it is common practice to obtain informal merger clearance from the ACCC, particularly when the guidance thresholds are met. Suspending the closing of a transaction until clearance is granted is not required but is common practice in circumstances where there are potential competition law concerns.

Given that filing is not mandatory, there are no sanctions for non-compliance with a filing requirement.

While parties are not required to seek ACCC clearance, if parties do not seek ACCC clearance and the ACCC identifies substantial competition concerns, it would be likely to seek an injunction from the Federal Court to prevent or unwind the transaction.

In addition to other remedies, where the ACCC considers there has been a contravention of section 50, the ACCC may also seek maximum penalties of the greater of $10 million, three times the value of the contravention, and 10% of the corporation's annual turnover. The ACCC can also seek an order from the Court to compel the merged entity to demerge if the transaction has already closed.

3.2 Who is responsible for filing and what, if any, filing fee applies?


There are three avenues for obtaining merger approval in Australia.

The informal merger clearance process is used the most regularly. It is typically the acquirer that is responsible for filing, although parties will often collaborate in preparation of the filing documents. There is no filing fee.

The formal merger clearance process has never been used. Formal merger applications must be made by the acquirer. There is a filing fee of $25,000.

The merger authorisation process is conducted by the Australian Competition Tribunal (Tribunal). The Tribunal may authorise a merger if it creates net public benefits. The acquirer may apply for merger authorisation. The filing fee for merger authorisation is $25,000.

3.3 What are the filing requirements and how onerous are these?


Each avenue of merger approval has different filing requirements.

There are no formal filing requirements for informal merger clearance. The process typically involves providing a submission or a letter to the ACCC regarding the parties (for example details of the Australian business operations, interests and assets of the acquirer and target), the transaction (for example details about the shares or assets to be acquired and rationale for the transaction), the relevant markets, and reasons why the transaction will not substantially lessen competition. The level of detail required will vary depending on the nature of the competition law issues involved. For simple mergers, a short letter may suffice. For complicated transactions where there are potential competition issues, detailed written submissions may be required. Depending on the issues that arise, the ACCC may seek further submissions or documents from the merger parties in an iterative manner.

The formal merger clearance process has strict filing requirements. These filing requirements are one reason why the formal merger clearance process is seen as unattractive and has not been used. There is a prescribed form (Form O), which will be accompanied by supporting information and documents, a signed undertaking that the parties will not proceed with the transaction while the application is being considered by the ACCC, and the filing fee.

The merger authorisation process also has strict filing requirements. There is a prescribed form (Form S), which will be accompanied by supporting evidence, a signed undertaking that the parties will not proceed with the transaction while the application is being considered by the Tribunal, and the filing fee. Complying with Form S is an onerous process.

The Australian Government has proposed changes to the merger clearance process under the CCA. The Government has proposed that the formal merger clearance process and the merger authorisation process be incorporated into a single process where the ACCC is the decision-maker in the first instance.

3.4 Are pre-notification contacts available, encouraged or required? How long does this process take and what steps does it involve?


Pre-notification contact with the ACCC is not required, however, it is common practice to speak to the ACCC prior to filing. This can be done confidentially.


4.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?


For informal merger clearance, which is the most popular form of review, there is no statutory timeframe. However, the ACCC Guidelines provide indicative timeframes for each stage of the informal merger clearance process.

Pre-assessment typically takes two to four weeks and can be done confidentially. A transaction may receive informal merger clearance on a pre-assessment basis. However, that is usually only available in straightforward cases where the transaction, on its face, does not raise any substantial competition law issues.

If the ACCC is not able to pre-assess a transaction, it will commence a public review. This process typically takes between six to twelve weeks and involves market inquiries and consideration of potential remedies to competition concerns. At the completion of this stage, the ACCC will either clear the merger or proceed to the next stage and publish a Statement of Issues.

Following the publication of a Statement of Issues, the ACCC will engage in a further round of public consultations and communications with the merger parties. This process typically takes between six to twelve weeks. At the end of this process, the ACCC will make a final decision whether or not to grant informal merger clearance. The informal merger clearance is an administrative process developed by the ACCC. A clearance will result in the ACCC issuing a comfort letter that it does not intend to commence proceedings alleging a contravention of the CCA. This comfort letter has no legal force but, nevertheless, provides merging parties with a high degree of comfort and is the usual way in which mergers are cleared in Australia.

Formal merger clearance and merger authorisation are legislative processes which result in a legal clearance.

For formal merger clearance, the ACCC is required to determine applications within 40 business days of receiving a valid application. This time period may be extended by agreement between the ACCC and the merger parties. If a decision is not made by the ACCC within the statutory timeframe, the application is taken to have been refused.

For merger authorisation, the Tribunal is required to make its determination within a period of three months, but this can be extended by a further three months.

4.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?


The test for informal and formal merger clearance is whether the merger or acquisition will have the effect, or be likely to have the effect, of substantially lessening competition in a market. A lessening of competition is considered substantial if it confers an increase in market power on the merged firm that is significant and sustainable.

In assessing the likely effect of a merger, the state of competition in the future with the merger is compared with the state of competition in the future without the merger (the counterfactual).

Efficiency arguments are not formally part of the statutory assessment. Nevertheless, the ACCC will consider efficiency arguments to the extent that they impact on the merged parties' incentives to compete. Broader factors, such as industrial policy and the public interest, are not considered under section 50.

The Tribunal must not grant merger 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 occur. The phrase 'public benefit' is not defined in the CCA. However, Tribunal decisions have indicated that the concept of public benefit should be given a wide meaning and include "anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principle elements… the achievement of the economic goals of efficiency and progress".

The broader public benefits of a transaction are only relevant to a merger authorisation application, where the Tribunal will assess whether the merger is likely to result in net benefits to the public.

4.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.


In circumstances where the ACCC identifies competition concerns, merger parties are able to offer court-enforceable undertakings for the purposes of alleviating such concerns. If the ACCC is satisfied that an undertaking sufficiently addresses the relevant concerns, it will grant informal merger clearance on the condition that the undertaking is given.

The ACCC prefers merger parties to provide structural undertakings (for instance divestments). It may accept behavioural undertakings, although the clear ACCC preference is not to accept a behavioural undertaking especially where the behavioural undertaking is to apply indefinitely. Structural undertakings are preferred because they are said to provide an enduring remedy with relatively low monitoring and compliance costs.

The ACCC can grant formal merger clearance subject to conditions. Likewise, the Tribunal may grant authorisation subject to the conditions.

Rights of appeal

5.1 Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?


There is no appeal process in respect of an ACCC decision not to grant informal merger clearance. If a negative clearance decision is made, the parties may consider alternative methods of merger clearance. This could include an application to the Federal Court seeking a declaration that the transaction is not likely to substantially lessen competition or a subsequent application to the Tribunal seeking merger authorisation on public benefit grounds. While unusual, there have been instances where both the Court and the Tribunal have been used to obtain competition law clearance following an ACCC decision not to grant informal merger clearance. These include two recent authorisation determinations by the Tribunal.

Unlike the informal merger clearance process, the formal merger clearance process contains an appeals process. An applicant can appeal the ACCC's determination to the Tribunal. An application for review must be made to the Tribunal within 14 days of the ACCC's determination. The formal merger clearance process has never been used and, as such, there has been no appeal to the Tribunal.

Whilst the CCA does not expressly provide for an appeal from a Tribunal's decision to grant or refuse authorisation, the Administrative Decisions (Judicial Review) Act 1977 applies to enable judicial review of the Tribunal's decision. This process has also never been used.

Your jurisdiction

6.1 Outline any merger control regulatory trends in your jurisdiction (i.e., cases, court filings, etc.).

The ACCC continues to take an active interest in the privatisation of public infrastructure assets. The ACCC chairman, Rod Sims, has publically expressed concerns that privatisation processes are being run for the purposes of maximising sale prices, rather than protecting competition and efficiency. While the ACCC has typically granted clearance to parties participating in privatisation processes, its public advocacy regarding privatisation can influence the regulation of privatised bottleneck assets post-transaction.

Process changes in merger clearance also appear likely in 2017. Following a comprehensive competition law and policy review, the Australian Government has released a draft bill to amend the formal merger clearance process and merger authorisation process in the CCA. Under the proposed changes, the formal merger clearance process and merger authorisation process will be repealed and, instead, mergers will be subject to the general authorisation process in section 88 of the CCA. Merger applications will first need to be made to the ACCC, with the Tribunal able to review ACCC decisions.

About the author



Patrick Gay

Partner, Herbert Smith Freehills

Sydney, Australia

T: +61 2 9322 4378

E: patrick.gay@hsf.com

W: www.herbertsmithfreehills.com

Patrick Gay is a partner of the competition, regulation and trade team. He has provided merger clearance advice to a range of clients including Metcash, Tabcorp, ASX, Wesfarmers and Lendlease. Gay co-authored the chapter on merger clearance in Australia in the recent publication, Towns Under Siege: Developments in Australian Takeovers and Schemes.

Gay also advises on competition law issues associated with the structuring and operating of joint ventures, including in respect of joint tendering. He is the co-author of the chapter on competition law and joint ventures in the recent publication, Before You Tie The Knot: Contemporary issues in Joint Venture Law.

Gay is listed as a recommended lawyer in Australia by the Global Competition Review, Chambers and Best Lawyers.

About the author



Matthew Bull

Partner, Herbert Smith Freehills

Melbourne, Australia

T: +61 3 9288 1582

E: matthew.bull@hsf.com

W: www.herbertsmithfreehills.com

Matthew Bull is a partner in the competition, regulation and trade team. He advises clients on global transactions, especially clients in the resources industry like South32, Peabody and Yancoal, including working with overseas counsel to co-ordinate merger filing analysis and clearances. He also advises on domestic transactions, including for clients like Allianz, NAB and Trafigura.

Bull has a particular focus on infrastructure transactions. He has been involved in all of the recent port transactions in Australia, as well advising on transactions involving toll roads, gas pipelines and electricity networks. He has been described in the Legal 500 as ‘particularly strong in the infrastructure space’

He also advises clients on competition law issues associated with establishing and operating joint ventures, including developing arrangements for bidding consortia, competitor collaborations and strategies for joint procurement and marketing. 

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