Draft Guidelines for the ACCC's informal merger process respond to some (but not all of) the concerns of the market.
There might be some greater clarity about the ACCC's informal merger process if proposed changes to its Merger Review Process Guidelines are adopted.
Seven years after its last major revision, the Guidelines are being revised, with changes that respond to some – but not all of – the concerns of the market. The draft Guidelines certainly are shorter and more user-friendly, and include more detail about the process. Parties to a merger needing more certainty about the time required for an ACCC review will not get a guaranteed decision date, but they will get a provisional timetable and some useful rough estimates of how much that timetable might be extended, depending on the complexity of the issues and degree of market concern.
The Guidelines also usually summarise the conditions where the Commission will be likely to want to review a merger proposal, noting that any request for clearance is voluntary under Australian law (there is no notification obligation).
Setting provisional dates for the ACCC's decision and indicative timetables
In the past indicative timetables have been published to give parties a rough idea of when an ACCC decision will be made. The standard periods for all public reviews have not, however, necessarily been observed, with the more complex proposed mergers taking six or seven months or more. The Commission is unapologetic in response to recent calls that decisions are taking longer and parties are being required to submit a great deal more information than they anticipated at the outset.
As a result the ACCC will be moving from standard periods to a more bespoke approach, based on the perceived complexity of the merger under review. Additionally, more steps will be identified. Of course, timetables will be subject to revision along the way.
The new Guidelines also recognise that the ACCC now deals with many matters under a "pre-assessment review" or "quick look", which may lead to a decision that no public review is warranted. These pre-assessment decisions can often be obtained within one-two weeks of approaching the Merger Branch at the Commission.
For most reviews, the provisional decision date will be between six-12 weeks. This might be adjusted, but generally this will happen after:
- the ACCC gives its feedback to the parties on issues arising from market inquiries; or
- the ACCC has considered their response to that feedback,
whichever is the latest. If it does need adjustment, it would typically be to add another four weeks to the process.
The market concerns letter recognised as part of the informal mergers process
Although market concerns letters have been frequently used in the informal mergers clearance process, they have not been formally recognised in the Guidelines. The revised Guidelines would rectify this, making them a clear step in the process.
The Guidelines note that the Commission will take a "scaled approach" to information requirements, under which a "complete information package" will not necessarily be required upfront, but additional information may be requested during the review. The Commission expects the parties to have that information readily available and will stop the clock if time is required to respond.
And our own experience confirms that the Commission is increasingly using its compulsory powers under section 155 to compel the production of relevant information from the merger parties and other market participants.
When will Reasons or Public Competition Assessments be published?
The number and timing of Public Competition Assessments has dropped off in recent years , and there are market concerns that the Commission has changed its priorities towards providing the same level of transparency for its major decisions that was experienced between 2003 and 2010.
We understand in some matters the Commission decided not to publish reasons publicly because the merger parties indicated they wished to revise the proposal and/or consider a challenge to the decision.
The revised Guidelines do not commit the ACCC to a set time for release. It notes that where a PCA is warranted, the complexity of the issues involved requires careful drafting.
The Commission has clearly stated that when it opposes a merger and there is a prospect of litigation, no PCA will be published until the parties confirm the merger will not proceed. If they do litigate, generally no PCA will be published at all.
Stopping the clock while overseas regulators do their job
If a merger is being reviewed by overseas competition regulators, the draft Guidelines say the ACCC can suspend its review until it has had discussions with those agencies, or even until those agencies have completed their reviews.
Process issue in the case of ASX listed target entities
An acquirer whose target is an ASX listed entity where an ACCC clearance may be required may wish to consider the implications of the likely approach to be taken by the ACCC in its case in relation to the timing of the despatch of offer documents to shareholders or, in the case of a scheme of arrangement the holding of the First Court Hearing to convene the shareholder meeting.
When are comments due?
The closing date is Friday 19 July. The ACCC has not yet set a date for the release of the finalised new Guidelines.
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.