The Australian Competition and Consumer Commission (ACCC) has
released a final version of its revised merger guidelines. The
greatest practical change for merger parties under the revised
guidelines is the simplification of the 'notification'
thresholds applied by the ACCC.
The revised guidelines were released following input from the
business and trade practices advisory community on a draft released
in February this year. They provide a long anticipated update to
the existing guidelines, which were first published in 1999.
Importantly, the revised guidelines do not require a radically
different approach to merger analysis. The legal test for
acquisitions of shares and assets under section 50 (viz,
whether it is likely to have the effect of substantially lessening
competition in a market) does not change. The guidelines continue
to set out the principles applied by the ACCC when considering
merger factors such as barriers to entry, imports, market
concentration and countervailing power as part of its competition
analysis. However, in doing so the revised guidelines place a much
greater emphasis on the competitive theories of harm and the
effects of market constraints on the merged entity, allowing for a
more integrated analysis of proposed merger transactions. They also
include a new, streamlined threshold for the notification of
mergers to the ACCC.
Simplification of notification thresholds
Formerly, the guidelines prescribed a 'safe harbour'
market concentration threshold test, under which merger parties
were encouraged to notify the ACCC of any transaction where the
post-merger market share of the merged entity would be:
more than 40% or
more than 15% where the combined market share of the four
largest participants would be greater than 75%.
The revised guidelines replace these 'safe harbours'
with an indicative notification test where both of the
following criteria are satisfied:
the products of the merger parties are either substitutes or
the merged entity will have a market share of more than 20%
post-merger in the relevant market(s).
The guidelines also advise parties to approach the ACCC in cases
where the ACCC has previously recommended that a particular company
or industry provide notification of any proposed mergers by that
company or industry.
Notably, the new notification threshold represents a departure
from the thresholds proposed in the draft guidelines released in
February, which were based on the quantitative Herfindahl-Hirschman
Index (HHI) test of market concentration, plus a list of four
qualitative criteria. Under the revised guidelines, the ACCC will
only apply the HHI test of market concentration as part of its
broader analysis of the competitive effect of the proposed
Strategy for ACCC merger clearance
Despite the new merger notification threshold test, notification
remains discretionary rather than compulsory under the revised
guidelines. Consequently, merger parties will still be entitled to
make their own decision as to whether or not they notify the ACCC
of the proposed transaction. Whilst mergers which fall under the
notification thresholds will 'rarely' be investigated, the
thresholds are merely 'indicative' and do not provide a
guarantee against future ACCC review. Merger parties should
therefore continue to seek specific advice on whether the ACCC
should be notified of any proposed transaction, and the form that
notification should take. Depending on the circumstances, this may
simply involve sending the ACCC a 'courtesy letter'
containing basic factual information about the transaction, or may
require a more detailed (informal or formal) clearance
1 The HHI is calculated by adding the sum of the squared
post-merger market shares for the merged firm and each rival firm
in the relevant market. A transaction will be less likely to
present horizontal competition concerns where the post-merger HHI
is less than 2000, or where the change in the HHI as a result of
the merger is less than 100.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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