On 21 November 2008, the Australian Competition & Consumer
Commission ("ACCC") published its new "Merger
Guidelines". The Merger Guidelines are the ACCC's first
published guidelines in the area of mergers since 1999.
What are the Merger Guidelines?
The Merger Guidelines outline the general principles that the
ACCC considers in analysing mergers under section 50 of the
Trade Practices Act 1974 (Cth) ("Act"). The
Merger Guidelines do not represent a significant departure from the
practice that the ACCC has taken since 1999 but provide an
up-to-date insight into the ACCC's approach, as well as being a
useful reference for affected firms.
Does this affect you?
The Merger Guidelines are relevant to any firm that is:
in the process of a merger;
is considering a merger; or
may potentially merge with another firm in the future.
The Merger Guidelines do not have any legal force but an
understanding of the Merger Guidelines will assist firms in
deciding whether or not to notify the ACCC of a merger.
Types of mergers that may be subject to the Act
The Merger Guidelines cover each of the following types of
mergers that may be subject to section 50 of the Act:
Horizontal mergers – mergers that involve firms
operating in the same market (i.e. competitors for a substitutable
Vertical mergers – mergers that involve firms at
different levels in a single vertical supply chain (e.g. a merger
between a manufacturer and distributor); and
Conglomerate mergers – mergers that involve firms
that interact across several separate markets and supply products
(e.g. firms that supply related products).
The prohibition under section 50 of the Act
Section 50 of the Act prohibits mergers that would have the
effect, or be likely to have the effect, of substantially lessening
competition in a market.
Not all mergers that lessen competition are prohibited by
section 50 of the Act. It is only mergers that lessen competition
substantially that are prohibited. The Merger Guidelines detail the
circumstances in which the ACCC believes a merger would
substantially lessen competition. It is important to remember that
there is no "golden rule" and, if you are considering a
merger, you should seek legal advice.
The ACCC's threshold – "real
When the ACCC is assessing whether a merger is likely to have
the effect of substantially lessening competition, the threshold it
uses is not whether it is more probable or not for the merger to
contravene section 50. Rather, the ACCC considers whether there is
a "real chance" that a substantial lessening of
competition will occur in a market (a "mere possibility"
The ACCC's forward looking approach – "with
The ACCC takes a forward looking approach to its analysis on the
effects or likely effects of a merger. Under the Merger Guidelines,
the ACCC focuses on the foreseeable future, which is generally
within one to two years.
In this context, the ACCC applies a "with and without"
test. This approach requires the ACCC to consider the future with
the merger and the future without the merger.
Options for potentially liable firms
Merger parties have three options to have their merger
considered and assessed:
The ACCC assesses the merger on an informal basis;
The ACCC assesses an application for formal clearance of a
The Australian Competition Tribunal assesses an application for
authorisation for a merger.
When to notify the ACCC?
The Merger Guidelines encourage merger parties to notify the
ACCC well in advance of completing a merger where both of the
The products of the merger parties are either substitutes or
The merged firm will have a post merger market share of greater
than 20% in the relevant market/s.
The level of competition in the relevant market and the degree
of market power of each of the merger parties is relevant in the
context of the above issues.
If you are in the process of a merger, you are not legally
required to notify the ACCC. However, not notifying the ACCC does
not preclude the ACCC from subsequently investigating the merger
and taking legal action against you.
If you are proposing to merge with another firm, failure to
notify the ACCC may leave you exposed to the risk of contravening
section 50 of the Act if the merger would have the effect, or be
likely to have the effect, of substantially lessening competition
in a market.
We recommend that you seek legal advice in relation to these
issues if you are proposing a merger where you believe the merger
may have a significant impact on competition in a market.
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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