On 21 November 2008, the Australian Competition & Consumer
Commission (ACCC) released the 2008 Merger Guidelines (New
Guidelines) which replace the original merger guidelines released
Purpose of the New Guidelines
The purpose of the New Guidelines is to provide the business
community with clear guidelines on the broad analytical framework
that the ACCC applies when assessing whether a merger or
acquisition has, or is likely to have, the effect of substantially
lessening competition in a market and therefore contravening
section 50 of the Trade Practices Act 1974 (Cth).
The changes to the guidelines reflect international best
practise, contemporary views on anti trust analysis and the
ACCC's experience since 1999.
What are the key changes?
When should you notify the ACCC of a proposed merger or
The ACCC will continue to assess each merger on its merits
according to the specific nature of the transaction, the industry
and the particular competitive impact likely to result in each
case. To assist merger parties to determine whether they should
notify the ACCC, the ACCC has developed a notification threshold.
The threshold has been established to filter, and therefore limit,
the merger reviews the ACCC conducts to those mergers which may
raise competition concerns.
Merger parties are encouraged to notify the ACCC where:
the products of the merger parties are the substitutes or
the merged firm will have a post merger market share of greater
than 20% in the relevant market or markets.
In practice, the notification threshold is not that different
from the approach that has been applied by the ACCC in recent
years, as the ACCC set the notification at a level that reflects
the ACCC's experience in determining which mergers are more
likely to raise competition concerns since 1999. However, it does
remove the safe harbour approach.
How will the ACCC assess market concentration?
The New Guidelines state that, in assessing the increase in
market concentration resulting from a merger, the ACCC will
concentration ratios; and
the Herfindahl-Hirschman Index (HHI).
The HHI is widely used by regulators overseas and, in this
regard, the change brought about by the ACCC aims to bring the
guidelines in line with international best practice.
The HHI is calculated by summing the squares of each percentage
of each player in the post-merger market, which indicates the level
of market concentration while the change in the HHI (referred to as
the 'delta') reflects the change in market concentration as
a result of the merger.
The New Guidelines state that where the post-merger HHI is:
less than 2000; or
greater than 2000 with a delta less than 100,
the ACCC will generally be less likely to identify competition
Enforceable undertakings and divestiture
The New Guidelines restate the ACCC's preference for
structural undertakings, that is, undertakings that generally
change the structure of the merged firm and/or the market,
typically through divestiture of part or all of a business. The
ACCC has provided guidance on the drafting of statutory
undertakings and has maintained that, where possible, divestiture
should occur on or before the completion of the merger.
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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