Answer ... Either at the commencement of an informal review process or during the course of that review process, if the ACCC indicates that the merger or acquisition raises competition concerns, the parties may decide to offer a court-enforceable undertaking under Section 87B of the Competition and Consumer Act (CCA) to address the Australian Competition & Consumer Commission’s (ACCC) concerns.
A Section 87B undertaking can also be offered for a merger authorisation. However, the process is more difficult if a Section 87B undertaking is not offered as part of the application for authorisation, given that the 90-day assessment period for authorisations constrains the ability of the ACCC to accept amendments to an authorisation application. Nonetheless, the parties to the merger or acquisition transaction may propose a Section 87B undertaking during the authorisation process, which the ACCC will consider. As for the informal merger review process, the ACCC will generally consult with interested third parties regarding any such proposed undertaking. In a merger authorisation, the ACCC may also take into consideration in assessing a Section 87B undertaking whether it will assist in ensuring that anticipated public benefit arises or that the public detriment is avoided.
The ACCC has discretion as to whether to accept a Section 87B undertaking, and will do so only if it determines that the undertaking will address the issues that have been identified and maintain the level of competition that existed prior to the proposed merger or acquisition. Section 87B undertakings will provide for either:
- structural remedies (ie, to change the structure of the merged or acquiring business or the relevant market); or
- behavioural remedies (ie, to change the behaviour of the merged or acquiring business, particularly in terms of pricing, quality or output).
The ACCC has a very strong preference for structural remedies. The most common form of structural remedy is divestiture.
There are significant consequences for breach of a Section 87B undertaking. If the Federal Court finds that a Section 87B undertaking has been breached, it may make any order that it thinks appropriate.
Answer ... There are no formal procedural steps for negotiating and submitting a Section 87B undertaking under either the informal merger review or the merger authorisation process. Under the informal process, the undertaking must be put forward voluntarily by the parties; however, under the merger authorisation process, the ACCC will make grant of the Section 87B undertaking a condition of its authorisation.
The ACCC will generally conduct market inquiries regarding any proposed Section 87B undertaking where it has formed a preliminary view that the undertaking would be acceptable. Under the informal merger review process, the ACCC cannot require the parties to accept any amendments to a proposed Section 87B undertaking, but it will raise concerns that arise from market inquiries with the transaction parties. If the concerns are not addressed to the satisfaction of the ACCC, it may not accept the Section 87B undertaking that is put forward. Substantial changes to a proposed Section 87B undertaking may also require further consultation. As a result of market inquiries, it is also theoretically possible that the ACCC will determine that the proposed Section 87B undertaking is not required.
The ACCC will seek to ensure that the reasons for accepting a Section 87B undertaking are publicly available (subject to any confidentiality issues). The ACCC is also concerned to ensure consistency between undertakings accepted in different merger cases.
Answer ... A foreign-to-foreign transaction will be treated in the same way as any other transaction assessed by the ACCC.