‘We have serious concerns’: ACCC wants control over company takeovers

Competition tsar Rod Sims has called for the watchdog to get the final say over mergers and acquisitions in Australia, with digital giants Google, Apple, Facebook and Amazon firmly in its cross-hairs.

Mr Sims said Australia’s current system, where the Australian Competition and Consumer Commission must go to court to stop a merger it considers anti-competitive, was flawed and out of step with other jurisdictions. The ACCC has been largely unsuccessful in these legal battles and failed to stop AGL acquiring Macquarie Generation and win its high-profile case against the $15 billion merger between TPG and Vodafone.

ACCC chairman Rod Sims has called for merger law reform. Credit: Louie Douvis

In a speech to the Law Council of Australia on Friday morning, Mr Sims said consumers and small businesses were increasingly being squeezed by corporate giants hoovering up smaller rivals.

“Without action, market power in Australia will become further entrenched; and will certainly not reduce,” he said. “We have serious concerns about the level of competition in our economy and our ability under the current law to prevent further consolidation via anti-competitive acquisitions.”

Mr Sims said Australia’s informal merger regime where companies seek the ACCC’s views about whether an acquisition can proceed had prompted lawyers to threaten that their clients would complete transactions before it has finished its review and approach other agencies to circumvent the regulator.

To strengthen its position, the ACCC is calling for a single new formal merger regime where all acquisitions above specified thresholds would be subject to mandatory notification to the regulator before proceeding.

‘We need a mindset change. Our economy would be better served by more companies deciding to compete rather than to acquire.’

ACCC chair Rod Sims

These acquisitions could not proceed until the ACCC gave clearance. For potentially problematic acquisitions below the threshold, the corporate watchdog would have “call in” powers.

The regulator wants four changes to the mergers test, including updating the list of relevant factors and defining “likely” as a possibility that is not remote.

Google, Apple, Facebook and Amazon are of particular concern to the ACCC, which argues the impact of any mergers and acquisitions by the digital giants is likely to be substantial and long-lasting. The four digital titans and Microsoft are “serial acquirers”, having bought nearly 500 businesses at a rate of around four a month between 2010 and 2020, according to Mr Sims.

“It is beyond debate that acquisitions have taken place that have contributed significantly to the substantial market power of the digital platforms,” he said. “With the benefit of hindsight, they should not have been allowed to proceed.”

To counter that, the regulator wants a tailored test for acquisitions involving the tech giants, where the probability of competitive harm that needed to be established would be lower than the test which applied to acquisitions in the economy more broadly.

The regulator said lower notification thresholds may also be necessary.

“We need a mindset change,” Mr Sims said. “Our economy would be better served by more companies deciding to compete rather than to acquire.”

The ACCC chair noted that while the regulator could contribute to policy and make recommendations on competition and consumer issues, merger reform ultimately was a decision for Treasury and the government.

“The ball is not in our court on merger law reform” he said.

Treasurer Josh Frydenberg said he did not want to make any changes that increased regulation.

“As ACCC chair Rod Sims acknowledged today, matters of merger law policy rest with the government and specifically the treasurer,” he said.

“While we must always ask if our regulatory framework is efficient and fit for purpose, I do not want to put more regulatory barriers in front of business. This is particularly so as we seek to drive our economic recovery from COVID-19.”

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