ACCC calls for mandatory mergers notification in competition fix

The competition watchdog warns the current mergers system is creating brinkmanship, with companies attempting to ram deals through the regulator.

The competition regulator has warned the nation’s current mergers and takeover notification scheme is broken, with two of the three proposed reforms unlikely to improve the business landscape for consumers.

In a submission to a Treasury review into the nation’s takeovers system, the Australian Competition & Consumer Commission said a mandatory disclosures regime was the best plan going forward.

Treasury opened its mergers reform consultation in November, focusing on whether the current rules and processes were “effective, enabling beneficial mergers while addressing those that could be anticompetitive” and looking at how the system could be improved.

The ACCC said its submission to Treasury’s review was aimed at showing without reform, business and consumers would “pay higher prices and have less choice”.

ACCC chair Gina Cass-Gottlieb said Australia was an outlier amongst its OECD peers for its current mergers and acquisitions system that did not require disclosure of proposed deals.

“Evidence shows that Australia’s economy is being impacted by weakened competition in many sectors, risking higher prices for consumers and businesses,” she said.

“The ACCC does not have the tools it needs to see and prevent all anticompetitive mergers, and it means that harmful mergers may be taking place under the radar.”

Treasurer Jim Chalmers at Parliament House in Canberra. Picture: David Beach/NCA NewsWire

The ACCC proposed Australia adopt the third of the three options presented by Treasury in its discussion papers.

This would see all mergers go to the ACCC for approval, with the regulator required to be satisfied the deal “is not likely” to substantially lessen competition.

In its submission, the ACCC notes close attention needed to be given to the incentives any reform option created for merger parties, given “commercial parties act rationally to

put themselves in the best position to get their deals through.”

The ACCC said the third option was “designed to take into account these incentives, address the current concerns about the effectiveness of Australia’s merger control regime,

and achieve the policy considerations that Treasury has identified are relevant to

merger control.”

However, the ACCC said it recognised “the vast majority of merger transactions do not harm competition”, noting it expected 90 per cent of all transactions would be dealt with by a notification waver from the regulator.

But the ACCC noted “some mergers can cause a long-term change in the structure of a market that results in an enduring lessening of competition, to the detriment of consumers, businesses relying on acquiring from or supplying to the merged entity, and the economy”.

“It is for this small number of more contentious, concerning mergers that the proposed changes are important,” the ACCC said in its submission.

“The absence of a mandatory-suspensory notification regime places the ACCC at a significant disadvantage when dealing with merger parties who are willing to push the boundaries of the informal, enforcement-based system.”

Ms Cass-Gottlieb said the ACCC was aware of the risks to the economy from an overly restrictive approach to mergers.

“Our proposed merger reforms are designed to allow an efficient, transparent and low-cost approval for the vast majority of mergers that do not raise competition concerns, so businesses can proceed quickly and with certainty,” she said.

“The option put forward by the ACCC achieves the right balance, with minimal regulatory burden for those acquisitions that do not have anticompetitive effects, and a structured, transparent and timely process for those acquisitions where there are potential anticompetitive effects.”

Ms Cass-Gottlieb took on the running of the ACCC in March last year, after almost 25 years working as a lawyer and adviser on a number of competition and regulator deals in Australia and New Zealand.

This includes the deal proposed by ANZ, currently grinding its way through the courts, that would see the Melbourne bank take over Suncorp’s banking arm, boosting its market presence and swallowing a regional competitor.

The ACCC has rejected a $4.9bn merger between ANZ and Suncorp Bank.

Ms Cass-Gottlieb has precluded herself from this deal, which the ACCC knocked back and which is now awaiting judgement from the Australian Competition Tribunal after the case was heard.

The ACCC chair said the current process was leading to legal fights, with parties not disclosing until forced

The regulator recently clashed with Woolworths over its attempted acquisition of 55 per cent of pet product retailer Petstock.

The regulator warned it was concerned the deal would diminish competition, also noting its concerns Petstock had snapped up a number of competitors in deals not disclosed to the regulator.

Petstock agreed it would divest 41 retail stores and a package of sites and assets as part of a court enforceable undertaking with the ACCC in a deal that allowed Woolworth’s investment to go ahead.

“We shouldn’t have a process that is prey to legal brinkmanship, with all the uncertainty and expense that entails,” Ms Cass-Gottlieb said.

“Consumers, small businesses and farmers will benefit from the ACCC reforms, which will include high levels of transparency and provide certainty.”