ACCC chair Gina Cass-Gottlieb calls for merger approval overhaul, flags businesses are ‘pushing the boundaries’

Gina Cass-Gottlieb has urged sweeping changes to Australia’s merger authorisation processes, warning that companies are often ‘pushing the boundaries’ on deal reviews.

The competition regulator’s chair Gina Cass-Gottlieb has urged sweeping changes to the nation’s merger authorisation processes, warning acquirers are often “pushing the boundaries” on informal competition reviews of transactions.

After just over a year at the helm of the Australian Competition & Consumer Commission, Ms Cass-Gottlieb used a speech in Canberra to say the current merger approval process was “no longer fit for purpose” and required an overhaul.

Ms Cass-Gottlieb said the reforms were even more important as Australia navigated a period of slowing economic growth, cost of living pressures and the transition to cleaner forms of energy.

“The ACCC needs to have the tools necessary to be able to properly scrutinise and, if necessary, prevent those mergers that are likely to substantially lessen competition,” she said.

“Without these tools, some markets are particularly vulnerable to being adversely affected by further consolidation. In particular, markets that already have large incumbents with positions of market power and markets where it is difficult for new rivals to enter.

“As we know, concentrated markets are generally not good for consumers – or indeed for economic growth and productivity.”

Ms Cass-Gottlieb outlined that unlike a spate of other developed markets, Australia’s merger approval process was voluntary and enforcement-based, which created issues. That was because there was no mandated requirement for parties to a takeover or merger to notify the ACCC, or wait for approval, before completing a deal. This sometimes led to the regulator having to pursue Federal Court action to prevent or unwind a transaction.

“We are finding that businesses are pushing the boundaries of the informal regime. Given that there are no upfront information requirements for an informal review, merger parties are increasingly giving us late, incomplete, or incorrect information,” Ms Cass-Gottlieb said. “An increasing number are threatening to complete their transaction before we have finalised our review.”

The reforms being urged are similar to those suggested by former ACCC chair Rod Sims in 2021, however, with several amendments including that parties will still be able to push for public benefits of a deal to be considered alongside how it impacts competition.

A spokesman for Treasurer Jim Chalmers said on Wednesday that “the government recognises there are a range of perspectives on our current merger regime and will carefully consider the proposals put forward by the ACCC”.

“It is important Australia’s merger regime supports competitive markets and productive economic growth,” he said.

ACCC chair Gina Cass-Gottlieb has urged sweeping changes to Australia’s merger authorisation processes, warning that companies are often ‘pushing the boundaries’ on deal reviews.Picture: Gary Ramage/NCA NewsWire

The ACCC is currently assessing a formal application for merger authorisation from ANZ to buy Suncorp’s bank and separately an application for tie-up between Linfox Armaguard and Prosegur Australia. The regulator has also commenced informal reviews of Australian Clinical Labs’ bid to buy Healius, Woolworths’ proposed acquisition of a majority stake in PETstock and Qantas’s purchase of the remaining shares in Alliance Aviation Services that it doesn’t already own.

Last week, ACCC deputy chair Mick Keogh signalled to ANZ and Suncorp he was “not convinced” of the claimed public benefits linked to the acquisition of the latter’s bank. The ACCC has urged the parties to provide further information about the proposed takeover ahead of ruling on the deal in June.

The regulator has, however, confronted a string of successful challenges to its merger decisions in recent years. In 2020, the ACCC’s blocking of a proposed merger between TPG and Vodafone was overturned by the Federal Court, which found the deal didn’t substantially lessen competition.

Ms Cass-Gottlieb said Australia’s merger approval process needed to move away from a voluntary model. She urged the nation to adopt a “formal clearance model, where merger parties must demonstrate to the satisfaction of the ACCC that their transaction is not likely to substantially lessen competition” before a deal can go ahead.

“We propose adopting measures common in overseas merger regimes. These include a mandatory requirement for the ACCC to be notified of mergers above specified thresholds, a requirement for transactions to be suspended from completion without ACCC clearance, and upfront information requirements,” Ms Cass-Gottlieb said. “This would bring Australia into line with most other OECD jurisdictions.”

In a change to what Mr Sims proposed, Ms Cass-Gottlieb said after receiving feedback she wanted to retain an option for mergers to be considered under a public-benefit test.

“Merger parties should have the option of subsequently being able to apply for clearance on public benefits grounds if the applicants are not able to first satisfy the ACCC or Tribunal that a transaction can be cleared on competition grounds,” she added.

The latest proposed changes to merger approval processes also urge updating a host of factors that are considered by the regulator as it assesses a deal. At present, the ACCC assesses the level of competition in a market, concentration of the relevant market and whether substitute products and services are available. Ms Cass-Gottlieb said the regulator should focus on changes that occurred overall as a result of transaction, and also flagged an expedited approval process should be an option for deals deemed non-contentious.

The Australian Competition Tribunal would be the review body for formal ACCC merger decisions, while the Federal Court would consider applications for judicial review.

Ms Cass-Gottlieb also cited a 2021 Treasury working paper that suggested higher mark-ups in the Australian economy were more likely to be caused by a drop in competition than the “increased stature of more productive firms”.

Separately, she also took aim at the conduct of some digital platform services and other companies operating in the online industry.

“The behaviours that concern the ACCC from a competition perspective include self-preferencing, restricting interoperability, exclusivity agreements, practices that limit consumers’ ability to switch between services or devices, or denying access to technological infrastructure,” Ms Cass-Gottlieb said.

“The ACCC has recommended a range of new competition measures to combat these practices in our recent Regulatory Reform Report. Most notably, these include service-specific mandatory codes of conduct for designated influential digital platforms.”