Merger laws could hit shopping centre deals at rate of more than a week

Efforts to block anti-competitive behaviour could stymie the retail property market altogether.

The Shopping Centre Council of Australia chair Anthony Mellowes says proposed merger reforms go “well beyond the original objectives of targeting market concentration“. Picture: Hollie Adams/The Australian

The Albanese government’s proposed merger reforms have alarmed the shopping centre industry, with major players warning that they were “poorly targeted” and had the potential to kill off the recovery in the still fragile sector.

Retail properties have emerged as a bright spot for investors in the wake of the Covid-19 pandemic as shoppers kept pouring into malls for their essentials, and they are again changing hands, albeit at a discount to boom times.

The Shopping Centre Council of Australia warned that the draft laws, on which formal consultation recently closed, went beyond their original intent and had the potential to stymie future investment in an unwarranted manner.

Under the proposed rules, the Australian Competition and Consumer Commission must be notified of all mergers and acquisitions valued at $35m or more, including often innocuous shopping centre transactions.

The industry argued that including all mergers and acquisitions went well beyond original plans to target market concentration – which has historically been assessed in large trans­actions.

Analysis by the SCCA provided to Treasury shows that under the proposed reforms, one shopping centre transaction per week, and seven bidders on average, would need to be assessed by the ACCC.

But industry sources said there would be much more than one review per week, as that estimate was based on closed deals. It did not account for those that did not proceed, they said, and this could triple the volume of transactions to be assessed, affecting investment.

On average, it has taken the ACCC about 160 days to finalise reviews, and industry players warned that such lengthy delays had the potential to cripple the market, hitting investment volumes and creating barriers for new developments.

The SCCA made several recommendations to the government to ensure the reforms were properly targeted and that clarity was provided before the bill was tabled.

The body’s chair, Region Group chief executive Anthony Mellowes, said the government’s proposed merger reforms had gone “well beyond the original objectives of targeting market concentration, and key competition tests have been changed”.

“We’re really in the dark about the timing, the process and criteria as to how the ACCC will assess parties – (it) could capture one shopping centre transaction per week and seven bidding parties per transaction using current averages,” Mr Mellowes said.

“Our industry is not opposed to sensible change, but the unnecessary regulatory burden and market uncertainty could be quite ­harmful.

“I really hope, and I say this respectfully, that Assistant Minister Andrew Leigh and Treasurer Jim Chalmers engage further with us and sort out sensible thresholds and carve-outs before the bill goes into the parliament.”

SCCA chief executive Angus Nardi said the proposed reforms were poorly targeted, and went well beyond fair expectations that they would target areas of market concentration.

“The government has rightly flagged the need to minimise the regulatory burden for acquisitions that don’t have anti-competitive impacts. However, we don’t think the proposed regime delivers on this,” Mr Nardi said.