Under the proposed new ACCC merger regime dominant companies like Qantas, Bunnings, Coles, Woolworths, Telstra, IAG, Suncorp and the big four banks will have increased obligations to show their takeover doesn’t breach the substantially lessening competition merger test.
The onus of proof is effectively reversed for all applicants because the ACCC will only need to be satisfied the test isn’t breached, whereas under present law it must prove it does breach it.
This is more difficult because it often relates to future activity and the courts have interpreted the law narrowly, often relying on self-serving claims by the merger proponents.
The reforms include adding as guideposts the loss of actual or potential competitive rival; increased access to, or control of, data, technology or other significant assets; and whether the acquisition is part of a series of relevant acquisitions.
The latter is aimed at so-called creeping acquisitions, which on their own mean nothing but collectively entrench market power.
The present system of judicial oversight of administrative decisions is weighted against the ACCC and these changes even the balance a touch.
Successive governments have attempted to avoid making tough micro-economic decisions by handing face-saving briefs to the ACCC in market studies like aviation, gas, dairy, water and childcare.
This government now has the chance to actually strengthen the regulators ability to complete its day job and in the process boost competition.
Competition beats increasingly complex, purpose-defeating regulation in sectors like energy.
The good news for reform proponents like Competition Minister Andrew Leigh, is Gina Cass-Gottlieb essentially backs Rod Sims’ proposed changes to the ACCC merger regime, while their predecessor Graeme Samuel — and most private practitioners — ask what is wrong with the present system that demands changing.
Cass-Gottlieb, a former member of the legal fraternity mafia, had played her cards close to her chest on the issue, not revealing her stance until this week at the National Press Club.
As far as the practitioners, christened “the mafia” by Samuel when he was ACCC boss, the obvious response is to back the status quo, even though their workload increases under the new rules.
Cass-Gottlieb has slightly modified the Sims reform proposals, backed by former chair Allan Fels, and in her 12 months as a regulator, on the other side of the fence, she has also changed her own stated views markedly.
The present dual — formal and informal — process will be streamlined but if the ACCC rejects a merger the proponents can then plead national interest as overriding the competition concerns.
As with formal authorisation applications any appeals must be based on material already presented, which overrides the present game of dribbling information as required that means the ACCC must battle to get to square one.
Ninety-five per cent of mergers are cleared, and if they involve a foreign company FIRB automatically notifies the ACCC but now the ACCC will have call in powers if no application is made.
Ironically, two cases cited where the merger parties attempted to ram a deal through without due process, were under the advice of Cass-Gottlieb and her old firm Gilbert & Tobin.
These were the attempted combination of the Virtus and Adora infertility businesses, and Qube and Newcastle Agri Terminal.
The undeniable evidence says Australian industry is too concentrated, which gives too many companies pricing power — hurting consumers, raising barriers of entry to markets, and in the process dulling innovation and demonstrably hampering productivity.
Next week one of those dominant companies, Qantas will learn if the ACCC plans (as it should) to block its $610m acquisition of the 80 per cent of rival Alliance Airlines it doesn’t already own and in the process extend its influence into the regional airline market, entrenching its 75 per cent plus control of the domestic airlines market.
The ACCC has been studying this since May last year, delaying a decision at least five times, which is a case in point on the need for better merger rules to hold the ACCC to account in its decision making and minimise the chance of companies gaming the system by changing their submissions.
The proposed mandatory notification of deals over a circa $50m threshold will come with set decision time limits.
The ACCC receives around 350 merger applications each year, of which 95 per cent are cleared and a handful are contentious.
New law firm in town
Former Clifford Chance partner and long time antitrust mafia member Dave Poddar has quit to establish a new boutique, Quay Law Partners, aimed at providing regulatory advice on media, technology, antitrust, data, privacy FIRB and cybersecurity issues.
The firm will have half a dozen partners and a dozen associates.
All eyes on ASIC
Next month when Joe Longo formally unveils his new structure for ASIC, a key focus will be how to create a culture within the corporate plod to use its data and technology systems better, to help make better regulatory decisions and better serve the market.
In his report last year Financial Regulator Assessment Authority chair (FRAA) Nicholas Moore backed Longo’s own concerns over ADIOC’s poor use of the data it does collect, which in turn makes its regulatory processes haphazard or in his words a “whack-a-mole” approach.
Better technology systems often means money and it is no coincidence that Longo’s restructuring proposals will be unveiled on May 2, one week before the federal budget is handed down.
An ASIC boss is subject to extraordinary oversight when you consider his or her boss is the Treasurer but more regularly, Assistant Treasurer Stephen Jones. After the Hayne royal commission, FRAA was established reporting to the Treasurer, a string of parliamentary committees headline by Senator Deborah O’Neill’s joint committee on corporations and financial services and Daniel Mulino’s House Economics Committee.
The ASIC chair inherits the Commission, which is comprised of people selected by the government independently and responsible to parliament, not the ASIC boss.
There are now there are just four commissioners, including Longo and deputy Sarah Court, but by this time next year the other two deputies — Karen Chester and Danielle Press — are up for renewal and Longo will be on the selection committee for any replacement if they are not re-appointed.
Likewise in the near term, decisions are due on Cathie Armour’s replacement along with that of Sean Hughes, which would bring the Commission back to full strength of five people.
The new structure is aimed at streamlining decision-making as well as refocussing the organisation to a data centric mind set.
Armour has joined the board of ASX rival Cboe, but it seems the desired structural separation of the Chess clearing system will come later rather than sooner.
The two enforcement divisions will be combined, there will be a separate markets and regulation divisions and a separate IT division with Jo Harper a potential leader.
ASIC has suffered some senior losses in the restructuring talk, including strategy chief Greg Kirk, markets enforcement boss Sharon Concisom and former financial services boss Joanna Bird.
Twenty-year ASIC veteran Warren Day is the staff head and Longo also has an office of the chair under ASIC veteran Louise Macaulay.
After some turmoil in the prior administration under James Shipton, Longo is attempting to create a structure in which the culture can change to what he is fond of saying is a confident, ambitious, feel good about itself and modern enforcement agency.
Nicholas Moore’s team suggested it has some work and in terms of technology systems, driven from a customer perspective, he held up the tax office as the benchmark.
When FRAA has completed its review of APRA in July it will turn then to review ASIC’s enforcement division.
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