Upcoming Mallesons seminarsThis reform affects all Australian and international companies which are considering mergers and acquisitions in Australia.
What do you need to do?Companies need to consider the impact of acquisitions on local areas more closely in their merger assessments and also take into consideration merger control when entering into leases and even buying or leasing vacant land.
Caroline Coops
Partner
Dave Poddar
Partner
James Marshall
Legal Adviser (Not Australian Qualified)
Dave Poddar
Partner
T +61 2 9296 2281
Caroline Coops
Partner
T +61 3 9643 4097
Sydney
Sharon Henrick
Melbourne
Lisa Huett
Shanghai
Martyn Huckerby
(贺墨亭)
The Minister for Innovation, Industry, Science and Research today issued a media release announcing the Government’s proposed reforms to the merger test to deal with creeping acquisitions. This announcement follows a detailed Treasury discussion and consultation process that commenced in September 2008. As yet no Bill has been issued for consultation or otherwise.
The key change focuses around section 50(6) to deal with ensuring that the Courts (and the ACCC, as part of its merger review process) are able to assess mergers based on national, State and regional (in particular, including local) markets. In order to do this it appears that the requirement that a merger have an effect on a “substantial market” will be amended. The term “substantial market” is likely to be deleted to make it clear the ACCC can focus on mergers in local markets, if the market is appropriately delineated to such a local level (as has occurred in some grocery, petrol and childcare mergers). This is a pragmatic reform as it avoids the requirement for all mergers to be mandatorily assessed at a local level as some politicians have suggested, which would have unnecessarily increased the legal burden and cost of all merger reviews to both the parties and the ACCC.
It also appears the Government intends to change section 4 of the TPA to remove the exception for acquisitions in the “ordinary course of business”. This change is not intended to require banks and others to make merger filings when taking security interests, but to avoid any argument that making acquisitions through entering into leases is exempt from merger control as part of the ordinary course of business for some large companies. It will be important that such a change is appropriately explained and drafted, so that it does not have unintended consequences for those taking security over assets.
While the change to “ordinary course of business” will cause some disquiet to big businesses, there is also a metaphorical ‘Sword of Damocles’ raised by the Minister in the media release. This is the clear threat that if the major supermarket chains dispute that acquisitions of new greenfields sites fall within section 50 (on the basis that there is no acquisition of a business or going concern that should trigger a merger review), the Government will amend the TPA to make it clear that such acquisitions are caught. Nonetheless, it is noteworthy the Minister’s media release only mentions the issue in relation to supermarkets. The application of such a law across all industry sectors with its potential impact on organic growth would be highly problematic.
The reforms are more unpalatable in the international context as they will leave Australia out of step with the United States and Europe, which do not have creeping acquisitions provisions. Moreover, the deletion of the requirement for market to be “substantial” will also raise questions as to whether the substantial lessening of competition test should be subject to some form of monetary threshold before it applies, as is the case in other leading jurisdictions.
The Government’s media release proposals are a better approach than some previous suggestions for reform, and more economically rational than other mooted proposals. Nonetheless, how the proposals translate to legislative drafting and proceed through any Senate Economics Committee review will need to be watched closely.