Merger control and unconscionable conduct reforms finally creep over the line

The Competition and Consumer Legislation Amendment Bill, which amends the merger control provisions of the Competition and Consumer Act 2010 (CCA) to address creeping acquisitions, and to update the CCA provisions on unconscionable conduct, was finally passed today by the Senate. The Bill was originally introduced by the Federal Government in May 2010 but lapsed following the announcement of the election later that year. The Bill, as re-introduced into Federal Parliament in June 2011, is essentially the same as the original version and is now awaiting Royal Assent.

Why have these reforms been made?

The Bill was introduced to give effect to two reforms.

The first is to deal with creeping acquisitions by amending section 50 of the CCA to give greater clarity to the provisions regulating mergers and acquisitions. Creeping acquisitions are generally defined to be a series of small-scale acquisitions that individually do not substantially lessen competition in a market in breach of s50 of the CCA, but collectively may have that effect over time. The amendments are intended to clarify that the ACCC (and courts) have the power to reject mergers and acquisitions that would substantially lessen competition in any local, regional or national market.

The second objective is to enhance and simplify the unconscionable conduct provisions of the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (ASIC Act).

What amendments will be made to the CCA?

A brief outline of the amendments to both the merger control and unconscionable conduct provisions is set out below. Our previous alert on 27 May 2010, “Merger control and unconscionable conduct reform”, provides a more detailed overview.

Merger control reforms

The Bill amends the merger control provisions by:

• amending the definition of “market’ in s50(6) of the CCA to remove the requirement that the market affected by a merger must be “substantial”; and
• amending s50(1) and (2) of the CCA to replace the words “a market” with “any market”.

These amendments to the merger control provisions are not really substantive changes. They simply clarify the ACCC’s existing approach to merger reviews (as set out in the ACCC’s Merger Review Process Guidelines). We do not envisage a significant change to the ACCC’s approach to merger reviews arising from the reforms, however particular consideration should be given to acquisitions which may be considered to raise competition concerns in respect of local markets as it is these types of acquisitions that the reforms seek to address.

These reforms are preferable to previous options that the Government proposed which were generally regarded as overly interventionist.

Unconscionable conduct reforms

There will be a statement of interpretative principles inserted into the CCA to provide that:

• the statutory prohibition against unconscionable conduct is not limited by the equitable or common law doctrines of unconscionable conduct;
• in considering whether conduct to which a contract relates is unconscionable, a court should not limit its consideration to the formation of the contract alone, but may also consider the terms of the contract and the manner in which the contract is carried out; and
• the statutory prohibition against unconscionable conduct can apply to a system or pattern of conduct over time, and need not be limited to an individual transaction or event.

Furthermore, the distinction between unconscionable conduct that affects business and that which affects consumers is also removed by consolidating sections 21 and 22 of the ACL. This means that the same factors will be relevant for both business and consumer transactions when determining whether there has been a contravention of the provisions for unconscionable conduct.

Equivalent reforms will be made to the ASIC Act.

The revised guiding principles for unconscionable conduct must be borne in mind when dealing with consumers or small businesses. These revised principles are to be welcomed as they provide greater clarity for businesses in seeking to ensure that business practices do not breach the provisions on unconscionable conduct.

Commencement

The merger control reforms will apply to acquisitions occurring after the commencement of Schedule 1 of the Bill, which will be no later than two months after the Bill receives Royal Assent.