Insight,

Is my deal caught? Government releases draft merger thresholds

30 August 2024

The Government has today released details of the proposed thresholds above which merger parties will be required to obtain ACCC clearance under the new mandatory and suspensory merger clearance regime. This follows the release of exposure draft legislation for the new regime late last month (see our previous update here).

Interested parties have until 20 September 2024 to comment on the proposed notification thresholds.

Key takeaways

The thresholds are proposed to be based on turnover, transaction value, and market concentration: Merger parties will be required to notify the ACCC if:
- they meet either the monetary thresholds OR the market concentration thresholds; AND
- the target business/asset has a “material connection to Australia”.

Within each test, there are two alternative limbs parties can satisfy, each of which has at least two cumulative elements. This means there are effectively six possible ways in which a transaction could be captured by the notification thresholds.

More acquisitions are likely to require ACCC clearance: Historically, the ACCC has received around 300 to 400 notifications for informal merger clearance or authorisation per year. Treasury estimates that the proposed thresholds could require 300 to 500 acquisitions to obtain ACCC clearance each year — and noted that these projections are subject to a substantial margin of error and do not fully cover potential notifications for acquisitions of land, patents, minority interests, or voluntary notifications.
The proposed thresholds are higher than the initial ACCC proposal: The ACCC initially suggested lower monetary thresholds than what Treasury has proposed (i.e., an acquirer or target turnover of $400 million or global transaction value of $35 million). Despite this, the number of different limbs and the inclusion of market concentration thresholds means more acquisitions will require ACCC clearance than under the current regimes.
ACCC proposed to have power to grant “notification waiver”: Businesses could also seek a “notification waiver” from the ACCC, removing the obligation to obtain ACCC clearance.
Thresholds will be indexed and subject to review: A statutory review, designed and supported by the Australian Centre for Evaluation, will take place three years from commencement of the new regime to evaluate the notification thresholds.

Overview of proposed thresholds

The proposed thresholds are outlined in the Consultation Paper in the diagram below:

More details on thresholds

Jurisdictional nexus: Even if the monetary thresholds or market concentration thresholds are met, ACCC clearance will only be required if there is a “material connection to Australia”, which could include the target business or asset being registered or located in Australia, supplying goods or services to Australian customers, or generating revenue in Australia.
Previous acquisitions aggregated for transaction value threshold: Acquisitions within the previous three years within the same product or service market/s (irrespective of geographic location) by the acquirer and acquirer corporate group are proposed to be aggregated for the purposes of assessing whether an acquisition meets the monetary turnover threshold only, regardless of whether those acquisitions were themselves individually notifiable.
Guidance on calculating monetary thresholds to be in regulations: The regulations will further clarify how turnover and transaction value are calculated for the purposes of whether the monetary thresholds are met (i.e., most recent financial year sales revenue).
Measure of market concentration thresholds yet to be determined: Treasury is yet to determine whether the market concentration thresholds will be measured by reference to “market share” (i.e., the merger parties’ proportion of the total market size by sales value and/or volume) or “share of supply” (i.e., the merger parties’ share of supply of goods or services in the areas in which they are active).