The Australian Government (the Government) opened consultation on Australia’s proposed merger notification thresholds. The Consultation Paper proposes a notification regime that consists of four different thresholds—two based on monetary thresholds and two based on market concentration. 

Once finalised, all acquisitions of shares or assets that meet any of those thresholds will be required to notify and seek clearance from the Australian Competition and Consumer Commission (ACCC). 

Treasury and the Government state that the thresholds seek to achieve the objectives of:

• Ensuring that the ACCC “is informed of mergers most likely to be anticompetitive [capturing anti-competitive and economically significant acquisitions], while minimising the overall compliance burden on businesses”; and
• Ensuring that the ACCC can also scrutinise mergers where the acquirer has substantial market power or seeks to acquire nascent competitors or engage in creeping or serial acquisitions.

Monetary Thresholds

Proposed acquisitions will trigger mandatory notification requirements if they reach either of the two following monetary limbs and there is a “material connection to Australia”:

Limb 1:

• The combined Australian turnover of the merger parties (including the acquirer group) is at least AU$200 million; and
• Either the Australian turnover is at least AU$40 million for each of at least two of the merger parties or the global transaction value is at least AU$200 million.

OR

Limb 2:

• The acquirer group’s Australian turnover is at least AU$500 million; and
• Either the Australian turnover is at least AU$10 million for each of at least two of the merger parties or the global transaction value is at least AU$50 million.

The requirement of a “material connection to Australia” will be met where the target business or asset is, for example, being registered or located in Australia, supplying goods or services to Australian consumers, or generating revenue in Australia. It is unclear whether de minimis supply of products to consumers located in Australia would be excluded, or whether any supply in Australia is intended to be capable of satisfying this connection.

As already announced, all acquisitions within the previous three years within the same product or service market/s (irrespective of geographic location) by the acquirer or acquirer group are proposed to be aggregated for the purposes of assessing whether an acquisition meets the monetary turnover threshold, regardless of whether those acquisitions were themselves individually notifiable. This approach is able to address potential competition concerns due to sets of smaller, creeping, or serial acquisitions.

Market Concentration Thresholds

Even if a merger does not trigger the monetary thresholds, it would be notifiable if either of the two following market concentration limbs are met:

Limb 1: 

• The combined share of the merger parties is at least 25%; and
• The Australian turnover of at least two of the parties to the acquisition (including the acquirer group) is at least AU$20 million each.

OR

Limb 2:

• The combined share of the merger parties is at least 50%; and
• The Australian turnover of at least two of the merger parties (including the acquirer group) is at least AU$10 million each.

The concentration thresholds are aimed at both acquisitions where the post-acquisition market structure is more likely to impede effective competition or which are likely to result in or involve parties with substantial market power (even if the acquisition itself is incremental in terms of increase in market share). 

Treasury and the Government are consulting further whether the “share” referred to above is “market shares” (based on the market definition “most likely to raise competition concerns”), or “share of supply” (based on the specific product or service supplied). 

Obviously, one approach (share of supply) will be more straightforward and less prone to argument about the relevant market definition—but query whether that is too a simplistic view of the actual relevant market/s being affected and market dynamics.

The Government’s Stated Rationale for the Above Thresholds 

The Consultation Paper states that the proposed thresholds are based on Treasury’s analysis of historical mergers considered by the ACCC. They are aimed at ensuring that the ACCC can examine the acquisitions that data has shown may raise competition concerns—at capturing around 90% of ACCC publicly reviewed transactions that raised competition concerns since 2018. 

Acknowledgement of and Attempts To Limit Undue Burdens and Over-capture

Treasury’s projected number of notifications is between 300-500 annually (ACCC annual reports have indicated that it has, year-on-year, generally reviewed between 300-350 proposed acquisition under the current informal clearance process).

Our experience and our engagement with clients and industry groups however suggest that the actual number of notifiable transactions will be very much on the higher end of estimates, particularly in the early years of the new regime as we all learn about the new regime, particularly given the mandatory nature of the regime.

This is particularly the case when considering that in some sectors or markets the monetary value of acquisition will automatically trigger the monetary thresholds, as well as other factors upon which Treasury is consulting, including the capture of partial acquisitions and the capture of minority shareholdings (where 20% shareholdings presumptively result in “control” and hence trigger a requirement to notify if the above thresholds are met). 

The Government (and the ACCC) is considering measures to mitigate the above risks.

It is considering:

• “Prior registration” of mergers in certain goods or services or in specified local or regional areas—as an alternative to applying market concentration thresholds—the intention being to minimise compliance costs “while allowing the ACCC to scrutinise potential mergers of concern in small product markets, or local or regional areas”; and
• Establishing a process that would allow parties to seek a notification waiver from the ACCC, including if there is uncertainty about whether the thresholds are met. If granted, a waiver would relieve parties of the obligation to notify an acquisition.

The ACCC similarly is seeking to ensure that the new regime will be efficient and workable. In this regard, ACCC Chair Gina Cass-Gottlieb has stated on a number of occasions that: 

• She expects that 80-90% of notified mergers will be cleared within 20 business days from the date that the ACCC accepts the application; and
• The ACCC will give businesses clear, substantive, and process-based guidance, by way of guidelines, as to its approach and expectations under the new notification regime—well before the new regime is in place.

The Government will consider submissions made on the above thresholds (due by 20 September 2024), as well as submissions about the consultation draft of the legislation and we expect that the final position will be announced later this year—early 2025 with a view the amending legislation for the regime will be introduced into Parliament during 2025—for a start on 1 January 2026.

The authors would like to thank graduate Alyse McDermott for her contribution to this alert.

Jenna S. Yim also contributed to this article.