IN BRIEF

Australia's new competition merger clearance regime is now live. It can now be used on a voluntary basis and becomes mandatory from 1 January 2026 for all acquisitions of shares or assets that meet the monetary thresholds set out below.

In this Part 1 of two insights, we focus on the Determination (the Australian Government's legislative instrument). Part 2, to be circulated shortly, will focus on the ACCC's finalised merger assessment guidelines and interim merger process guidelines.

The Determination clarifies and finalises the Government's position on the:

• Monetary thresholds for notification, including:
  • Calculation of revenues attributable to asset purchases or market valuations in the event that revenues attributable to an asset cannot reasonably be made – a very important clarification particularly in respect of acquisitions of land and rights to land (such as leases) in circumstances where many such acquisitions may now be subject to notification;
• Set of exceptions to notification, which include an expanded set of exceptions for acquisitions of land or property rights;
• Fees associated with applications for notifications. While the Government has retained its "full cost recovery" approach to the applications under the new regime, it has agreed to a "sliding scale" depending on the transaction value of the acquisition and level of review required by the ACCC; and 
• Template application forms that set out the significant amount of information and documents required to be included as part of a valid application.

TURNOVER THRESHOLDS FOR MANDATORY NOTIFICATION

The final Determination did not change the turnover thresholds for mandatory notification. They are set out below:

_{Source: K&L Gates LLP}

A few relevant considerations in relation to these thresholds:

• Any reference to the revenue of a party is a reference to:
  • The Australian revenue of the relevant entity (being the entity's most recently ended 12-month financial reporting period, that is attributable to transactions or assets within Australia or into Australia) plus the Australian revenue of each connected entity of the party (within the meaning of the Corporations Act);
• Given that any acquisition of an asset is potentially captured by the new regime, the Determination has clarified that:
  • Where the acquisition is of an asset, the relevant Australian revenue of the target is the revenue that is attributable to the asset being acquired (the term "attributable" not being defined, but guidance may be available from accounting standards); and
  • To the extent that it is not reasonably practicable to attribute the Australian revenue of the target to the acquisition of the relevant asset, for example where the acquisition is of a "greenfields" site or unimproved land for which there has not been any revenue prior to the acquisition, the deemed revenue is 20% of the market value of the asset (again accounting standards may assist – in the context of a lease, the explanatory statement to the Determination referred to the market value being 20% of the rent for the entire term of the lease).
• In the context of serial acquisitions, any "small acquisition" is to be disregarded –– a small acquisition being an acquisition where the revenue of the target (or in the case of acquisitions of assets, the revenue attributable to the asset being acquired) is less than AU$2 million; and
• Any acquisition of shares or assets by a major supermarket, being either Coles or Woolworths, is notifiable if it amounts to:
  • An acquisition of a supermarket business; or
  • An acquisition of legal or equitable interest in land:
    • That has a commercial building upon it, where the gross lettable area is greater than 1000 sqm (with a mechanism to calculate gross lettable area); or 
    • That does not have a commercial building upon it, where the land is greater than 2000 sqm,

including land directly adjacent to land already owned by the parties.

EXCEPTIONS TO NOTIFICATION

The Determination has confirmed, and expanded, the exceptions to notifications (in addition to small acquisitions referred to above). The key exceptions of note are as follows:

Certain Land Acquisitions

• Acquisitions of legal or equitable interests in vacant or developed land for:
  • Developing residential premises; or
  • Any purpose of a person carrying on a business primarily engaged in buying, selling or leasing or developing land – other than a purpose relating to operating a commercial business not ancillary to the primary purpose of buying, selling or leasing or developing the land;
• Acquisitions of an interest in an entity where:
  • The entity's only non-cash asset is a legal or equitable interest in land; and
  • The entity's holding of land is for one of buying, selling or leasing or developing the land;
• Extensions or renewals of a lease for the land;
• Acquisitions of interests in land where the acquirer had previously acquired an equitable interest in the same land that had been already notified; 
• Acquisitions of land in the form of land development rights; or
• Acquisitions of legal or equitable interests in land that relate only to a sale and lease back arrangement relating to that land.

Certain Insolvency, Financial and Debt Arrangements

• Acquisitions by a person in their capacity as an administrator, receiver, manager or liquidator;
• Acquisitions of shares or assets by the operator of, or participant in, a clearing or settlement facility or participant;
• Acquisitions of shares or assets as a result of the exercise of a right under a contract to close out a transaction under the contract or the exercise of a right of set-off, as long as the acquisition will not have the effect of that person having control of the entity or acquiring substantially all of the asset;
• Acquisitions resulting from an issue of securities, as an underwriter, from a buy-back, or of a derivative, as long as it does not result in control or substantially all of an asset;
• An acquisition of a share or asset that is a debt instrument, debt interest in an entity, which is part of a securitisation arrangement or securities financing transaction, or of a security interest, as long as the acquisition will not have the effect of that person having control of the entity or acquire substantially all of the asset.

NOTIFICATION FEES

The Government has now confirmed the fees payable under the new regime. It has reiterated its full cost recovery position for applications under the regime, but has had regard to the fact that there should be a sliding scale of fees for the more detailed Phase 2 assessments commensurate with the value of the transaction. The fees are as follows: 

APPLICATION FORMS

As the new regime is a formal statutory regime, in essence every aspect of the process is more regimented and subject to formalised documentation – even the informal pre-notification engagement is more formalised. The links to each of the forms are below:

• Pre-Notification engagement request
• Notification of proposed acquisition: short form
• Notification of proposed acquisition: long form

Key observations about the nature and content of the application forms

• The application for a waiver from notification is not yet available as applications for waivers can only be made after 1 January 2026, and the ACCC is waiting for further detail, by way of an additional Determination from the Government.
• In due course, the ACCC will have a portal in place by which the application forms and all accompanying documents can be uploaded. At present, if parties wish to make a voluntary notification under the new regime, these documents are to be lodged by email.

Pre-Notification Engagement Requests

• In relation to the pre-notification engagement request, in addition to identifying the parties and an overview of the transaction and the value or consideration of the transaction, it seeks details regarding:
  • The Australian revenue for the parties (and connected entities) for each of the previous three years; 
  • The acquisitions made by the notifying party in the previous three years, including relevantly those that involved the goods and services which were the same or similar as the goods or services the subject of the acquisition being notified; and 
  • Whether the notifying party is intending to notify with a short form or long form application – and the ACCC recommends that in order for there to be substantive engagement in the pre-notification period, if available, a draft of the application form be provided at this time.

    This means that:

    • Even in this pre-notification period, the acquirer needs to be well advanced with its consideration about the competition implications of the proposed acquisition and the "basic" information relevant to the initial engagement with the ACCC; and
    • While not unduly onerous, the acquirer needs to factor the preparation time both for the gathering of relevant information and for engagement with lawyers or drafters of the application as part of its processes.

Short Form Notification

• In relation to an application by way of a short form notification, in addition to all of the information required during the pre-notification process, key observations or information and documents required are as follows:
  • The type of acquisition (horizontal, vertical or conglomerate);
  • The rationale for the acquisition (while it is not required – unlike for the long form application – this would ideally be supported by internal documents of the acquirer);
  • Notification of whether the acquisition is required to be notified in any other jurisdiction and if so, a confidentiality waiver for the ACCC to engage with overseas competition regulators;
  • Identification of the goods or services affected by the acquisition, and hence the relevant markets or market definitions, together with identification of the other key suppliers of the relevant goods or services;
  • The estimates of market shares of the parties to the acquisition, and other market participants, for each of the previous three years by volume, value and capacity as appropriate;
  • Contact details for the five closest competitors, five largest customers and five customers closest to the median spend of customers;
  • Whether the transaction documents contain any "goodwill protection provisions" and if so why they are necessary for the protection of the goodwill being acquired;
    • While these "restrictions" are commonplace in all such transaction documents, consideration now has to be given to the breadth and length of the restrictions, having regard to the nature of the business of the target or goodwill being acquired;
  • The documents required to be provided are:
    • The most recent versions of all the transaction documents, including supply and purchase agreements (SPAs), heads of agreements, offer documents etc;
    • Any other agreements between the parties related to the acquisition, including supply agreements, leases, licensing agreements and other ancillary agreements, services agreements etc;
    • Audited financial reports of the parties; and
    • Organisational charts of the parties.

Long Form Notification

• While this insight focuses on the Determination, it is instructive that the ACCC has given guidance on when it will expect that the long form notification be used, as follows:
  • In the case of horizontal acquisitions, where the parties' combined market share post-acquisition is:
    • Equal to or greater than 40% and the increment resulting from the acquisition is equal to or greater than 2%; or 
    • Between 20 and 40% and the increment resulting from the acquisition is equal to or greater than 5%;
  • In the case of vertical acquisitions, where the party active in the upstream market has a market share equal to or greater than 30% and the other party has a downstream market share equal to or greater than 30% and vice versa; 
  • In the case of conglomerate acquisitions, if the parties supply adjacent goods or services, where one of the parties has an estimated market share equal to or greater than 30%; or
  • Where the parties consider that the acquisition is likely raise substantive competition considerations (such as the acquisition of a vigorous competitor/party driving down prices).
• In relation to an application by way of a long form notification, in addition to all of the information required for the short form notification, it seeks significantly more detail about the likely competitive effect of the acquisition and the structure and dynamics of the markets likely to be affected, including:
  • Barriers to Entry, including details regarding:
    • Suppliers or competitors that have entered the market or started to supply the relevant goods or services in each of the previous three years, or ceased participating in the market in each of the previous three years; and
    • Estimated capital costs of entry, time required to enter having regard to investment, existing contractual arrangements etc, economies of scope and scale and other regulatory or key inputs required to enter the market(s); 
  • Depending on whether the acquisition is horizontal, vertical or conglomerate, responses to detailed and specific questions about market dynamics as set out in Appendices A, B or C of the long form, as appropriate;
  • Third party data sets or reports used by the parties to estimate and analyse market shares;
  • In addition to the above, other documents required to be provided include:
    • Documents received by the board or senior management for each of the parties within the previous two years:
      • Setting out the rationale for the acquisition or sale, assessing or analysing the acquisition and the valuation of the target, post-acquisition strategies, including integration plans – as well as information memoranda or similar; and
      • In the nature of presentations, studies, industry reports or the like that describe market conditions, competitive conditions, market shares, as well as business plans of the parties (separate from the acquisition);
  • Documents in the possession of either party in the previous two years – including the most recent versions of all the transaction documents SPAs, heads of agreements, offer documents etc; and importantly
  •  A declaration by the acquirer of the completeness and accuracy of the application.

Clearly, the new regime will require the acquirer or the parties to take considerable time and effort to prepare the above applications and make available the documents relevant to the proposed acquisition.

As we are all getting across it, this process will (at least initially) slow the pace of progress of transactions – but in time the parties, as well as the ACCC, will achieve a cadence such that the process will not be unduly onerous.