Companies will be required to notify the competition watchdog of mergers of a certain size in a major revamp of Australia’s competition laws designed to reduce unfair market concentration.
On Wednesday the treasurer, Jim Chalmers, will announce that the government will overhaul the voluntary system that has left the Australian Competition and Consumer Commission flying blind when scrutinising mergers, because the regulator is only informed of about a quarter of mergers.
But despite the ACCC asking for a new approval test, the Albanese government won’t be reversing the onus of proof to require companies to prove the proposed deal wouldn’t be likely to substantially lessen competition.
Instead it will tweak the merger test and bring three years of transactions within the scope of mandatory notification to prevent serial or creeping acquisitions flying under the radar.
Chalmers will announce the merger law reforms at the ACCC’s Bannerman competition lecture, arguing that the changes will help “differentiate between harmful and beneficial mergers”.
In an advance copy of the speech seen by Guardian Australia, Chalmers says Australia’s competitiveness has been declining since the 2000s with “increasing market concentration across industries”.
“Over recent decades, the mark-ups that businesses apply to goods and services have increased by more than 2 percentage points,” he says. “Reforms that address the decline in competition can deliver big economic benefits.”
Chalmers says the government wants to tackle mergers that “can cause serious economic harm” because “they’re solely focused on squeezing out competitors to capture a larger percentage of the market” rather than lifting productivity.
“This can strangle innovation, reduce productivity in our economy and punish consumers with reduced choice.”
Chalmers says Australia’s merger laws are “no longer fit for purpose” because the ACCC “isn’t properly equipped to detect and act against anti-competitive mergers”.
Only 330 mergers are scrutinised a year, on average, but 1,400 mergers were recorded last year.
“But we don’t know whether these are the right 330, or the mergers with the greatest potential to cause harm,” Chalmers says.
The ACCC chair, Gina Cass-Gottlieb, says: “We welcome the treasurer’s announcement today that the government will move to strengthen Australia’s merger laws, which will benefit Australian consumers and businesses of all sizes, as well as the wider economy.
“Higher prices, less choice and less innovation can result from weakened competition. Stronger merger laws are critical to ensure anti-competitive mergers do not proceed.”
Under the new system “mergers above monetary thresholds and which would significantly change market concentration will need to be notified to the ACCC and be approved before proceeding”, Chalmers says.
The thresholds – which will include a measure of market share – will be determined in 2024 before the new system begins in January 2026.
The proposal paper says “all mergers within the previous three years by the acquirer or the target” will count towards the threshold.
Australia’s competition laws have come under increased focus due to concerns market concentration is seeing consumers ripped off. The former ACCC chair Rod Sims has said the existing test that a merger will substantially lessen competition is nearly impossible to prove.
The ACCC had asked for a new approval test, stating that a “merger can only proceed if the decision maker (the ACCC or tribunal on review) is satisfied that it is not likely to substantially lessen competition”.
In its submission the ACCC said this would mean “where the material before the decision maker does not positively satisfy it that there is no likely substantial lessening of competition, a merger will not be approved”.
It rejected the claim this amounted to “a reversal of the ‘onus of proof’ as this is an administrative decision being considered outside of the court context”.
According to the government response in the proposal paper the merger test will be strengthened by specifying that substantially lessening competition would include “if the merger creates, strengthens or entrenches a position of substantial market power in any market”.
Chalmers argues that “the biggest reforms to merger settings in almost 50 years” will help create “a stronger, more competitive and more productive economy”.
In other changes, there will be a public register of all mergers and acquisitions notified to the ACCC, and the watchdog will become the “the single decision maker on all mergers”.
Mergers the ACCC says will pose no threat to competition will be approved within 30 days.
The government will also introduce cost recovery fees for assessing mergers, which treasury estimates will “be between $50,000 to $100,000 for most mergers but small businesses will be exempt”, Chalmers says.
