Explainer: What small businesses need to know about ACCC merger reforms
Businesses planning a merger will need to seek Australian Competition and Consumer Commission approval under a new mandatory scheme.
Businesses planning a merger will need to seek Australian Competition and Consumer Commission (ACCC) approval under a new mandatory scheme.
The major changes are laid out in a new merger reform paper, published by the Treasury on Wednesday, which says Australia’s current voluntary disclosure system needs replacing.
Treasurer Jim Chalmers said the existing three-path system for merger approval is inefficient and allows companies to undertake mergers that significantly lessen competition.
“We will simplify and speed up the process for mergers that are in the national interest and give the regulator stronger powers to identify and scrutinise transactions that pose a risk to competition, consumers and the economy,” he said.
“Higher prices, less choice and less innovation can result from weakened competition,” ACCC chair Gina Cass-Gottlieb said in a statement.
“Stronger merger laws are critical to ensure anti-competitive mergers do not proceed.”
The reforms have particular significance for small businesses, as the federal government is concerned with “killer” buyouts preventing new and innovative companies from meaningfully competing with incumbent giants.
Here is what small businesses need to know.
Why is the system changing?
Under today’s voluntary system, businesses are encouraged to flag their proposed merger with the ACCC before it takes place.
The ACCC has long argued it lacks the power to catch and kill every merger likely to lessen competition, worsening outcomes for both businesses and consumers.
At the same time, the federal government believes a dynamic economy — where new businesses are encouraged to prosper in their own right — cannot be achieved while a few dominant corporations have the power to acquire any new competitors they see as a threat.
What is changing?
Under the new and mandatory system, the competition watchdog will need to approve each and every merger above a certain threshold (more on that soon).
The ACCC must permit a merger to go ahead, unless it is likely to “substantially lessen competition, including if it creates, strengthens, or entrenches substantial market power,” says the merger reform paper.
Businesses that disagree with the ACCC’s decision will be free to lodge a review with the Australian Competition Tribunal.
How will small businesses be covered?
The merger reform paper says the ACCC will need to consider mergers above certain monetary and market-share thresholds.
The precise shape of those thresholds will be determined by legislation, but it appears the smallest mergers — like those between two local businesses in a diverse and active industry sector — won’t require explicit ACCC approval.
Monetary thresholds will be set by consultation before that legislation comes to pass and will be set in terms of turnover, profitability, or transaction value.
“Share of supply or market-share thresholds will ensure mergers below the monetary thresholds but which otherwise present risks to competition will be notified to the ACCC,” the paper says.
Importantly, the ACCC will keep an eye on “creeping” acquisitions and non-competitive roll-ups.
It will monitor the previous three years of merger activity by either the acquirer or merger target “for the purposes of assessing whether a merger meets the notification thresholds, irrespective of whether those mergers were themselves individually notifiable”.
The relevant Minister will also have the power to add additional notification obligations, if they see fit.
How long will merger approvals take?
Even though the new system will radically reshape the ACCC’s authority, it expects the bulk of mergers will be considered within 30 days, with a 15-day fast-track option if no concerns are found.
If concerns are found, businesses can expect decisions to be handed down in around 120 days.
What will such mergers cost?
Applicants will need to pay the ACCC for each review, with the merger reform paper saying it will cost between $50,000 and $100,000.
Critically, small businesses will be exempt from those fees.
Treasury will consult on those fees in 2024, and will presumably lay out what constitutes a ‘small business’ in this context.
Separately, businesses whose mergers would fall under the ACCC’s purview, but choose not to flag it for review, can expect significant financial penalties.
Will this constrain non-problematic mergers?
The federal government insists the new system will not operate as a de facto ‘no’ to proposed mergers, and won’t stop straightforward mergers from taking place.
It also knocked back the ACCC’s proposal that merger parties themselves need to prove a merger won’t lessen competition, after “stakeholders objected to the perception that this ‘reversed the onus of proof’”.
When does the new merger scheme begin?
The new merger control system will begin on January 1, 2026, with Treasury consultation on the exposure draft to begin this year.
