Merger reforms: Notification thresholds consultation paper published

The limbs are summarised in the Treasury diagram below. Source: The Australian Government the Treasury.

In short, the monetary thresholds (assuming a two-party deal) will be triggered if:

• The acquirer group’s and target’s combined Australian turnover is at least $200m, and each party has at least $40m in Australian turnover (or the global deal value exceeds $200m) OR

• The acquirer group’s Australian turnover is at least $500m, and either the target has $10m in Australian turnover or the global deal value exceeds $50m

To assess whether the acquisition meets the monetary turnover threshold, all acquisitions by the acquirer group within the previous three years in the same product or service market/s would be aggregated.  This applies regardless of the geographic location or whether those other acquisitions were notifiable.

On the market share thresholds, Treasury is consulting on whether to adopt a “market share” approach, or a “share of supply” approach. The proposed thresholds (assuming a two-party deal) would be:

• If the parties have at least a 25% combined share, then each party must have at least $20m in Australian turnover

• If the parties have at least a 50% combined share, then each party must have at least $10m in Australian turnover

Overall, the thresholds mean that no notification would be required if the merger parties (including the acquirer group) have no Australian turnover.

Ministerial determinations will be used to establish additional thresholds to capture smaller transactions in specific sectors or affecting local markets – the grocery retailing, fuel, liquor and oncology-radiology sectors are specifically mentioned.  Ministerial determinations must involve prior stakeholder engagement, and be supported by evidence-based advice.

The ACCC will publish guidance on the thresholds, and businesses will be able to engage with the ACCC on whether the thresholds are met prior to formal notification.

On the supporting rationale:

• Treasury has taken a “risk-based” approach to setting thresholds, which acknowledges that some transactions of potential concern would not be notified.

• Treasury analysis indicates that the proposed thresholds would have captured 90% of all deals publicly reviewed by the ACCC and potentially raising concerns since 2018, with the monetary thresholds alone capturing 75%.

• Applying these thresholds, Treasury projects 300 to 500 notifications per year, compared its view that “around 1500 or more” mergers occur in Australia each year.

• Combined turnover and transaction value tests are common in other jurisdictions. Treasury provides a comparative table on page 15 of the consultation paper.m

Treasury is also considering a process for the ACCC to grant a “notification waiver”. A waiver would be binding on the ACCC, and exclude the penalty and voiding provisions, providing the parties certainty. The ACCC will have 30 business days to grant a waiver. Except for waiver applications for on-market bids, waiver applications will be listed on the ACCC’s public register (along with any decision and reasons). Review by the Tribunal will be available, including by non-merger parties with a sufficient interest.