After much consultation, Labor’s competition law reforms emerged last week — for more consultation — with only a limited increase in the scope for the Australian Competition and Consumer Commission (ACCC) to prevent or place conditions on anti-competitive mergers and acquisitions.
The draft legislation does significantly alter Australia’s competition law assessment process by requiring all transactions above a certain threshold to be submitted to the ACCC for a two-phase assessment, rather than the current voluntary approach. If the ACCC suspects a transaction might substantially lessen competition, it will move into a second phase of detailed assessment.
What that threshold of size is, and what will determine the ACCC’s suspicions, remains vague. As noted by John Durie (one of the few journalists to bother examining the proposals), this is a poor outcome after such a long wait for clarity from the government, especially given one of the goals for the process was greater certainty for potential parties regarding transactions.
The changes are more incremental around what shapes the ACCC’s determination that a transaction will substantially lessen competition. Under the new laws, the regulator will be able to block transactions that have the effect of “the creation, strengthening or entrenching a substantial degree of power in a market”, which potentially makes all acquisitions by firms already possessing a substantial degree of power open to prohibition as they would entrench that power.
The ACCC will also be able to take into consideration the accumulated impact of acquisitions within the previous three years, even if they were too small to be notifiable, giving the regulator some capacity to address creeping acquisitions that would previously have been beneath its capacity to intervene.
However, the capacity for companies to appeal to the Australian Competition Tribunal (ACT) remains intact. In a classic case of “they would say that”, competition lawyers think the current basis for appeal of ACCC decisions is too limited. From a public interest perspective, it remains too broad, with companies able to simply keep appealing ACCC decisions up through the Federal Court and to the High Court in the hope — often realised — of finding a friendly judge to undo the ACCC’s work.
How much the new legislative guidance on “substantial lessening of competition” will expand the ACCC’s powers to halt the damaging expansion of large corporations will thus depend heavily on how the judges of the ACT and superior courts interpret concepts such as entrenching market power and cumulative effects of acquisitions. This will take some time, and there’ll presumably be a rush by companies to get marginal mergers through before the new laws are passed.
That might be a while away too. If legislation isn’t introduced until October, which is still likely to be a stretch, there’ll only be three sitting weeks left in the year, and the inevitable Senate inquiry will soak up the rest of 2024 anyway, pushing the legislation into an election year. Depending on election timing, even these limited changes might not see the light of day until the next term of Parliament.
The big omission from the new legislation — not that it was ever up for grabs in this process — is divestiture powers, which are the one remedy that might actually reverse the relentless concentration that characterises so many of Australia’s key markets, rather than merely preventing them from becoming still more concentrated, which is what the current package offers.
Only the opposition is offering such powers currently, and only in relation to large retailers. Perhaps the Senate inquiry can address the issue; sadly, it will be under the control of government senators, so no progress can be expected given the prime minister’s tendency to describe divestiture powers as “Soviet”. So we’ll have to make do with the optimistic hope that sometime next year new laws will prevent the state of competition in Australia from growing even worse.
