Australia to implement mandatory merger control regime by 2026

Observations

• The Australian Competition and Consumer Commission (ACCC) will review a lot more deals: The notification thresholds are low. The new regime will result in many more transactions being notified particularly for parties that already have a material presence in Australia.
• Ministerial directions will target certain sectors: Incumbents in certain sectors (such as supermarkets) will need to notify all transactions. More detail on this will follow.
• Serial acquisitions and complex deals will face closer scrutiny (and more risk): The ACCC will consider in aggregate all acquisitions in the same market(s) over a three-year period to determine if notification is required as well as the competitive effects. This will impact regular deal-doers including private capital businesses. The legal test and process will be slightly tilted to favor the ACCC so complex reviews will get tougher.
• Risk allocation will attract more attention: When a review is expected to be difficult, risk allocation mechanisms in deal documentation will logically attract more attention. This is a common theme globally.
• Deals in 2025 must watch the transition: Deals with completion dates in 2H 2025 will need to include appropriate conditions precedent and sunset provisions in documentation to accommodate the transition period.

Key elements of the regime

Notifiable transactions types

With limited exemptions, acquisitions of shares, assets or units must be notified if:

• There is an acquisition of control (as set out in s50AA of the Corporations Act) – namely, the acquirer gains the capacity to determine the target’s financial and operating policies (including consideration of practical influence and patterns of behaviour); and
• Certain financial thresholds (see below) are crossed.

The Minister can designate that certain types of acquisition must be notified irrespective of thresholds. Supermarkets (and potentially certain acquisitions in the fuel, liquor and oncology radiology sectors) are likely to be designated. It has also been flagged that notification of acquisitions in a private company above a 20% shareholding may be mandated if one of the parties has local turnover above AUD200 million (USD135m).

Thresholds

Economy-wide monetary threshold

An acquisition is notifiable if:

(a) Australian turnover of the merger parties is at least AUD200m (USD135m); and

(b) Target’s Australian turnover is at least AUD50m (USD33m); OR the global transaction value is at least AUD250m (USD167m).

Threshold for large business acquiring smaller business

An acquisition is notifiable if:

(a) Acquirer’s Australian turnover is at least AUD500m (USD335m); and

(b) Target’s Australian turnover is at least AUD10m (USD6.5m).

Three-year cumulative threshold to address serial acquisitions

Acquisitions by merger parties with combined Australian turnover of more than AUD200m (USD135m) will be notifiable where the cumulative Australian turnover from acquisitions in the same market(s) over a three-year period is at least AUD50m (USD33m). Where a large acquirer business is involved, notification is required if the cumulative Australian turnover from relevant serial acquisitions is at least AUD10m (USD6.5m).

Process / review timelines

The Bill introduces review timeframes (from the date of notification) of:

• 15 business days for ‘fast-track’ no issue cases
• 30 business for a standard ‘phase 1’ review
• 120 business days for a ‘phase 2’ review (where substantive competition issues are identified).
• A public benefit process (essentially a phase 3 review), will allow parties to make a subsequent application (post a negative phase 2 review) to the ACCC to assess net public benefits, adding a further 50 business.
• Limited merits review by the Australian Competition Tribunal is available (based on the material available to the ACCC).
• In certain circumstances a notification waiver can be obtained. This might apply, for example, where: there are clearly no-issues; there is a need for urgent completion; and public interest considerations apply.

Transition period

• From July 1, 2025, merger parties can voluntarily notify under the new mandatory notification regime.
• From January 1, 2026, all transactions that meet the notification requirements must be notified.
• Between July 1 and December 31, 2025 ACCC authorisation or informal clearance decisions will stand.

Substantive test

• The ACCC will grant clearance unless it is satisfied that the acquisition would be likely to have the effect of substantially lessening competition (SLC). A SLC can arise from the creation, strengthening or entrenching of substantial market power.
• The ACCC can consider the aggregate effect of all acquisitions by the merger parties in the prior three years in the relevant market(s).

Notification details

• There will be a fee, a form, and upfront information requirements (all to be determined).
• The acquirer will typically be responsible for making the notification (although this is not a formal requirement).
• Subject to limited exceptions, notifications will be subject to a public review and ACCC decisions will be published. There will be a process to exclude competitively sensitive information from the public record