Australia to Tighten Scrutiny of Mergers Involving Large Companies

Woolworths and Coles supermarket signage in Melbourne, Australia on March 13, 2024. Asanka Ratnayake/Getty Images

The Australian government has introduced a bill to overhaul the country’s merger laws, marking the most significant change to its competition framework in almost five decades.

The new legislation, presented by Treasurer Jim Chalmers in Parliament on Oct. 10, aims to establish a system that differentiates between mergers deemed to stifle competition, and those that provide real economic benefits.

The reforms empower the Australian Competition and Consumer Commission (ACCC) to more effectively scrutinise mergers while accelerating the approval of pro-competitive deals.

“These reforms, set to take effect on Jan. 1, 2026, will align Australia with other OECD nations by introducing mandatory merger notifications—an element currently absent from our system,” Chalmers stated.

The debate on the bill was adjourned in Parliament later in the morning.

Earlier, Shadow Treasurer Angus Taylor had indicated the opposition would review the policy.

Key Merger Reforms

The government outlined five major changes that the new rules will bring to Australia’s merger regime.

First, merger approvals will be faster, with transactions that do not threaten competition being cleared within 30 working days.

Second, oversight will be strengthened through a mandatory notification system, requiring businesses to inform the ACCC of certain mergers before proceeding. This move addresses concerns that potentially harmful mergers might go unchecked.

The third reform simplifies the process by consolidating the existing three streams of merger reviews into a single pathway.

Fourth, the law will introduce a more targeted focus, concentrating on mergers that risk creating or entrenching substantial market power. Such mergers will be subject to more thorough scrutiny, while beneficial mergers will be fast-tracked.

Finally, the reforms will also create a public register of all notified mergers to promote transparency.

Gina Cass-Gottlieb, the ACCC commissioner, welcomed the changes, noting that many transactions posing real risks to competition currently go unreviewed.

She added that the new reforms would provide the ACCC with “fit-for-purpose tools” to ensure competition risks are properly addressed. The reforms will also encourage greater community and business engagement in the ACCC’s processes.

What Mergers Must Be Reviewed

The bill introduces specific financial thresholds to determine which mergers will require mandatory notification.

They include mergers for businesses with turnovers over $200 million, or if the business being acquired has an Australian turnover above $50 million. Additionally, mergers with a global transaction value of over $250 million will fall under this rule.

For very large companies, having an Australian turnover exceeding $500 million, acquisitions of smaller businesses with turnovers above $10 million will also require mandatory notification.

The rules also target serial acquisitions, where businesses with combined Australian turnovers of more than $200 million must notify the ACCC if, over a three-year period, their acquisitions cumulatively amount to at least $50 million.

For very large businesses, this threshold is set at $10 million.

However, land acquisitions related to residential property development and certain commercial property purchases will be exempt from the notification requirement to prevent the system from being overwhelmed.

Rationale Behind the Reform

The ACCC reviews around 330 mergers annually, but Australia records over 1,400 mergers a year, with a total value of approximately $300 billion.

The lack of compulsory merger notifications has raised concerns that many potentially harmful mergers are not being adequately assessed. Moreover, the current system has been criticised for being opaque and causing costly delays for businesses.

The new merger laws aim to address these issues by speeding up the approval process and making it more transparent, with the ACCC playing a more active role in reviewing mergers.

Chalmers said the reforms were developed in consultation with industry and community stakeholders.

The thresholds will be reviewed 12 months after the legislation comes into effect to ensure they are appropriately capturing the right mergers.

Additionally, the bill allows the treasurer to adjust the thresholds in response to high-risk mergers, such as those in the supermarket sector. This flexibility ensures that Australia’s merger laws can evolve in response to changing market conditions.

In other news, Treasurer Chalmers announced the reappointment of David Gruen as Australia’s statistician for a second five-year term.

Chalmers praised Gruen as an exceptional economist and public sector leader, noting his distinguished track record of leadership and innovation.

“Dr. Gruen will continue to lead the Australian Bureau of Statistics (ABS), further contributing to the nation’s economic analysis and public sector leadership”, he added.