Coalition Backs Merger Law Reform but Raises Concerns About Red Tape, Unneeded Costs

Angus Taylor MP at a press conference at Parliament House in Canberra, Australia on Feb. 17, 2022. AAP Image/Mick Tsikas

The Coalition has voiced cautious support for the government’s proposed overhaul of Australia’s merger laws.

Shadow Treasurer Angus Taylor warned that while the bill may address competition issues, it risks increasing red tape, imposing unnecessary compliance costs on smaller businesses, and deterring innovation if not carefully implemented.

“The Coalition will continue to examine the bill closely through the Senate inquiry and Senate estimates processes. There’s an opportunity there to look at whether this can be made to work better,” he told Parliament on Nov. 5.

On Oct. 10, Treasurer Jim Chalmers introduced the bill, which aims to establish a system that differentiates between mergers deemed to stifle competition and those that provide real economic benefits.

However, Taylor raised concerns about the bill’s potential burden on the private sector, particularly small and medium-sized enterprises (SMEs), which he said could bear the brunt of new compliance costs.

He noted that while Treasury estimated transaction costs to fall between $50,000 and $100,000, smaller companies might struggle to afford these expenses.

Taylor argued that this could have a dampening effect on innovation and economic growth, as SMEs already face substantial regulatory hurdles.

“Good regulation can make a difference,” Taylor stated, “but we don’t want a system that simply feeds lawyers and consultants without delivering better outcomes for consumers.”

According to Taylor, the new framework could hinder small business flexibility and limit startups’ ability to enter the market.

He emphasised the Coalition’s commitment to effective competition policy that encourages growth but warned that the “blanket approach” proposed in the bill might harm thriving industries by treating them the same as heavily concentrated sectors.

Concerns Over ACCC Capacity and Resources

Taylor also questioned the Australian Competition and Consumer Commission’s (ACCC) expanded role in reviewing merger transactions under the new framework, noting that this would likely require significant resourcing.

He highlighted that detailed “Phase Two” reviews could cost over $500,000 per transaction, putting added pressure on the ACCC, which has already seen significant increases in budget and staff in recent years.

Taylor supported the bill’s plan for a one-year review to assess its effectiveness but underscored the importance of focusing regulatory scrutiny on highly concentrated sectors.

He noted that market concentration issues are particularly prominent in industries like supermarkets, hardware, aviation, and energy, where more stringent regulations may be beneficial.

What the New Merger Bill Introduces

The bill’s key reforms include a requirement for companies to notify the ACCC of certain mergers before proceeding, replacing the current voluntary clearance system.

This shift aligns Australia’s approach with jurisdictions like the UK and the United States. The bill also consolidates existing merger review streams into a single pathway to expedite approvals for transactions that pose no competitive risk.

Additionally, the ACCC would prioritise scrutiny for high-risk mergers that may create or entrench significant market power, allowing beneficial mergers to proceed more quickly.

It also recommends a public register of all notified mergers to promote transparency within the regulatory process.

ACCC Commissioner Gina Cass-Gottlieb welcomed the reforms, noting that the changes would address gaps that currently allow some anti-competitive mergers to go unchecked.

Despite voicing concerns, the Coalition affirmed its commitment to competition reform that benefits consumers.

“In the end, it is consumers who drive competition. They know what they want, and no bureaucratic framework can replace that,” Taylor said.