The Australian merger control is aimed to prevent competition problems in the Australian market. Merger control here is voluntary for companies. However, the level to which this procedure is voluntary in practice, we will consider in this article.
Australia's merger is governed by the Australian Competition and Consumer Protection Commission (ACCC). One can evaluate merger transactions in Australia in two ways: informally or officially.
Informal Merger Review
ACCC can pre-evaluate a transaction in a confidential format and then report that it does not intend to intervene in the transaction. Australian companies are looking forward to and hope for just such a solution, as it is the least expensive option. However, there are pitfalls here: a transaction executed in this way is not protected from lawsuits.
You can obtain permission to merge in Australia within 90 days from the date of application.
Despite the voluntary format, it is still recommended that you obtain permission to merge Australian companies from ACCC if, after the merger, the company has a market share of over 20%. It is believed that transactions that exceed this benchmark may raise competition concerns.
Australian Foreign Investment Regulation
The Foreign Investment Board regulates issues related to foreign investment and decides on the right to prohibit transactions that are contrary to national interests. The effect of a transaction on competition is considered a factor of national interest. So in practice, investing in Australian companies is being tested by the regulating bodies.
If, during such an audit, the regulator concludes that the risk of reduced competition is high, then the parties are expected to have a long public inspection. If the regulator is not satisfied by the result, it will state this publicly, followed by a public review of the transaction. It may take another three months before the regulator decides whether to authorize the transaction or oppose it. That's why companies get frustrated when they have to go through a public audit rather than a confidential one.
The regulator will only provide permission to merge in Australia if the transaction is unlikely to significantly reduce competition.
In the Near Future
Australia's merger control regime expects some changes that have been welcomed by entrepreneurs looking to create a startup in Australia. In particular, when considering the likely consequences of mergers and acquisitions of the target business in Australia, it is planned to amend the provision preventing the potential competitor removal from the market.
Lately, the Australian regulator has repeatedly assured in its conviction that competition benefits from many competitors, even in industries with a high concentration. Significant resources must be allocated to parties considering acquiring a company's assets in concentrated markets so that the regulator does not obstruct such acquisitions.
Our experts advise on the most significant provisions for merger control in Australia and beyond. If you are planning to conclude an M&A deal in Australia, we are at your service.