On 27 September 2013, the Australian Competition and Consumer Commission (ACCC) released its Informal Merger Review Process Guidelines 2013 (Guidelines) providing updated guidance on the ACCC's informal merger review process. A copy of the Guidelines can be accessed here
. This followed a public consultation process in July, and is the first time the Guidelines have been updated since 2006. The aim of the Guidelines is to outline a flexible, transparent and efficient process for obtaining informal merger clearance from the ACCC.
The key updates to the Guidelines
: The relatively new pre-assessment process adopted by the ACCC for dealing expediently with the large number of non-contentious mergers notified to it has been formalised.
• Tailored and increasing timelines
: The ACCC is moving away from setting standard periods for review, instead adopting a more tailored approach, based on the complexity of the merger under review. The ACCC's indicative timelines for each phase of a public review have now increased to six to 12 weeks (up from eight). In light of recent practice, these timelines appear more realistic, however the ACCC has indicated that it expects the majority of merger reviews in which substantive competition concerns do not arise will still be completed within eight weeks.
• Scaled approach to information requirements
: The ACCC does not require merger parties to provide a complete information package at the outset, instead requiring a certain level of information at the commencement of a review and then requesting additional information as the review progresses.
• Feedback from market inquiries
: To facilitate a "no-surprises" approach and provide merger parties with the opportunity to fully respond to all issues raised by market participants, the ACCC will generally provide them with details, in writing, of any relevant issues or concerns arising during market inquiries.
• Publishing Public Competition Assessments
: The ACCC has increased the time to publish its reasons for a decision from two weeks to 30 business days, at the same time indicating that certain factors (such as the relevant merger becoming the subject of litigation) may result in an even longer period.
The updated Guidelines will not result in any significant changes to the ACCC's current approach to informal merger reviews as they largely reflect the ACCC's current practice.
When should parties consider seeking merger clearance?
There is no legal obligation to notify the ACCC of a proposed merger and not all mergers that lessen competition are prohibited at law – only those that have (or are likely to have) the effect of substantially lessening competition are prohibited. In this regard, merger parties are encouraged to consult with the ACCC where:
• the products of the merger parties are either substitutes or complements; and
• the merged firm will have a post-merger market share greater than 20% in the relevant market.
Merger parties may seek either informal or formal merger clearance (although the formal merger clearance process has yet to be used since its introduction in 2007).
Why seek informal merger clearance?
Although there is no legal obligation to notify a proposed merger, well advised merger parties should consider seeking informal merger clearance where the ACCC's thresholds are exceeded so as to minimise the possibility of disruption to the transaction timetable as a result of the ACCC initiating its own review or even subsequent legal action by the ACCC (such as injunctive, divesture and/or penalty orders).
Although an informal clearance, in contrast to a formal clearance, does not confer protection from subsequent legal action by the ACCC, it enables the merger parties to seek the ACCC’s views without having to comply with the more onerous formal clearance processes. If informal clearance is obtained, merger parties can progress with a significant level of comfort regarding the ACCC's position, promoting deal certainty.
What is informal clearance?
Essentially, there are three categories of informal merger assessments that the ACCC may make:
: the ACCC forms a view, based on available information, that the risk of the transaction substantially lessening competition is low and therefore a confidential or public review is not required. While this is not a decision that is made lightly by the ACCC, and will depend on the ACCC’s familiarity with the relevant industry and the adequacy of the information provided by the merger parties, by far the majority of mergers notified to the ACCC are able to be pre-assessed. Typically, the ACCC is able to pre-assess a matter within two weeks of it being notified.
• Conditional confidential
: the ACCC provides a preliminary conditional view on a confidential merger proposal where requested by the merger parties. One of three
conclusions will be drawn:
1. the transaction does not appear to raise competition concerns (although this outcome is unlikely, given the pre-assessment process);
2. the ACCC is not in a position to determine whether the transaction raises competition concerns and so will conduct a public review once the transaction becomes public; or
3. the transaction does give rise to competition concerns and the ACCC will conduct a public review once the transaction becomes public. The process is generally concluded within two to four weeks and the ACCC is careful to ensure it does not provide an inappropriate level of comfort to merger parties given that market inquiries have not been undertaken.
: The ACCC conducts market inquiries, at the end of which it either makes a final decision advising that it does not oppose the transaction or, where the transaction raises competition concerns, issues a Statement of Issues. If the latter, it then commences a further public consultation process and provides the merger parties with an opportunity to respond to the issues raised before making its final decision. Although the ACCC has indicated the market inquiries process will take between six to 12 weeks and a further six to 12 weeks if a Statement of Issues is released, the duration of a public review is dependent on (amongst other matters) the complexity of the transaction, the issues involved and the sufficiency of available information.
The ACCC has prepared the following overview of its informal merger review processes:
Overview of informal merger review process
In all cases, the threshold issue is whether a public review of the merger is required. Given there are no compulsory pre-notification requirements under the informal merger review system, in deciding that, the ACCC is largely reliant on the merger parties and others providing information on a voluntary basis, as requested throughout the review process. Accordingly, it is important that the merger parties provide fulsome disclosure (even if it is on a confidential basis) of information relevant to an assessment of a transaction by the ACCC if they are to obtain any real benefit from an informal merger review.
While the Guidelines have been updated to largely reflect existing practice, rather than imposing any new requirements or changing any processes, they provide welcome clarity, transparency and guidance around the informal merger review system, promoting greater confidence and certainty for merger parties.