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Clifford Chance

Clifford Chance
Antitrust/FDI Insights<br />

Antitrust/FDI Insights

Revealed: Possible thresholds for proposed mandatory merger filing regime in Australia

Transactions involving companies with turnover of AUD$400 million or a transaction value of more than AUD$35 million would trigger a mandatory ACCC merger filing under proposed ACCC reforms to the Australian merger notification regime.

Proposed merger filing thresholds
The ACCC continues to support sweeping reforms to Australia's merger review regime including the introduction of a mandatory and suspensory merger notification model and changes to the substantive merger test that would result in closer alignment of Australia's merger control laws with those of the European Union.

A submission dated March 2023 from the ACCC to Australian Treasury and Competition Minister, Andrew Leigh, confirms much of what has been previously written about on this topic, including the ACCC's pursuit of the introduction of mandatory merger filing thresholds and shifting the burden of proof as part of a broad-ranging revamp of Australia's merger control regime (ACCC Proposal).

The ACCC's Proposal indicates that "determining thresholds…could be set with reference to the value of the proposed transaction, the size of the business being acquired globally and/or within Australia, or a combination of these factors". The ACCC Proposal goes on to suggest that transactions satisfying the following thresholds would trigger a mandatory merger notification to the ACCC:

  • Companies to a transaction meet a turnover threshold of AUD$400 million (or USD$273.3 million); or
  • The global transaction value exceeds AUD$35 million (or USD$23.9 million)

(Proposed Thresholds).

Whilst the ACCC has acknowledged that mandatory notification thresholds require "careful consideration", it has also indicated that it believes that the AUD$400 million figure is appropriate.

The Proposed Thresholds would appear to currently lack the level of specificity and certainty needed by merger parties to determine whether a transaction would be notifiable and to be consistent with International Competition Network best practice.

Further detail regarding the application of the Proposed Thresholds, such as whether the relevant turnover is Australian-specific or global in nature, if the turnover threshold is combined between both merger parties or capable of being satisfied by one merger party, if one or both thresholds would need to be satisfied to trigger a filing, and if any additional Australian nexus would be required, have not yet been revealed and are relevant factors for merger parties.

Implications of the Proposed Thresholds

The Proposed Thresholds both appear to be global in nature and would potentially capture a significant volume of transactions, including those with a reasonably de minimis nexus to Australia.

As a point of comparison, the Proposed Thresholds fall well below those used in the merger notification regimes of the European Union and the US but are higher than the current combined worldwide turnover thresholds currently used in France, Greece and the Netherlands. Unlike the thresholds used by the Competition and Markets Authority (CMA) in the UK, there is currently no reference to a "share of supply" test.

Global thresholds have the drawback of capturing transactions that have minimal or no nexus to Australia. If implemented without other, cumulative thresholds that require the target to have a certain degree of sales or assets in Australia, the ACCC's merger regime has the potential to go from one in which parties to transactions that raise no conceivable concerns in Australia can opt not to notify, to one in which hundreds of “no issues” mergers would have to be notified every year, many of which have no nexus to Australia. Even the UK’s new proposals to introduce new thresholds to capture acquisitions of nascent competitors (while retaining the voluntary regime) require at least one of the parties (which could be the purchaser) to have significant turnover in the UK (£350m) and a significant UK share of supply (33%).

Although thresholds based on global transaction value have been implemented in some jurisdictions as a way to catch acquisitions of potential/nascent competitors that do not yet generate significant turnover in a jurisdiction, for the reasons outlined above they are typically combined with a carefully defined test for nexus/likely effects. For example, Germany (which was one of the first to introduce such a threshold) requires the target to be active in Germany “to a considerable extent” (such as having R&D facilities or significant volumes of monthly active users of digital services), but the test will not be met by purely future / prospective activities: a target's activities will not be considered significant if it generated a turnover below €17.5m in Germany and if this turnover adequately reflects its market position and competitive potential (such as where the target's products generate significant turnover abroad but not in Germany).

Ultimately, further details around the interpretation and application of the Proposed Thresholds will be required before more meaningful comparisons can be drawn and the implications of the ACCC Proposal can be assessed more definitively.

Next steps on consultation

No details have been released regarding the form, substance, procedural requirements or any fees associated with mandatory filings. The possible timing of public consultation on or further consideration of the ACCC Proposal by the Australian Government also remains unknown. As such, it is possible that Australia's existing voluntary merger control regime may remain in place for some time to come.

However, it is clear that against the backdrop of increased ACCC concerns around "creeping acquisitions", "killer acquisitions" and deal activity by entities with existing market power, the introduction of a mandatory merger filing regime in Australia will have important ramifications for entities who frequently undertake transactions in or with a potential nexus to Australia. As such, private equity and institutional investors, market participants with larger market shares (particularly those in concentrated industries), and BigTech should be particularly mindful of developments in this space.

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