In late November 2024, the Government passed the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (“Merger Bill”), which will introduce a mandatory and suspensory merger clearance regime in place of the existing voluntary regime. Under the new merger laws, compulsory notifications will come into effect on 1 January 2026, but voluntary notifications can be made from 1 July 2025. 

The ACCC has now released draft merger assessment guidelines (“Draft Guidelines”), which outline its approach to assessing the potential effects of mergers on competition under the new regime, as well as its approach to assessing whether a merger is likely to result in a net public benefit. The publishing of the Draft Guidelines follows on from the ACCC publishing guidance on how it intends to manage the transition to the new regime (as discussed in our previous article). 

The Draft Guidelines replace the existing merger guidelines (from 2008) and merger authorisation guidelines (from 2018), and contain guidance on concepts in the new regime, such as cumulative acquisitions and the ‘creating, strengthening, or entrenching’ of market power. They also cover recent issues in the area of merger control, such as acquisitions involving multi-sided platforms, as well as interoperability and data in the context of mergers. 

New theories of harm - acquisitions of nascent competitors in the ACCC’s sights 

In the Draft Guidelines, the ACCC sets out a number of scenarios (or theories of harm) where it considers that mergers can raise competition concerns. A new scenario (as compared with the previous guidelines) is the acquisition of a nascent competitor (e.g. a start-up) which prevents it from entering or expanding into a market in a way that may have increased competition. 

The ACCC considers that the effects of a transaction on potential competition can be more pronounced in certain markets, such as digital markets, which are typically characterised by network effects and are prone to “tipping” (i.e. where a market shifts from multiple competitors to one or two suppliers due to network effects). This arguably increases the competitive significance of new competitors in these markets.[1]

The reforms in the Merger Bill, which expand the definition of substantial lessening of competition ("SLC") to include where a transaction creates, strengthens, or entrenches a substantial degree of power in a market, are likely to enable the ACCC to more closely scrutinise the acquisition of nascent or potential competitors by businesses with market power (commonly referred to as ‘killer acquisitions’), including in digital markets. 

Serial acquisitions and roll-up strategies

The reforms in the Merger Bill also enable the ACCC to consider the cumulative effect of acquisitions by taking into account the combined effect of the merger and any acquisitions in the previous three years. 

The ACCC will be able to consider acquisitions in the previous three years which involve a merger party and where the target(s) is involved in the supply or acquisition of the same (or substitutable) goods or services. The intent is to allow the ACCC to consider the impact of serial or ‘creeping’ acquisitions – acquisitions which, when considered together, may substantially lessen competition. 

The Draft Guidelines also include a new theory of harm where a firm serially acquires a number of smaller firms providing similar products. Under the new regime, the ACCC may be able to treat the effect of the acquisition as being the combined effects of the acquisitions and any acquisitions that took place in the preceding 3 years. 

The ACCC also provides guidance on the types of competition concerns that may result from serial acquisitions. These include:  

• increased market concentration if a firm incrementally increases its market share, resulting in a large firm that exercises control over price, service, and quality;
• smaller competitors may face challenges in achieving minimum efficient scale; and
• it may be more difficult for smaller rivals and potential entrants to introduce niche goods or services. 

Guidance on mergers involving multi-sided platforms

The ACCC’s Draft Guidelines include new material which clarifies its approach to analysing mergers involving multi-sided platforms, since there may be some aspects of merger analysis which are unique to these platforms. 

The guidance is consistent with the ACCC’s previous work in the Digital Platforms Inquiry and Digital Platform Services Inquiry, which found that digital platforms markets have unique economic characteristics, such as strong network effects and significant economies of scale. Importantly, these markets may also be ‘multi-sided’ such that services are provided to two or more groups of users. A good example is social media platforms where services are provided to users and advertisers. The ACCC states that: 

…When assessing the potential for a merger involving a platform to give rise to unilateral effects, the ACCC may consider the impact on each side of the platform separately, the impact on both sides of the platform, or the impact on overall competition between platforms. The ACCC considers that each side of a platform generally constitutes a separate market, while also recognising that each side may affect the other…

Other new aspects of the Draft Guidelines

The Draft Guidelines also include the following features: 

• an increased focus on interoperability and data in the context of mergers, including a new theory of harm which involves a supplier of a real estate platform acquiring a supplier of data analytics services. The ACCC’s concern here is that the linking of the platform and service could foreclose other data analytics suppliers in the market. The ACCC also lists “limiting interoperability and access to data” as a way that vertically integrated firm might foreclose rivals. 
• new guidance on the public benefits test: while the public benefits assessment under the new regime is largely in line with the current approach, the ACCC expects that merger parties will provide “extensive details” to quantify public benefits and detriments. This includes the underlying data relied on and methodology used to calculate benefits and detriments. The ACCC draws on the principles in the recent Australian Competition Tribunal’s decision in ANZ/Suncorp.[2]
• more detail on how the ACCC will assess rivalry-enhancing efficiencies: the Draft Guidelines contains more detailed information on the ACCC’s approach to assessing efficiencies: it will only consider efficiencies to be relevant “when there is clear and compelling information or evidence” that efficiencies directly impact competition in a market. The ACCC expects these efficiencies to be merger-specific and verifiable.

[1] The acquisition of a ‘nascent competitor’ has been a longstanding concern of competition regulators around the world, particularly in digital markets. For example, the ACCC previously expressed concerns over Google’s acquisition of Fitbit, raising concerns that it may have entrenched Google’s dominant position in the supply of data-dependent health services and ad tech services (with Google ultimately completing the acquisition before the ACCC had finalised its review). 

[2] Applications by Australia and New Zealand Banking Group Limited and Suncorp Group Limited [2024] ACompT 1 (available here).

If you need more information or further guidance on this topic, please contact Thomas Jones, Matthew Bovaird, Patrick Cordwell, or Dylan McGirr. 

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