is Professor of Management, Information Economics with the Melbourne BusinessSchool. He is a highly experienced teacher, economic researcher and consultant to clients suchas United Energy, AAPT, the National Australia Bank and the Australian Competition andConsumer Commission. Joshua is also founder and director of CoRE Research, advising oninfrastructure development and regulation, as well as trade practices and competition policy.Email: email@example.com
Dealing with difficult mergers
Whether or not a proposed merger is difficult, i.e. detrimental tocompetition, determines how easily it will get through the ACCC.This article considers what makes mergers difficult and whenmight such mergers be judged not to be detrimental tocompetition?
A dramatic change has occurred in the means by which mergers and acquisitionsare assessed in Australia for competition issues. In 2005, the Dawson Committeerecommendations were implemented allowing merging parties to apply directly tothe Australia Competition Tribunal (ACT) for merger authorisation — effectivelyavoiding the Australian Competition and Consumer Commission (ACCC). Thesecases are now heard by a panel consisting of a Federal Court judge, a lawyer and an economist. While the ACCC continues to assist the Tribunal, itsregulatory power has been diminished.Prior to these reforms, the vast majority of mergers were handled informally bythe ACCC. In this situation, an acquirer (or merging parties) approached theACCC with details about the merger. If it appeared innocuous from a competitionperspective — usually because it involved at least one smaller firm in an industry— the ACCC often cleared the merger at that point. The clearance included acommitment not to oppose the merger in the courts.If the merger was more complex, the ACCC sometimes sought the views of other market participants: competitors, suppliers and, most importantly, customers. If these were favourable, the merger was cleared. If not, more negotiationsfollowed, with offers of undertakings (for example, to divest assets) and threats of litigation. It was at this point that the process grew more complicated andfrustrating for merger applicants.Certainly, of all the mergers about which the ACCC was notified each year, onlya handful reached this stage of difficulty and, of those, only two or three wereopposed by it (See Table 1). This suggests that the formal bypass arrangementsto the ACCC under the new regime seems somewhat heavy-handed.[needssome explanation here]