Important amendments to ACCC merger clearance regime

The Australian Government has passed important amendments to Australia's merger control regime.

While the core elements of the merger control regime remain unchanged, the amendments seek to reduce unnecessary regulatory burden and provide greater certainty for merger parties. The three key changes relate to:

• replacing the automatic voiding of certain non-notified acquisitions with a court-supervised voiding model, under which an acquisition is voided only on application by the ACCC to the Federal Court;
• refining the definition of "associate" to narrow the circumstances in which minority investments may trigger notification requirements; and
• providing a mechanism to extend the period during which an approved transaction can be put into effect.

Removal of automatic voiding of non-notifiable acquisitions

The amendments remove the automatic voiding of acquisitions that are required to be notified but are not.

Under the current regime, a notifiable acquisition that is completed without the required notification is automatically void. Automatic voiding applies regardless of whether the failure to notify was deliberate or inadvertent and can have widespread unintended consequences in relation to non-notified acquisitions.

The amending law replaces this automatic voiding mechanism with a court-supervised "voidable" model. Under the new law:

• a non-notified acquisition will continue to contravene the merger regime if implemented without notification;
• the ACCC is able to apply to the Federal Court for an order declaring the acquisition void;
• the Court must, on application by the ACCC, declare that the non-notified acquisition is void, and is taken to have always been void, unless the Court believes it is undesirable to make the order; and
• the Court also has power to make associated remedial orders, including divestiture orders and orders dealing with ownership records and title transfers.

In considering whether to make orders, the Federal Court must not have regard to whether an acquisition is likely to have the effect of substantially lessening competition or give rise to public benefits.

These changes apply from the day after royal assent and will not apply retrospectively to acquisitions that took place prior to these amendments.

Changes to definition of associates

The Australian Government has also amended the definition of control to address concerns that the previous law required notification in relation to acquisitions of minority interests, where minority shareholder protections or standard governance arrangements did not confer meaningful competitive influence over the target business.

The amending law introduces new provisions clarifying when a person, either alone or together with associates, is considered to control a corporation for the purposes of the merger notification exemption.

The proposed reforms also narrow the concept of "associate" by clarifying that a second entity will not be an associate of a first entity merely because the first and second entity have entered an agreement in respect of a third entity that contains certain classes of provisions including:

• minority shareholder protection rights;
• dividend policy agreements;
• certain arm's-length financing arrangements; and
• arm's-length shareholder agreements about governance processes.

These amendments are likely to significantly reduce the extent to which acquisitions of non-controlling minority interests are required to be notified under the merger control regime. This is particularly relevant for institutional and private equity investors, where ownership arrangements can potentially add complexity in waiver or notification processes.

Ability to apply for extension to determination period

Under the current regime, an approved acquisition becomes "stale" if it is not implemented within 12 months after ACCC approval. Once the approval becomes stale, parties must submit a fresh notification before completing the transaction, with the ACCC's guidance clearly stating that waivers will not be available to cure stale notifications.

The proposed amendments introduce a new administrative extension process. Merger parties will be able to request that the ACCC extend the implementation period by up to six months at a time, with no limit on the number of extensions that may be granted.

The ACCC has discretion to grant an extension. In determining whether to grant an extension, the ACCC must have regard to:

• whether there are reasonable reasons why the acquisition has not been put into effect;
• whether there have been material changes to the market since the initial determination was made; and
• whether it would be more appropriate for there to be another notification of the acquisition.