Jacqueline Downes welcomes certain contemplated changes, including revised test for control
The government has responded well to numerous issues raised by the business and legal communities during the consultation process for proposed merger reforms, said Jacqueline Downes, Allens partner and practice leader of the firm’s competition, consumer, and regulatory team.
The Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 was introduced into the Australian Parliament on 10 October.
Downes welcomed the revised test for control, which will exempt acquisitions of less than 20% of publicly listed companies and which will align more closely with the control test in the Corporations Act 2001. She also approved of the government’s removal of uncertainty relating to market share thresholds and its introduction of an exemption for some property transactions.
She also welcomed the introduction of a waiver power, which will allow for some flexibility that was previously lacking, as well as the addition of the ability for the Australian Competition Tribunal to introduce new evidence if the parties have not had the opportunity to present it before the Australian Competition and Consumer Commission (ACCC). This addition promotes procedural fairness, she said.
“We will need to see how it is implemented in practice,” Downes said of the proposed merger reform.
Possible issues
Downes acknowledged that the planned changes will undoubtedly make the merger clearance process more challenging and will potentially introduce inefficiencies unnecessarily hampering business transactions.
Under the proposed legislation, the merger approval process is still very complex and still likely to capture many transactions, Downes said. The revised test for control, while welcome, will unnecessarily cover a large number of transactions, Downes added.
Apparently, the government has not moved much on the financial thresholds, according to the Treasurer’s statement, Downes noted. The government plans to require notification for all acquisitions of over 20% of a private company by corporations with more than $200m in revenue, Downes also noted.
“In our view, the complexity together with the potential volume of mergers captured raises significant concerns about the ability of the ACCC to review mergers promptly,” Downes commented.
Given that the transitional arrangements provide that voluntary notifications under the new regime will start in July next year, with a dual-track regime in place until the end of 2025, Downes urged companies to consider carefully their merger timelines to avoid needing to restart the process under the new regime.
