A rise in market concentration in Australian business over recent years has “noticeably weakened” the intensity of competition across a number of industry sectors, including retail, according to Australian Competition and Consumer Commission chair Gina Cass-Gottlieb.
In a submission to a Treasury Competition Review into the functionality of Australian merger laws, she cited the recent acquisition by Woolworths of the Petstock business as a case in which the laws had failed consumers – not the deal itself, but earlier mergers by the target business uncovered during the commission’s considerations.
In a submission to the Competition Taskforce’s Merger Reform Consultation Paper, Cass-Gottlieb said data from the taskforce confirmed the commission was not being told of many mergers taking place – including by Australia’s biggest corporations. This was happening at the same time as larger firms were increasing their merger activity. Of the estimated 1000 to 1500 mergers of Australian businesses occurring every year – about half of which involved the largest 1 per cent of the nation’s companies – only about 330 are notified to the ACCC under the existing voluntary merger regime.
“This means we do not have the chance to consider how they may harm competition and consumers. It is important to note that the most significant increases in merger activity are occurring in sectors like manufacturing, retail, professional services, and health and social services, which are markets that directly impact consumers as they go about their lives,” she explained
“For example, we recently found while investigating a separate transaction that Petstock, a speciality pet product and services retailer, had completed a large number of concerning acquisitions in the pet industry that were not notified to the ACCC despite raising significant competition concerns. This matter was ultimately resolved with Petstock committing to sell a significant number of stores,” Cass-Gottlieb said.
“This is particularly concerning given an ongoing and significant increase in market concentration in Australia’s economy over the last decade.”
Cass-Gottlieb said reform of laws governing mergers and acquisitions was “urgently needed” to bring Australia in line with other developed economies and to ensure the merger laws are effective in preventing anti-competitive transactions.
She said that Australian consumers, farmers, and small businesses need to have confidence that potentially anti-competitive acquisitions will be scrutinised and if necessary prevented.
“Without effective merger control, we are all likely to face higher prices, lower quality, less innovation, less choice and lower productivity across the economy.”
Reform package
The ACCC has drafted a package of reforms it believes reflects features of merger regimes in other major economies, including mandatory notification of mergers above certain thresholds and a requirement to not complete the transaction until approval is granted.
To protect the interests of businesses engaging in “non-contentious” mergers, a 20-day fast-track process would offer exemption from the requirement to lodge a formal notification. “This would allow the vast majority of mergers to be assessed expeditiously,” the ACCC said.
Also included in the commission’s recommendations is a right of review to the Australian Competition Tribunal.
Creeping acquisitions
Cass-Gottlieb said dealing with serial or ‘creeping’ acquisitions’ has been a long-standing challenge for the ACCC, given the contention that – taken independently – separate acquisitions may not trigger current legal prohibitions under existing merger laws. However together – and over time – they can result in serious harm to competition, she said.
“The ACCC’s strong view is that the competitiveness of Australian markets is best preserved by moving to a regime where, for the most significant mergers, the merger parties must make their case that their proposed transaction should be cleared. They should be required to produce evidence that satisfies the ACCC that there will be no likely substantial lessening of competition,” Cass-Gottlieb said.
The review is being run by The Treasury with further information available here. The ACCC’s full submission can be viewed on the commission’s website.
