'Too permissive' merger rules eyed for reform

Companies could be subject to tougher anti-competitive merger laws under possible reforms floated by the federal government. 

Australia's consumer watchdog has been pushing for stronger rules so it can prevent companies from joining forces if there's a risk firms will then gain too much market power.

Excessive market concentration can lead to higher prices for consumers and weigh on productivity, the Australian Competition and Consumer Commission says.

Treasurer Jim Chalmers and Assistant Minister for Competition Andrew Leigh are also wary merger rules are "too permissive" and are "allowing some mergers that don’t deliver benefits to consumers, workers and the wider economy".  

Yet the Treasury consultation paper into possible reforms released on Monday nodded to the benefits of mergers, with many of these deals allowing firms to achieve economies of scale and diversify risk. 

"Ideally, merger control regimes would target those mergers that are anti-competitive and allow mergers that are pro-competitive or benign to proceed," the Treasury paper said.

Several possible pathways for reform were fleshed out in the paper, including the ACCC's preferred tweaks.

The consumer watchdog wants mandatory notification and approval of upcoming mergers, with some firms thought to be pushing the boundaries of the voluntary set up and offering up incomplete, incorrect and late information. 

The ACCC also wants the test of an anti-competitive merger to be bolstered so it can prevent the likes of "creeping acquisitions", which is where a company makes multiple smaller acquisitions that are problematic in concert.

Several other models for notifying mergers, test whether a merger is likely to substantially lessen competition, and the body responsible for making decisions on deals were outlined in the paper.

Some ideas were borrowed from places such as the United States, Canada, the United Kingdom and New Zealand, and not all proposed options were as stringent as what the ACCC has proposed.

For example, on notification, the government has outlined a mandatory lodgement option where instead of the ACCC making the call, the watchdog would need to prove to the Federal Court that the merger would likely be anti-competitive.

Dr Chalmers said many countries were reviewing their merger rules to reflect concerns around highly concentrated industries, particularly in the digital sphere.

"Academic research has found many top firms are growing their market share, and businesses at the top of their industries are often remaining there for longer," he said. 

"Other research suggests markups have risen in some sectors while new entrant competition has fallen."

The arrival of new firms has typically led to lower prices for mobile phone plans, home loan interest rates, and petrol, he said. 

"There are concerns that increasingly these kinds of disruptive firms are being acquired by larger incumbent businesses in a way that harms competition."

License this article

What is AAPNews?

For the first time, Australian Associated Press is delivering news straight to the consumer.

No ads. No spin. News straight-up.

Not only do you get to enjoy high-quality news delivered straight to your desktop or device, you do so in the knowledge you are supporting media diversity in Australia.

AAP Is Australia’s only independent newswire service, free from political and commercial influence, producing fact-based public interest journalism across a range of topics including politics, courts, sport, finance and entertainment.

What is AAPNews?
The Morning Wire

Wake up to AAPNews’ morning news bulletin delivered straight to your inbox or mobile device, bringing you up to speed with all that has happened overnight at home and abroad, as well as setting you up what the day has in store.

AAPNews Morning Wire
AAPNews Breaking News
Breaking News

Be the first to know when major breaking news happens.

Notifications will be sent to your device whenever a big story breaks, ensuring you are never in the dark when the talking points happen.

Focused Content

Enjoy the best of AAP’s specialised Topics in Focus. AAP has reporters dedicated to bringing you hard news and feature content across a range of specialised topics including Environment, Agriculture, Future Economies, Arts and Refugee Issues.

AAPNews Focussed Content
Subscription Plans

Choose the plan that best fits your needs. AAPNews offers two basic subscriptions, all billed monthly.

Once you sign up, you will have seven days to test out the service before being billed.

AAPNews Full Access Plan
Full Access
  • Enjoy all that AAPNews has to offer
  • Access to breaking news notifications and bulletins
  • Includes access to all AAPNews’ specialised topics
Join Now
AAPNews Student Access Plan
Student Access
  • Gain access via a verified student email account
  • Enjoy all the benefits of the ‘Full Access’ plan at a reduced rate
  • Subscription renews each month
Join Now
AAPNews Annual Access Plan
Annual Access
  • All the benefits of the 'Full Access' subscription at a discounted rate
  • Subscription automatically renews after 12 months
Join Now

AAPNews also offers enterprise deals for businesses so you can provide an AAPNews account for your team, organisation or customers. Click here to contact AAP to sign-up your business today.

Download the app
Download AAPNews on the App StoreDownload AAPNews on the Google Play Store