In the dynamic world of business, change is the only constant. This adage holds particularly true for Australia, where a significant transformation is underway in the regulation of corporate mergers and acquisitions (M&A). The Australian Government recently announced comprehensive reforms to the country’s M&A rules, which are set to take effect from January 2026. These changes, aimed at bolstering competition and productivity, are set to fundamentally alter the way medium to large businesses operate.
The ACCC’s New Role
Central to these changes is the Australian Competition and Consumer Commission (ACCC). The ACCC is poised to assume a more significant role, transforming into the first instance administrative decision-maker for many mergers. This implies that companies will now have to convince the ACCC that their proposed transaction will not substantially lessen competition in the corporate landscape before they can proceed with their deals. This is a marked departure from the current voluntary system where companies were not legally obligated to notify the ACCC of a planned merger or acquisition.
The specific financial thresholds for mandatory notification under the proposed changes to Australia’s merger laws have been revealed. Transactions involving companies with a turnover of AUD$400 million or a transaction value of more than AUD$35 million would trigger a mandatory ACCC merger filing. These thresholds are subject to further consultation and may change before the new laws take effect. It’s also important to note that all mergers undertaken by the parties to the merger within the last three years will be aggregated for the purposes of assessing whether a merger meets the notification thresholds.
Legal Experts’ Viewpoints
Various legal experts have offered their insights on these changes, noting that they will result in substantial changes to the Australian merger landscape. In a piece by Corrs Chambers Wesgarth prior to the formulation of the new rules, their legal team noted that the ACCC has lost every merger challenge it had brought in the past twenty years, with the ACCC blaming the existing laws for their deficiencies. It is therefore no surprise that the ACCC was quick off the mark with a statement supporting the new regime.
The new laws will introduce a mandatory notification requirement for merger deals above certain thresholds. This means that more potential acquisitions will be subject to notification obligations and suspension, even where competition concerns are limited or absent. This has the potential to alter the share prices and preparedness of target companies whilst the ACCC decides whether to let the deal out of the gates.
One concern is that transactions that raise no competition concerns may now need to be notified to the ACCC simply due to meeting the financial thresholds. This could potentially slow down the M&A process for businesses.
Additionally, merger parties will be required to submit greater volumes of information to the ACCC upfront, which could increase the administrative burden of completing a transaction.
Unintended Consequences
Legal experts have raised several concerns about potential unintended consequences of the new merger laws in Australia:
- Lower Standard for Opposition: The change to the legal meaning of “likely” would set a very low standard for opposing a transaction. This could potentially lead to more transactions being opposed, even if they are not necessarily anti-competitive.
- Rejection of Court Precedents: The new rules could reject decades of Australian Court precedents that are based on sound legal and economic principles. This could lead to uncertainty and inconsistency in the application of the merger laws.
- Inconsistency with International Regimes: The new rules could make Australia’s merger laws inconsistent with comparable international regimes. For example, other regimes require agencies to show anti-competitive effects on the balance of probabilities standard (e.g., the UK) or higher (e.g., the EU). This could potentially make it more difficult for international companies to navigate Australia’s merger laws.
- Increased Costs for Businesses: The proposed changes could increase costs for businesses. For instance, the ACCC’s opponents argue that the changes are unnecessary and will cost business time and money. They believe that the ACCC wants to make its life easier by lowering thresholds for proving that a merger is anti-competitive.
- Potential Overkill: Some experts argue that the proposed changes are an overkill. They point out that the existing informal clearance mechanism sees around 90% of applications cleared by the ACCC, and relatively few cases actually go to court. Therefore, they believe that the proposed changes might be excessive.
The chief executive of the Business Council of Australia, Bran Black, said that the intended changes balance economic and monitoring needs, but care should be taken to avoid “unintended consequences” and unnecessary “red tape”. The Law Council, led by its Business Law Section, is concerned that taken as a package, the ACCC’s proposals are unbalanced and would have a chilling effect on investment in Australia and increase the regulatory burden and transaction costs for deals that are productivity-enhancing.
Impact on Different Sized Companies
The impact of these changes will be felt across companies of all sizes. For larger corporations, the new laws could mean more scrutiny and potentially higher costs. The government has indicated that cost recovery fees will be introduced, whereby higher-risk mergers face higher fees. Treasury expects fees to be between $50,000 to $100,000 for most mergers.
For smaller businesses, the impact could be less pronounced. Small businesses will be exempt from these fees, potentially making it easier for them to engage in M&A activity. However, they will still need to navigate the new regulatory landscape and ensure their activities do not lessen competition.
Conclusion
The proposed changes to Australia’s M&A rules represent a significant shift in the national business landscape. While they aim to foster a more competitive economy, businesses (and the ACCC) will need to adapt to this new environment.
As we move towards 2026, it will be interesting to see how these changes play out and what impact they will have on the Australian competition landscape. Bureaucratic red tape, delays or unnecessary opposition to transactions by an overzealous ACCC has the potential to grind M&A to a halt.
As always, in the world of business, the only constant is change…
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Photo by Javier Allegue Barros
