Out of the blue, the Government today announced it proposed to change the definition of market for purposes of merger review. The current definition of market refers to a ‘substantial market for goods or services’ and the proposal involves removal of the word ‘substantial’.
In his press release, competition minister Craig Emerson claims that this change is intended to fulfill the Government’s election promise to deal with ‘creeping acquisitions’. It is tough to see how it will do this. Former chair of the ACCC’s Merger Review Committee, Prof Stephen King has made this observation in relation to the proposed change:
Markets are based on substitution. If properly defined, an economic market for merger analysis captures the relevant level of competition. A market might be nationwide or even international. Or it may simply cover a single town or even part of a town … The key issues are – what is the nature of competition and what will the merger or acquisition do to this competition. If the merger substantially lessens competition in a properly defined economic market then it will harm consumers and the economy. The merger should be opposed. Requiring that the market is also ‘substantial’ is redundant. So if Durie’s speculation is correct, the government will be getting rid of a redundant but confusing adjective!
It is also unclear how this proposal fits with other proposals directed toward creeping acquisitions, including the Government’s own Creeping Acquisition Discussion Paper No 2 (for which submissions closed on 10 July 2009 and the proposed ‘Richmond Amendment‘, currently under review in the Senate. The press release is light on detail in this respect.
The Conduct Code Agreement 1995 now requires the Government to consult with state and territory governments in relation to the proposed amendments (full details of which are not yet available) before their implementation. Hopefully more details will emerge in the coming weeks.
The papers
News of the proposal was reported in the following papers this morning:
- David Crowe, ‘ACCC gets tough on creeping giants’ Australian Fin Review, p 5.
- John Durie, ‘Competition Minister takes aim at creep for control’, The Australian
- John Durie, ‘Craig Emerson plans changes to the law to stop creeping takeovers’, The Australian
Some notes on this item: it claims that ‘markets such as the US and the EC rely more on turnover tests than market share in determining whether a deal should be stopped.’ Actually, no they don’t. The US and EU (we’re not allowed to call it the European Community anymore, post Lisbon Treaty) rely on turnover tests to determine whether parties MUST notify their mergers to relevant authorities; they impose a mandatory pre-merger notification obligation on mergers meeting certain threshold and jurisdictional tests. Turnover itself is not part of the competition assessment in any of those jurisdictions. In addition, the change to notification thresholds in the US from approx $65m to $63m (referred to in the article as evidence of the US ‘widening its net’) reflects an annual adjustment designed to account for changing levels of gross national product – it is designed to keep the ‘net’ steady, rather than to increase or reduce it.
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Competition Law 