ACCC seeks more control over mergers and acquisitions amid competition concerns

• The ACCC highlights mergers and acquisitions, big tech power and court requirements as some of the biggest challenges faced by Australian economic competition
• Chair Rod Sims says the competition watchog will seek more control over mergers and acquisitions to prevent a substantial lessening of competition in Australia
• This includes amending a requirement by courts for the ACCC to “prove the future” when it comes to Australian mergers and acquisitions
• The ACCC also flagged concerns around the power big tech companies have over content, competition and communications
• The watchdog says it will consider the need for sector-specific regulation as part of its five-year digital platform services inquiry

Australia’s competition watchdog has today highlighted mergers and acquisitions, big tech power, and court requirements as some of the biggest challenges faced by Australian economic competition.

The comments were made by Australian Competition and Consumer Commission (ACCC) Chair Rod Sims at the 2021 Annual Competition Law and Economics Workshop, which focussed on competition law and policy in Australia.

In his address, Mr Sims flagged the importance of having the “right regulatory settings” for preventing a substantial lessening of competition in Australia.

The talk of competition policy reform picked up steam back in August when the ACCC first proposed new laws that would give it more control over mergers and acquisitions in Australia.

“Merger control is critical to protecting and promoting competition. It is the gatekeeper, protecting us from the negative effects of increases in concentration,” Mr Sims said.

“If we are serious about protecting competition in this country, we must ensure our merger control regime works as effectively as possible, and that it is consistent with international best practice.”

A lack of stopping power

The ACCC has historically had a hard time blocking key mergers it thought would lessen competition in Australia.

These include energy giant AGL’s purchase of Macquarie Generation back in 2014 and the $15 billion TPG-Vodafone merger in 2020.

In fact, just this week, the ACCC watchdog said it was seeking an urgent injunction to stop Virtus Health’s (VRT) proposed $45 million buyout of Adora Fertility from Healius (HLS).

The ACCC launched a public review of the proposed transaction in September, but the companies made the call to barge forward with the transaction this week despite the fact that the ACCC review is still in its early stages.

Mr Sims said the ACCC was an “outlier” compared to other international regulatory bodies in terms of its ability to control mergers. As such, the watchdog is seeking greater control over Australian mergers and acquisitions.

The issue, he said, boiled down to Australia’s merger test current requiring the ACCC to “prove the future” in competition cases.

Essentially, courts often require the ACCC to prove the likely future state of competition post-merger to the civil standard of proof.

This means the watchdog must show evidence of what might happen decades in the future.

“The ACCC’s view is that the assessment of substantial lessening of competition should focus on the disruption to the competitive process caused by the alleged anti-competitive conduct (or merger), rather than requiring evidence to establish future events which might occur without the conduct or merger,” Mr Sims said.

The big tech battle

On top of the call for fresh merger and acquisition policies, the ACCC once again raised concerns around the power big tech companies have over content, competition, and communication.

The bulk of the ACCC’s concerns stems from the ability of companies such as Facebook, Google and Apple to participate alongside competitors on the platforms they control.

“We have found that many of these firms are vertically integrated and there is evidence of considerable anti-competitive self-preferencing where firms favour their own interests over downstream rivals in a number of different ways depending on the market,” Mr Sims said.

Apple, for example, can prioritise marketing for its own apps over competitors’ and sell devices with these apps pre-installed. Facebook can use algorithms to favour first-party services. Google can keep the data it collects hidden from rivals to benefit its own services over its competitors.

“Around the world, there is growing recognition among relevant authorities that existing anti-trust laws have not held up well to the challenges posed by digital markets,” Mr Sims said.

The Australian Government has already begun to address these issues through policies such as the News Media Bargaining Code, but Mr Sims has floated the idea of introducing ex-ante regulation for tech giants.

The ACCC said it would consider the need for sector-specific regulation as part of its five-year digital platform services inquiry.