When I took on the competition portfolio for Labor, a friend issued me a challenge: how many Australian industries can you name that are not dominated by a few big firms?
It’s a tough ask, and the problem has only gotten worse. The last couple of decades has seen a rise in market concentrated. There’s been an increase in price markups – the gap between firms’ costs and what they charge consumers. The lousy productivity growth of the 2010s is likely a key reason why real wage growth was so sluggish under the former federal government.
So what can we do about it? One of the key pillars of competition policy is merger law. It acts as the ‘preventive medicine’ of competition, analysing whether mergers will help or harm the economy.
Most mergers don’t raise competition concerns. Often, they are a healthy way for firms to achieve economies of scale and scope, and access new resources, technology and expertise. But they can cause serious economic harm when firms are focused on squeezing out competitors to capture a larger percentage of the market. The small number of proposed mergers that raise competition concerns warrant close scrutiny.
For business, a less competitive market can increase the cost of doing business, and reduce the incentives and opportunities to invest, grow and innovate. For consumers, a less competitive market leads to higher prices, less choice, and lower wage growth.
The strength and effectiveness of our merger law says a lot about the type of competitive industry structure we want in our economy.
That’s why Treasurer Jim Chalmers and I last year set up a Competition Taskforce, and made merger reform its top priority. Our guiding principle is that any change must deliver benefits to the economy and to consumers while providing certainty to businesses.
Consulting over summer 2023–24, the stakeholder feedback was clear: Australia’s ‘ad hoc’ merger process is unfit for a modern economy and we lag best practice in other countries. Australia is out of step with most of our international peers, being one of only 3 OECD jurisdictions with a voluntary merger notification system.
Businesses told the Competition Taskforce that uncontentious mergers were subject to frustrating delays, uncertainty, and added costs. Some in the business community opposed changing the Australian Competition and Consumer Commission’s test to ‘reverse the onus of proof’. We heard that feedback, and the government is not reversing the onus of proof in merger reviews.
On the other hand, the Australian Competition and Consumer Commission was telling us about concerns with the approach to merger control in Australia. The Australian Competition and Consumer Commission was dealing with inadequate merger notifications, insufficient information, and a reactive, adversarial approach from some businesses, with limited capacity to present economic evidence in court.
And for the wider community, engaging with the Australian Competition and Consumer Commission’s merger reviews is often difficult.
In response, Treasurer Chalmers and I announced the most significant reforms to merger settings in almost 50 years.
The proposed reforms will make Australia’s merger approval system faster, stronger, simpler, targeted and more transparent.
Where the Australian Competition and Consumer Commission considers that a merger poses no threat to competition – which is most mergers – approvals will be provided within 30 working days.
We are legislating a mandatory notification system and we are empowering the Australian Competition and Consumer Commission as the single decision maker on all mergers that meet the notification thresholds.
Mergers above monetary thresholds or market concentration thresholds will need to be notified to the Australian Competition and Consumer Commission to be approved before proceeding. We will set the thresholds based on international practice and through consultation.
We are reducing 3 merger review streams to a single, streamlined path to approval that removes duplication and standardises notification requirements for all mergers.
Mergers that create, strengthen or entrench substantial market power will be identified and stopped while those consistent with our national economic interest will be fast tracked.
Finally, the merger system will be more transparent, by ensuring the community – consumers, businesses and the public – has better visibility of merger activity.
There will be a public register of all mergers and acquisitions notified to the Australian Competition and Consumer Commission to promote transparency and accountability.
Reviews of the Australian Competition and Consumer Commission’s decisions will be the responsibility of the Australian Competition Tribunal, made up of a Federal Court judge, an economist and a business leader.
These changes – some of which have been debated for decades – will make it easier for the majority of mergers to be approved quickly, so the Australian Competition and Consumer Commission can focus on the minority that give rise to competition concerns.
Modernising Australia’s merger laws will be good for business, good for consumers, and good for workers. It will boost productivity, and make life fairer for small business. More competition will deliver a fairer society, and a stronger economy.