AUSTRALIA: An Introduction to Competition/Antitrust

The Australian Competition and Consumer Commission (ACCC) continues to be an active enforcer of the Competition and Consumer Act 2010 (Cth) (CCA) and a strong advocate for legislative reform, particularly in respect of Australia’s merger clearance process.

It is not surprising, given broad cost of living and inflation concerns, that the ACCC’s current enforcement priorities (published in March 2023) have a particular consumer focus and/or include a focus on pricing in key sectors of the economy. ACCC enforcement priorities include manipulative marketing in the digital economy, unfair contract terms, competition and consumer issues in relation to the pricing of essential services – with a focus on energy and telecommunications as well as competition and pricing issues in gas markets. The investigation of cartel conduct and other forms of anti-competitive conduct (including the misuse of market power) remain ongoing and enduring ACCC priorities.

Merger Review Developments 

Although the CCA prohibits mergers that will have the effect or likely effect of substantially lessening competition, competition law clearance in Australia is currently a voluntary process.

The principal form of merger clearance in Australia is informal clearance, which is an administrative legislated process. The less used legislated merger authorisation process differs from informal merger clearance in a number of aspects, including because it allows for the consideration of public benefits.

Compared with prior years, there was some decline in ACCC merger review activity in 2023. However, the ACCC considered a number of significant transactions and opposed clearance in the following instances. 

• In April 2023, the ACCC opposed the proposed acquisition of Alliance Aviation Services Ltd by Qantas Airways, citing competition law concerns in air transport services markets.

• In September 2023, the ACCC opposed the proposed acquisition by toll road operator Transurban Group to acquire a majority interest in Horizon Roads Pty Ltd. The ACCC concluded that the proposal would be likely to substantially lessen competition for future toll road concessions in Victoria.

• In December 2023, the ACCC opposed the proposed acquisition of Healius Limited by Australian Clinical Labs Limited. The ACCC concluded that the proposed acquisition would be likely to substantially lessen competition in Australian pathology markets.

Recent ACCC activity has also included the investigation a number of mergers where clearance was not sought. In considering Woolworths Group Limited’s acquisition of PETstock Pty Ltd, Australia’s second largest specialty pet retailer, the ACCC became aware of a number of prior PETstock acquisitions that were not notified to the ACCC. The ACCC’s clearance decision in December 2023 included undertakings requiring divestments relating to those prior transactions. In February 2024, the ACCC published a Statement of Issues in respect of realestate.com.au’s proposed acquisition of Dynamic Methods, which had not been notified. The ACCC stated this was “yet another example of a potentially concerning merger not being notified to the ACCC under the current informal voluntary system… [which] highlights the importance of reform in Australia’s merger laws”.

In the context of merger authorisation, two recent decisions are of note, as follows. 

• In August 2023, the ACCC refused merger authorisation for ANZ Banking Group to acquire Suncorp Group’s banking arm. The ACCC refused authorisation, concluding that it was not satisfied that the acquisition is not likely to substantially lessen competition in various banking markets. The parties sought review by the Australian Competition Tribunal, which reversed the decision of the ACCC and granted authorisation on 20 February 2024.

• In June 2023, the ACCC granted authorisation of the proposed merger of Linfox Armaguard Pty Ltd and Prosegur Australia Holdings Pty Ltd, subject to a court enforceable undertaking. The acquisition resulted in an effective merger to monopoly in cash transport management and processing services markets. The ACCC recognised that the cash-in-transit industry is in a structural decline and that without the proposed merger it was highly probable that either Armaguard or Prosegur would withdraw from the market, thereby causing material disruptions and public detriment.

Since 2020, the ACCC has called for the introduction of a mandatory suspensory clearance regime. In March 2023, the ACCC outlined its updated proposals for merger reform. The ACCC is advocating for the introduction of a regime that would include mandatory notifications with suspensory effect as well as call in powers for transactions below notification thresholds. The ACCC also proposes, in essence, a shift in the evidentiary burden such that notifiable transactions would cleared if the ACCC, or the Competition Tribunal on review, is satisfied that the transaction is not likely to substantially lessen competition. In addition, the ACCC has argued for changes to the relevant prohibition in order to more clearly equate mergers that entrench or enhance market power with a substantial lessening of competition.

The ACCC’s and other models for merger reform have recently been considered by the Treasury’s competition review taskforce. Ultimately, reforms will be dependent on the final report by the Treasury and the response of the Australian government. However, there appears to be considerable momentum for some change to the Australian process.

Cartels 

The CCA strictly prohibits cartel conduct, which continues to be a matter of ACCC focus. Parallel criminal and civil sanctions exist for making or giving effect to cartel provisions.

In 2023, there were a number of matters of interest, as folows. 

• In February 2023, Aussie Skips Recycling (along with its chief executive) pleaded guilty in the Federal Court to a criminal cartel offence. This followed guilty pleas in 2022 by another waste management company to related cartel conduct.

• In August 2023, BlueScope Steel was ordered to pay an AUD57.5 million penalty for attempting to fix prices for flat steel products supplied in Australia. The penalty decision followed a finding, in December 2022, that BlueScope had attempted to induce eight steel distributors in Australia and an overseas manufacturer to enter agreements to fix and/or raise the level of pricing for flat steel products. The penalty is the largest penalty to date imposed for cartel conduct in Australia. As the conduct related to the period prior to 10 November 2022, the new and substantially increased penalty regime did not apply. Under the new regime, the maximum penalty is now the greater of AUD50 million, three times the value of the benefit (where the benefit can be calculated), or 30% of the adjusted turnover of the body corporate during the breach turnover period (where the benefit cannot be calculated). It is reasonable to expect that this record penalty will be surpassed by new cartel penalties in the foreseeable future.

Digital Markets 

The ACCC continues to advocate for broader regulatory changes relating to digital market platforms as part of its ongoing Digital Platform Services Inquiry. Pursuant to this inquiry, the ACCC is publishing bi-annual interim reports, with the final report to be delivered in March 2025. The ACCC is advocating for the introduction of mandatory codes to apply to digital platform services.

The ACCC contemplates that the proposed codes will prohibit types of anti-competitive conduct that hinder the ability of rival firms to compete, so that:

• third-party services are treated at least as favourably as first party services;

• consumers should be able to switch between alternative digital platforms with improved transparency over prices and quality; and

• codes should address unfair and unreasonable terms faced by business users in dealing with digital platforms.

The ACCC also cites concerns regarding digital platform mergers as a reason for changes to the Australian merger clearance regime.

Vertical Arrangements and Considerations of Market Power

The ACCC’s enforcement priorities include investigating:

• allegations of anti-competitive conduct in the financial services sector (with a focus on payment services); and

• exclusive arrangements by firms with market power.

The full scope and outcome of the ACCC’s efforts in this regard are not yet apparent. Of particular note are the ongoing proceedings that the ACCC commenced against Mastercard, alleging misuse of market power and anti-competitive exclusive dealing. The ACCC alleges that Mastercard provided discounted rates for Mastercard credit card transactions where retailers committed to routing debit card transactions through Mastercard rather than alternative options. These proceedings are ongoing. Demonstrating the interplay between regulators, Mastercard (and Visa) has provided undertakings to the Reserve Bank of Australia, which effectively prohibits them from engaging in the conduct that is the subject of the ACCC proceedings.