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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TRADE PRACTICES AMENDMENT
(MATERIAL LESSENING OF COMPETITION - RICHMOND AMENDMENT)
BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by authority of Senator N Xenophon)
TRADE PRACTICES AMENDMENT
(MATERIAL LESSENING OF COMPETITION - RICHMOND AMENDMENT)
BILL 2009
1. Background
The purpose of this Bill is to amend the Trade Practices Act 1974 to
strengthen Australia's anti-merger law and to address the issue of
creeping acquisitions.
In the case of mergers, the provisions under this Bill will prevent
corporations from directly or indirectly merging with or acquiring an
asset which would result in material lessening of competition in the
relevant market.
Currently, the test is whether the merger or acquisition would result
in the "substantial" lessening of competition, which means it is set
at too high a threshold and as a result a number of controversial
mergers have recently been approved.
Rather, a "material" lessening of competition test would lower the
threshold for determining whether a merger or acquisition is anti-
competitive and would allow the merger or acquisition to be tested by
reference to whether it has a pronounced or noticeably adverse affect
on competition, rather than on whether the merged entity would be able
to exercise substantial market power post-merger, as is currently the
case.
The Bill also seeks to prevent creeping acquisitions from taking
place. Currently, Section 50 of the Trade Practices Act can be
circumvented by companies undertaking small scale acquisitions which
individually don't appear to substantially lessen competition, but
which over time do result in a lessening of competition and the
increased dominance of the merged entities.
Under this Bill, a corporation that already has a substantial share of
a market must not directly or indirectly merge with or acquire shares
or an asset which would have the effect of lessening competition in
the market. This is to prevent corporations with substantial market
share from gaining greater share, thereby lessening competition by
acquiring smaller competitors or assets to the detriment of
competition and consumers.
2. Short Title
This clause is a formal provision and specifies the short title of
Bill, once enacted, may be cited as the Trade Practices Amendment
(Material Lessening of Competition - Richmond Amendment) Act 2009.
3. Commencement
This Act will commence on the day on which it receives Royal Assent.
4. Schedule
Under this clause, each Act that is specified in a Schedule to this
Act is amended or repealed as per the Schedule concerned, and any
other item in a Schedule to this Act has effect according to its
terms.
5. Schedule 1 - Amendment of the Trade Practices Act 1974.
Section (1) repeals the current subsection and replaces it with a
requirement that a corporation must not directly or indirectly acquire
shares in the capital or assets which would have the effect or be
likely to have the effect of materially lessening competition in a
market.
This applies a lower threshold test to mergers and acquisitions such
that evidence of a substantial lessening of competition is not
required, with the new lower threshold only requiring proof of a
material lessening of competition.
Section (2) addresses the issue of creeping acquisitions and states
that a corporation that already has a substantial share of a market
must not directly or indirectly merge with or acquire assets which
would have the effect or be likely to have the effect of lessening
competition in a market.
This is to limit corporations from making seemingly small acquisitions
over a period of time, but where the end result is a lessening of
competition in the market.