Merger laws could stifle business growth

Written on the 5 March 2010

New merger laws to be examined via the introduction of the Trade Practices Amendment could result in significant changes in the way that competition aspects of mergers are assessed.

The Trade Practices Act will be amended to ban any acquisition or merger that could have a noticeably negative affect on competition in a market.

According to Brett Bolton, a specialist in competition and trade practices law at HopgoodGanim Lawyers, this could result in a significant reduction in the number of mergers and acquisitions approved by the Australian Competition and Consumer Commission.

“The rationale for the Bill is that the current laws are too lenient, meaning that a number of controversial mergers have been approved in recent times. Currently, around 97 per cent of mergers are approved,” says Bolton.

The amendments are designed to protect small businesses and consumers from large corporations that try to constantly increase their market share, creating highly concentrated markets and stifling competition.

But Bolton says the Bill could hamper the ability of Australian companies to grow and compete in the international marketplace.

Opponents of the Bill argue that the current merger laws have enabled Australian firms to grow to a size where they can effectively compete with larger overseas corporations, and that any change to these laws will jeopardise this growth.

“It will be interesting to see how the amendments affect mergers and acquisitions, and what this will mean for the future of such a vital component of Australia’s economic efficiency,” says Bolton.

The Bill also proposes amendments that would stop corporations with substantial market share from buying shares or assets.

“These changes are designed to address a loophole in the current law that allows companies, particularly the large supermarket chains, to make a series of small acquisitions, which can have a significant cumulative effect,” says Bolton.

The Bill is currently under review by the Senate Economics Legislation Committee, which is due to provide its report on March 18.


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