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BUSINESS MERGERS AND ACQUISITIONS
The Market Conduct Rules prohibit the acquisition of assets of a business or shares if the acquisition would result in a substantially lessening of competition in a market. The prohibition relates to the structure of the market rather than to behavior in that market.
It is prohibited by law because the acquisition of one competitor by another can have just as much serious anti-competitive consequences as arrangements that substantially lessen competition. Anti-competitive acquisitions are therefore prohibited.
Acquiring shares or assets of other business that would result substantially lessening of competition in a market without the approval of the ICCC is illegal.
The ICCC Act allows the ICCC to formally approve business acquisition in specific circumstances. The ICCC can grant a clearance (s.81) if it is satisfied that the proposed acquisition would not result in a substantially lessen competition. Where clearance is sought, the ICCC only assesses the competition effects of the proposed acquisition.
The ICCC can also grant an authorisation (s.82) for a business acquisition that would result in a substantial lessening of competition, if it can be demonstrated to the satisfaction of the ICCC that there would be positive public benefits which would outweigh the lessening of competition.
Authorisation of business acquisition is a two staged process. The ICCC is first required to assess the competition effect of the proposed acquisition in the market, to determine whether the proposed acquisition would substantially lessening competition in a market. If the Commission is satisfied that there would not be such an adverse competitive effect, the Commission must give a clearance for the proposed acquisition. If the Commission is not so satisfied, it must then determine whether the acquisition will result, or will be likely to result, in such a benefit to the public that it should be permitted.
A formal approval by the ICCC would provide legal certainly to parties to an acquisition to proceed with their proposed acquisition without risking a contravention of the ICCC Act.
Businesses are encouraged to approach the ICCC for guidance, on an informal basis, as soon as there is a real likelihood that a proposed acquisition may proceed, and this should be done well before the completion of an acquisition.