The Australian Competition and Consumer Commission has been forced to take a tougher stance on accepting undertakings during mergers following examples of businesses acting in bad faith, ACCC chairman Graeme Samuel said today.
The Australian Competition and Consumer Commission has been forced to take a tougher stance on accepting undertakings during mergers following examples of businesses acting in bad faith, ACCC chairman Graeme Samuel said today.
"It is apparent that the incentive of some merger parties changes once an undertaking is accepted and the transaction is completed," he said.
"Before a merger is cleared, the priority of merger parties and their advisers is to get the deal done. Once the transaction in completed however, priorities shift and some parties view the undertaking commitments given to the ACCC as annoying constraints on their commercial strategies. Their priority becomes minimising the impact those undertakings have on their business.
"To deal with this problem the ACCC has had to considerably strengthen the elements that must be included in an undertaking before it is accepted.
"The ACCC has been raising concerns about this publicly for several years, but despite our best endeavours, we are still finding some in business and some of their advisors are gaming or wanting to challenge the undertakings that are given.
"This threatens the effectiveness of the entire undertakings process", he warned.
"If the gaming of the undertaking process continues, the ACCC will have to seriously look and whether undertakings are an effective solution to dealing with problematic takeovers, or whether we need to seriously consider removing them from our consideration."
He commented that the ACCC's informal merger clearance process has remained popular with merger parties, providing flexibility and the ability to be tailored to meet the needs of individual cases.
"This can largely be attributed to changes introduced by the ACCC in recent years to improve the flexibility, transparency and effectiveness of the process."
The ACCC had recently reviewed its merger guidelines to better reflect the changes to best-practice merger analysis that have developed, both here and overseas, since 1999.
"The revised guidelines are intended to explain to the business community and its advisors the process used by the ACCC to evaluate the competitive effects of mergers. The revised guidelines do not change how the ACCC carries out merger evaluation. Rather they state how we currently do this evaluation."
Mr Samuel said that the issue of creeping acquisitions was a "strong theme" in the recent grocery inquiry.
"Despite strong claims from a number of quarters, the ACCC was not presented with evidence that creeping acquisitions were a significant issue in that particular market.
"However, we did express our support for the introduction of more general creeping acquisitions amendments to the Trade Practices Act to deal with the potential shortcomings of section 50.
"As we found with the grocery inquiry, creeping acquisitions has become a tag that is applied to certain transactions that are not necessarily representative of the matter being dealt with."
