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, commission chairman Graeme Samuel said last week.
"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 is 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.
"If the gaming of the undertaking process continues, the ACCC will have to seriously look at whether undertakings are an effective solution to dealing with problematic takeovers, or whether we need to seriously consider removing them from our consideration."
Mr Samuel said 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.
The ACCC has recently reviewed its merger guidelines to reflect practices that have developed in Australia and overseas.
"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 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," he said.
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