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The update reviews federal and state regulators and projects. Also included is our status report on current regulatory projects dealing with energy market transformation.
On 4 August 2017, Rod Sims the Chairman of the Australian Competition and Consumer Commission (ACCC) addressed the Law Council of Australia’s Competition and Consumer Workshop to shed some light on the ACCC’s current focus on cartel investigations and a new approach to information gathering in merger analysis.
On mergers …
On cartel enforcement …
Evidence in merger cases: expect “significant” document requests and examinations of senior executives
Mr Sims also addressed criticisms from the wider business community that the ACCC allows too many mergers resulting in problematically high levels of market concentration. Mr Sims stated in the last financial year:
Mr Sims acknowledged the ACCC’s unsuccessful track record in opposing contested mergers before the Australian Competition Tribunal and Federal Court. Mr Sims acknowledged that the ACCC’s approach in opposing mergers before the Tribunal and courts has been criticised for being ‘theoretical and lacking in commercial reality’ and that the ACCC has not been successful in opposing a litigated merger for more than 20 years, in contrast with the experiences of other international competition regulators which enjoy a much higher success rate in blocking contested mergers.
In response to this lack of success, Mr Sims indicated that the ACCC sought input and advice from other competition agencies, including a senior litigator from the US Department of Justice. Jeanne Pratt has also recently joined the ACCC, from the Canadian Competition Bureau, to head the ACCC mergers group for 12 months. It is clear that the ACCC considers that merger clearance processes in these and other jurisdictions (such as Europe) involve much more extensive information gathering by the regulator for complex mergers.
In light of the criticism and lack of success, and given its view that this may be the result of less comprehensive information gathering than other agencies, Mr Sims indicated that the ACCC will adopt a more wide ranging approach to gathering evidence in complex merger cases.
This would include:
What this means for merger parties
As noted by Mr Sims, approximately 90% of mergers notified to the ACCC are ‘pre-assessed’ without going to a full public review. Of the remaining 10% of mergers that are not pre-assessed, generally these may expect increased scrutiny and longer review time frames. This is already a trend that we have seen over the past few years, with fewer mergers being publicly reviewed but longer time frames for those that are (see chart). In recent years, we have also experienced longer pre-assessment time frames. With the new proposals, these trends look set to accelerate.
These changes are likely to have the effect of making clearance pathways outside of the ACCC look more attractive to merger parties. These alternatives include:
Gilbert + Tobin has extensive experience in merger litigation, including acting for two of the three parties who have successfully applied for authorisation in the Tribunal.
Cartel investigations – a pipeline of cartel matters and a specialist criminal cartel unit
Following the ACCC’s first successful criminal conviction resulting in a AU$25 million fine against Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) last week, Mr Sims drew attention to the ACCC’s recent investment in its specialist criminal cartel unit. Mr Sims stated that the ACCC has now developed a pipeline of cartel matters that have been referred to the Commonwealth Director of Public Prosecutions (CDPP) for assessment.
Since criminal sanctions for cartel conduct were introduced in 2010, the CDPP has only commenced two proceedings for alleged involvement in a cartel conduct. Having established a dedicated criminal cartel unit as well as recent indications of a growing pipeline of investigations, we expect that the CDPP will institute further criminal proceedings for cartel conduct in the near future.
Mr Sims also drew attention to the Federal Court’s judgment in NYK that made it clear that the penalty could have been much higher but for NYK’s early plea and past and future cooperation with the ACCC. Mr Sims stated that majority of the ACCC’s current cartel investigations involve an immunity applicant and/or cooperating parties. Mr Sims announced that the ACCC will conduct a review of its Immunity and Cooperation Policy with a focus on further incentives for parties that cooperate with the ACCC in cartel investigations.
While it is unclear how the ACCC may further incentivise its Immunity and Cooperation Policy, it appears as though the ACCC is aiming to build on its success in NYK by increasing the number of criminal cartel investigations it has on foot. The ACCC’s strategy will be to encouraging more corporate whistle-blowers to proactively identify their involvement in cartel conduct and cooperate with the ACCC in its investigations.
Mr Sims also took the opportunity to highlight recent developments in the law with respect to anti-competitive and cartel conduct. Specifically, Mr Sims drew attention to the ACCC’s success in: