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Trade Practices Amendment (Material Lessening of Competition—Richmond Amendment) Bill 2009

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2008-2009

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

SENATE

 

 

 

 

TRADE PRACTICES AMENDMENT                       

(MATERIAL LESSENING OF COMPETITION - RICHMOND AMENDMENT)

BILL 2009

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

(Circulated by authority of Senator N Xenophon)

 

 

 

 

 

 

 

 

 

 

 

 

 

TRADE PRACTICES AMENDMENT                       

(MATERIAL LESSENING OF COMPETITION - RICHMOND AMENDMENT)

BILL 2009

 

 

1.     Background

The purpose of this Bill is to amend the Trade Practices Act 1974 to strengthen Australia's anti-merger law and to address the issue of creeping acquisitions.

 

In the case of mergers, the provisions under this Bill will prevent corporations from directly or indirectly merging with or acquiring an asset which would result in material lessening of competition in the relevant market.

 

Currently, the test is whether the merger or acquisition would result in the "substantial" lessening of competition, which means it is set at too high a threshold and as a result a number of controversial mergers have recently been approved.

 

Rather, a "material" lessening of competition test would lower the threshold for determining whether a merger or acquisition is anti-competitive and would allow the merger or acquisition to be tested by reference to whether it has a pronounced or noticeably adverse affect on competition, rather than on whether the merged entity would be able to exercise substantial market power post-merger, as is currently the case.

 

The Bill also seeks to prevent creeping acquisitions from taking place. Currently, Section 50 of the Trade Practices Act can be circumvented by companies undertaking small scale acquisitions which individually don’t appear to substantially lessen competition, but which over time do result in a lessening of competition and the increased dominance of the merged entities.

 

Under this Bill, a corporation that already has a substantial share of a market must not directly or indirectly merge with or acquire shares or an asset which would have the effect of lessening competition in the market. This is to prevent corporations with substantial market share from gaining greater share, thereby lessening competition by acquiring smaller competitors or assets to the detriment of competition and consumers.

 

2.       Short Title

This clause is a formal provision and specifies the short title of Bill, once enacted, may be cited as the Trade Practices Amendment (Material Lessening of Competition - Richmond Amendment) Act 2009 .

 

3.       Commencement

This Act will commence on the day on which it receives Royal Assent.

 

4.       Schedule

Under this clause, each Act that is specified in a Schedule to this Act is amended or repealed as per the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

 

 

 

5.       Schedule 1 - Amendment of the Trade Practices Act 1974.

Section (1) repeals the current subsection and replaces it with a requirement that a corporation must not directly or indirectly acquire shares in the capital or assets which would have the effect or be likely to have the effect of materially lessening competition in a market.

 

This applies a lower threshold test to mergers and acquisitions such that evidence of a substantial lessening of competition is not required, with the new lower threshold only requiring proof of a material lessening of competition.

 

Section (2) addresses the issue of creeping acquisitions and states that a corporation that already has a substantial share of a market must not directly or indirectly merge with or acquire assets which would have the effect or be likely to have the effect of lessening competition in a market.

 

This is to limit corporations from making seemingly small acquisitions over a period of time, but where the end result is a lessening of competition in the market.