The Dawson report and changes at the top of the accc are remodelling the regulatory landscape. From CFO in August 2003.
Just as you get used to one umpire, they replace him and change the rules of the game. So it is with Professor Allan Fels, the outgoing chairman of the Australian Competition & Consumer Commission (ACCC), who has been replaced – temporarily, at least – by Graeme Samuel. So it was with the publication in April of the Dawson Committee’s review of the Trade Practices Act.
Anyone involved with mergers and acquisition activity has a lot to absorb with these two changes and the phones of competition lawyers are running hot. To exacerbate matters the Government now has to consult the states before any of Dawson’s changes will be brought in. And the initial one-year limit to Samuel’s appointment hardly helps. This time next year we could be welcoming yet another umpire onto the pitch and a new interpretation of the rules, as revised by Dawson.
Certainly the big end of town is relieved that Fels is stepping down. What is yet to emerge is whether they will be pleased by Samuel’s regime.
Andrew Christopher, partner, Baker & McKenzie, says the ACCC is going to come under a bit more objective scrutiny than it has in the past thanks to the Dawson review. On Samuel his measured comment is: “The business community has seen the chairman operating as a law unto himself. Someone with a different approach is likely to bring a different perspective.”
Tony O’Malley, practice team leader competition at Mallesons Stephen Jaques, feels that sometimes Fels was a little over zealous. He says: “No one is quite sure what it will be like having another chairman. I think there is a particular culture that has developed with Allan [Fels] as the chair. Quite an aggressive culture, certainly aggressive in terms of enforcement activity.”
The main difference he expects under Samuel is that less of the ACCC’s business will be played out in the media.
For all the big end of town’s huffing and puffing over the regulator the Dawson review produced nothing unexpected. It also left untouched the test – set out in sections 50 and 50a of the Trade Practices Act – as to whether a merger would “substantially” lessen competition in the market or be in the interests of the public.
Christopher says the recommendations were the predicted response reflecting the majority of views.
“Certainly in some industries – transport, financial services, utilities energy, aviation – the ACCC had adopted a fairly conservative posture,” he says. His other concern was “the process itself of merger adjudication was overly long, cumbersome and expensive”.
Malleson’s O’Malley says that investment banks are coming to lawyers early in a deal because it is critical early on to see whether a deal contravenes the Trade Practices Act.
He says that the current informal clearance process works well for 95 per cent of mergers, something Dawson noted. O’Malley: “But for the 5 per cent of mergers that I would call complex and contested it does not work well at all.”
Under the current regime the ACCC won’t give detailed reasons why it won’t allow a merger, it can take too long to process a merger and ACCC informal clearance doesn’t stop a third party, such as a disgruntled competitor, from challenging a merger.
One of the keys to improving the process within the ACCC is to make it more transparent. Among the checks and balances suggested by Dawson are:
* The ACCC should provide reasons for its decisions in the informal clearance process when it is asked to and where it rejects a merger or accepts undertakings. O’Malley says: “Really all that is doing is bringing Australia into line with what already happens in every other major industrial country.
“The benefit of it is that over time when you get a series of decisions – as in Europe and Britain – you can build up a body of precedent knowledge.”
* A voluntary parallel formal clearance process. It suggests that the ACCC is obliged to reach a decision within 40 days. If it doesn’t make a decision within 40 days it is deemed a refusal.
* The applicant can seek review then with Australian Competition Tribunal (ACT).
O’Malley says there has been great success with a similar formal process in New Zealand. A decision must be made within three months. The ACT has three members: a High Court Judge, an economist and a business person who are, ideally, free from political interference. The current members’ appointments expired in April 2003.