Shedding light on the pre-assessment process
Since 2010, the ACCC has been conducting what it terms ‘pre-assessments’ of mergers.
Pre-assessments refer to an assessment of a merger ‘on the papers’, as distinct to a substantive investigation of the merger under the ACCC’s informal or formal review processes.
The ACCC will clear a merger via pre-assessment where it considers that the risk of competition issues arising is low.
In its most recent annual report, the ACCC advocated the benefits of pre-assessments, stating: “This pre-assessment process enables the ACCC to respond quickly where there are no significant concerns”.
Dealing with mergers promptly and efficiently is a primary concern for the ACCC in conducting merger assessments.
In a speech given in September this year, the Chairman of the ACCC Rod Sims stated “the length of time our reviews take, and the potential impact on the parties’ commercial timeframes, is something we are acutely aware of and we are taking a number of steps to address.”
The pre-assessment process appears to be one of these steps.
According to the ACCC, most pre-assessments take two or less weeks to complete. This is in contrast to the ACCC’s informal review process, which can take anywhere between four weeks to eight or more weeks to complete.
Pre-assessments also enable the ACCC to flush out non-contentious matters and focus attention on the more complex transactions, which may raise serious competition concerns or novel public interest issues.
Over the years, there has been a rise in the number of mergers being cleared by pre-assessment. In 2009-10, approximately 47% of matters examined by the ACCC were assessed as not requiring further review. This increased to 63% of matters in 2010-11 and 74% of matters in 2011-12.
But, despite their increasing use, there is little publicly available information about the process.
Pre-assessments are not placed on the ACCC’s mergers register and the ACCC’s Merger Review Process Guidelines published in 2006 and Merger Guidelines published in 2008, pre-date the implementation of the pre-assessment system.
As such, the public, businesses and their advisers are often in the dark about whether the ACCC has cleared a transaction by pre-assessment, as well as where the ACCC draws the line between a merger that is unlikely to raise competition concerns such that a pre-assessment is appropriate and when a merger requires more substantive review.
This appears to be in contrast with the ACCC’s goal of increasing knowledge and transparency of its merger review process.
However, Sims has stated that “the ACCC is looking to improve its [merger] processes” and there is talk that the ACCC will be updating its Merger Review Process Guidelines in the coming year, so perhaps we won’t be in the dark for much longer.
Watch this space.