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News & Trends - Pharmaceuticals

New laws proposed for mergers and acquisitions

Health Industry Hub | April 11, 2024 |

The federal government is proposing new laws that will require major merger and acquisition proposals to seek approval from the competition regulator.

The proposed reforms were announced by the Treasurer, Dr Jim Chalmers, in response to submissions made by the Australian Competition and Consumer Commission (ACCC), which advocated for a fit for purpose merger regime designed to effectively identify and prevent anti-competitive transactions.

“Higher prices, less choice and less innovation can result from weakened competition. Stronger merger laws are critical to ensure anti-competitive mergers do not proceed,” said ACCC Chair Gina Cass-Gottlieb.

Currently Australia’s merger regime does not require merger parties to notify the ACCC of proposed acquisitions or to wait for ACCC clearance before proceeding.

Despite over 1,400 mergers recorded last year, valued at approximately $300 billion, only around 330 were formally notified to the ACCC under the existing voluntary merger framework. The competition regulator is currently reviewing Sigma’s proposed $8.8 billion merger deal with pharmacy retailer Chemist Warehouse.

Scheduled to take effect on 1 January 2026, pending legislative approval by the parliament, the new laws propose the introduction of “cost recovery fees” for merger reviews, wherein higher-risk mergers would incur elevated fees. Treasury projections estimate fees ranging from $50,000 to $100,000 for most mergers, with exemptions granted to small businesses.

Treasurer Chalmers highlighted the potential economic detriment posed by certain mergers, particularly those driven “solely focused on squeezing out competitors to capture a larger percentage of the market”.

Moreover, the proposed reforms include provisions to address serial acquisitions, where multiple smaller transactions over time cumulatively undermine competition. ACCC Chair Cass-Gottlieb hailed these amendments as crucial in improving public trust in Australia’s competition laws.

Additionally, Treasurer Chalmers announced the appointment of respected industrial organisation economist Dr Philip Williams AM as a Commissioner of the ACCC and the confirmation of lawyer Stephen Ridgeway as an Associate Commissioner.

The government will consult on the final details of the laws before they are put before parliament later this year.

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