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Law Notes Competition Law Notes

Mergers Notes

Updated Mergers Notes

Competition Law Notes

Competition Law

Approximately 152 pages

Very comprehensive notes with a table of contents. This subject has a lot of readings to do before class and is difficult to get your mind around. These notes will save you a lot of time as you could potentially skip doing the readings each week. They are also very easy to understand and thus will help you get the principles of competition law a lot easier. ...

The following is a more accessible plain text extract of the PDF sample above, taken from our Competition Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Mergers (s 50) SLC

  • Note: the old test for mergers was dominance (more of a structural test). Now the test is SLC (focuses on the state of competition in the market – a dynamic test). So there is only one case dealing with SLC – the AGL case.

Steps:

  1. What is a corporation? S 4 ‘corporation’: "corporation" means a body corporate that: (a) is a foreign corporation; (b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed; (c) is incorporated in a Territory; or (d) is the holding company of a body corporate of a kind referred to in paragraph(a), (b) or (c).

  2. S 50(1): The merger prohibition for ‘corporations.’ A corporation must not directly or indirectly: (a) acquire shares in the capital of a body corporate; or (b) acquire any assets of a person; if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market.

  3. S 50(2): The prohibition for ‘persons.’ A person must not directly or indirectly: (a) acquire shares in the capital of a corporation; or (b) acquire any assets of a corporation; if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market.

  4. What is the market?

  • S 50(6) defines market as a ‘market’ in Australia, State or Territory or region of Australia. It is no longer a substantial market.

  • ACCC Merger Guidelines (Nov 2008) state that S 50 requires a forward looking analysis into the effects or likely effects of a merger. The ACCC therefore focuses on the foreseeable future (generally within 2 or 3 years).

    1. Will the merger have the effect of or be likely to have the effect of substantially lessening competition in the market?

    2. S 50(3): These non exhaustive matters must be taken into account for the purposes of subsections(1) and (2) in determining whether the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market:

  1. the actual and potential level of import competition in the market;

  2. the height of barriers to entry to the market;

  3. the level of concentration in the market;

  4. the degree of countervailing power in the market;

  5. the likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins;

  6. the extent to which substitutes are available in the market or are likely to be available in the market;

  7. the dynamic characteristics of the market, including growth, innovation and product differentiation;

  8. the likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor;

  9. the nature and extent of vertical integration in the market.

    1. What do the merger guidelines say?

    2. Authorisation or formal or informal clearance? Informal clearance is the most common. The corporation/person will not be prevented from making the acquisition if the corporation is granted a clearance or an authorisation for the acquisition under Division3 of PartVII: see subsections 95AC(2) (clearance) and 95AT(2) (authorisation).

What is an acquisition of shares?

  • S 4(4) requires that the acquisition of shares in the capital or assets of a body corporate involve obtaining or gaining ownership of some legal or equitable interest in shares in the capital or assets of a body corporate, whether the acquisition is by a person alone or jointly with another person.

  • The interest must be of a proprietary kind, not a possessory kind.

  • TPC v Arnotts (1990): it was held that the granting of an option over shares was an acquisition for the purposes of s 50 since it created an equitable interest in those shares.

S 4(4)

In this Act:

  1. a reference to the acquisition of shares in the capital of a body corporate shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such shares; and

  2. a reference to the acquisition of assets of a person shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such assets but does not include a reference to an acquisition by way of charge only or an acquisition in the ordinary course of business.

What is the market?

  • S 50(6) defines market as a ‘market’ in Australia, State or Territory or region of Australia.

  • See above for defining the market.

The market definition is decided based on practicality:

Australian Meat Holdings:

  • The market will be determined by practical considerations, rather than purely economic considerations. In this case the judge relied on a farmer’s evidence that cattle would not be transported far away to get slaughtered.

Metcash

  • French J said that there was no attempt to connect economic theories to the real world market to show they were even likely.

Qantas/Air New Zealand

  • An economist had excellent knowledge about European aviation but not much knowledge about aviation in the Asia Pacific region.

AGL Case

  • The ACCC’s ‘bandwagon effect scenario’ was found not to be realistic and thus not to have the effect of SLC.

ACCC market definition:

ACCC Merger Guidelines– approach to the merger definition when assessing applications for merger clearance.

  • Market definition: In assessing whether a merger substantially lessens competition, the ACCC will examine the competitive impact of the transaction in the context of the markets relevant to the merger. The market definition establishes the relevant field of inquiry for merger analysis to identify those sellers and buyers that may potentially constrain the commercial decisions of the merger parties and the merged firm, and those participants, particularly customers, that may be affected if the merger lessens competition.

  • The concept of a market: A market is the product and geographic space in which rivalry and competition take place. S 4E provides that a market includes goods and services that are substitutable for, or...

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