The Federal Court yesterday upheld the ACCC’s application for Judicial Review, setting aside the decision of the Australian Competition Tribunal on 22 June 2017 to authorise the proposed merger between Tabcorp at Tatts. The matter has now been referred back to the Tribunal.
The reasons for decision have been embargoed from release (both to parties and the public) while solicitors for the parties determine whether it contains commercial in confidence material that requires redaction; the solicitors have no more than five business days to make this determination and it is hoped reasons will be available late next week.
The merger review process
There is no mandatory merger notification or clearance requirement under Australia’s competition laws. Ordinarily parties to mergers that may raise concerns notify the ACCC and seek ‘informal clearance’ – an indication from the ACCC that it will not oppose the merger. Tabcorp initially notified the ACCC of the merger but, after the ACCC raised some preliminary competition concerns, it withdrew its application for informal clearance, instead applying directly to the Australian Competition Tribunal for ‘authorisation’ of the merger.
The Australian Competition Tribunal is empowered to authorise a proposed merger/acquisition (s 95AT) on public benefit grounds, provided satisfied that the ‘proposed acquisition would result, or be likely to result, in such a benefit to the public that the acquisition should be allowed to occur’. Once authorised the merger will not contravene the merger provision in the Competition and Consumer Act 2010 (s 50), which prohibits acquisitions which would have the effect (or likely effect) of substantially lessening competition in a market.
The Tribunal decision
On 22 June 2017 the Tribunal announced it would grant authorisation to Tabcorp for its proposed acquisition of Tatts. The public benefits claimed and considered by the Tribunal as sufficient to justify authorisation were predominantly in the form of cost synergies and improved efficiencies. Importantly, the Tribunal also concluded that the merger would not substantial lessening of competition in any market.
For more details on the Tribunal decision see my earlier blog: Tribunal Clears Tabcorp/Tatts Merger (ACL Blog, 30 June 2017)
The claim for judicial review
The ACCC (and separately CrownBet) sought judicial review of the Tribunal’s decision. As there is no opportunity for merits review from a merger authorisation decision of the Tribunal, this was the only mechanism by which the decision of the Tribunal could be overturned. The ACCC claimed that the Tribunal made three reviewable errors in granting authorisation for the mergers:
- that the Tribunal was wrong to reason that it could only conclude the acquisition would result in a detriment if it found there was a substantial lessening of competition;
- that the Tribunal wrongly failed to compare the likely future state of competition with and without the proposed acquisition
- that the Tribunal erred in the weight it gave to private benefits relative to benefits that would flow to consumers
For further detail on the ACCC’s application for judicial review see my earlier blogs:
- ACCC appeals tribunal’s Tabcorp/Tatts merger authorisation (ACL Blog, 10 July 2017)
- ‘The Tabcorp/Tatts case should end the clash between the ACCC and the Competition Tribunal’ (The Conversation, 12 July 2017)
The Full Federal Court
The full bench of the Federal Court (comprising Justice Besanko, Justice Perram and Justice Robertson) ordered yesterday that the decision of the Tribunal be set aside and the matter referred back to the Tribunal.
As a result of the need to redact commercial in confidence material from the reasons for judgment, those reasons have been embargoed from release to the parties and public. The solicitors for the parties must inform the Court within five business days whether or not there is material in need of redaction; it is hoped the reasons will be available very shortly thereafter. For now, however, it is not known which of the claims of ‘reviewable error’ made by the ACCC succeeded and the reasons for this.
More to come next week … in the meantime I will continue to post all details as they emerge on my Tatts/Tabcorp merger page.
It’s not surprising that there’s plenty of interest in this est AU$11 billion proposed merger between these gambling giants, even in the absence of reasons for the Federal Court’s decision. See, for example:
- Damon Kitney and Scott Murdoch, ‘Tabcorp-Tatts up in air as court orders new hearing’ (The Australian, 21 September 2017)
- Elizabeth Knight, ‘Tabcorp and Tatts marriage gets questioned at the alter’ (SMH, 21 September 2017)
- Stephen Letts, ‘Tabcorp bid for Tatts hits a hurdle as ACCC has a win in court’ (ABC News, 21 September 2017)
- Scott Murdoch, ‘Tabcorp merger with Tatts sent back to Australian Competition Tribunal’ (The Australian, 20 September 2017)
- John Stensholt, ‘Tabcorp suffers court setback in $11b Tatts pursuit’ (AFR, 20 September 2017)
- Nick Toscano, ‘Tabcorp and Tatts merger derailed in Federal Court’ (SMH, 20 September 2017)
- Tom Wadlow, ‘Tabcorp-Tatts merger falls at the final hurdle? Why the ACCC filed for judicial review’ (Australia Business Review, 20 September 2017)
For more of the background and links to the Tribunal’s decision see my case page.