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Legislation

Trade Practices (Creeping Acquisitions) Amendment Bill 2007

 

Overview

The Bill was introduced by Senator Fielding (Family First).

The bill proposed to amend Australia's merger laws by allowing the cumulative effect of all acquisitions by the same company within a six year period to be considered when determining whether that series of mergers would substantially lessen competition.

In his second reading speech, Fielding stated:

Family First is introducing the Trade Practices (Creeping Acquisitions) Amendment Bill 2007 to stop big business from acquiring shares or other companies, through buyouts or takeovers, when it has the result of substantially reducing competition.

The problem of “creeping acquisitions” is a significant one for small business and the Trade Practices Act has to be strengthened to deal with it.

Creeping acquisitions refers to where a big company acquires shares, assets or other businesses over a period of time, which results in high levels of market concentration to the detriment of fair competition.

On its own, each acquisition might appear insignificant, but combined, over a period of time, they could create significant changes in a market. ...

It is very difficult for the Australian Competition and Consumer Commission (ACCC) to declare that a small purchase, on its own, leads to a substantial reduction in competition.

But the combined effect of these so-called creeping acquisitions, over time, can result in a substantial reduction in competition. Less competition in any market is not good. Fair competition is vital as it keeps prices as low as possible for Australian families.

The Trade Practices Act does not adequately deal with this issue, and that is why Family First is introducing legislation to outlaw creeping acquisitions over a six-year period, that have the effect, or likely effect, of substantially reducing competition.

It is a serious concern that the Trade Practices Act does not give adequate powers to the ACCC to be able to prevent a series of acquisitions by considering the combined effect of those acquisitions on competition.

... This was a recommendation of the Senate Committee that examined the Trade Practices Act in 2004 and must be implemented.

The Senate Economics Committee report “Effectiveness of the Trade Practices Act 1974 in protecting small business” recommended that creeping acquisitions be addressed to stop the further concentration of markets, but the Government’s bill passed this week failed to address this.

Former ACCC Chair Professor Allan Fels stated in the report: When a big retailer, say, is going to buy a very large number of outlets at a given time, if they bunch them all together it is possible for us to look at them as a whole and say, ‘This could substantially lessen competition. ‘ But most often acquisitions are made in small parcels or one at a time, so each case as you look at it does not seem to amount to a substantial lessening of competition. It has to be a substantial lessening of competition in a market. ...

 

Key provisions

Schedule 1 of the Bill provided:

1 At the end of section 50

Add:

(7) For the purposes of the application of subsection (1) in relation to a particular corporation, an acquisition shall be deemed to have the effect, or be likely to have the effect, of substantially lessening competition in a market if the acquisition and any one or more other acquisitions by the corporation or a body corporate related to the corporation in the period of 6 years ending on the date of the first mentioned acquisition together have the effect, or are likely to have that effect.

(8) For the purposes of the application of subsection (2) in relation to a particular person, an acquisition shall be deemed to have the effect, or be likely to have the effect of substantially lessening competition in a market if the acquisition and any one or more other acquisitions by the person in the period of 6 years ending on the date of the first mentioned acquisition together have that effect, or are likely to have that effect.

2 After subsection 50A(1B)

Insert:

(1C) For the purposes of the application of subsection (1) in relation to a particular person, an obtaining of a second controlling interest shall be deemed to have the effect, or be likely to have the effect, of substantially lessening competition in a market if the obtaining of the second controlling interest and any one or more other relevant transactions by the person or an associate of the person in the period of 6 years ending on the date of the obtaining of the second controlling interest together have that effect, or are likely to have that effect.

3 Subsection 50A(9)

Insert:

associate of the person means:

(a) where the person is a body corporate, a related body corporate;

(b) where the person is a natural person, a body corporate in which the person has a controlling interest by reason, but not necessarily by reason only, of the application of subsection (8).

relevant transaction means:

(a) the acquisition of shares in the capital of a body corporate; or

(b) the acquisition of any assets of a person; or

(c) the acquisition of another second controlling interest in a corporation or each of 2 or more corporations.