AUSTRALIA Law and Practice Contributed by: Mark Grime and George Lukic, Thomsons
structural integration of assets, it will fall outside the mandatory merger notification regime but will remain subject to the general restrictive trade practices provi - sions of the CCA. Substantive Assessment: Fully Functional Versus Non-Fully Functional While functionality does not dictate whether a busi - ness must file, it will affect how the ACCC reviews the competitive risk during the clearance process. Fully functional JVs If the JV operates as an autonomous economic entity on a lasting basis (acting independently of its parents), the ACCC assesses it primarily under the traditional section 50 merger test. The focus is structural and will examine whether the removal of the parents as independent competitors, or the creation of the new JV entity, will substantially lessen competition. Non-fully functional JVs If the JV is not a standalone business, such as a pure R&D syndicate, a joint purchasing vehicle, or a cost- sharing production JV that passes all output back to the parents to sell independently, the ACCC may view the arrangement as highly susceptible to behavioural co-ordination. While the initial formation of the JV might trigger a mandatory merger filing via the asset or share thresholds, the ACCC will also scrutinise the underlying JV agreements for “spill-over” effects and assess whether the information sharing and opera - tional collaboration required by the non-functional JV breaches Australia’s strict prohibitions against cartel conduct or anti-competitive agreements under Part IV of the CCA. 2.11 Power of Authorities to Investigate a Transaction While below-threshold transactions are not legally required to be notified, they remain fully subject to the overarching prohibition in section 50 of the CCA against acquisitions that substantially lessen competi - tion. The ACCC retains a “call-in” power and actively moni - tors unnotified transactions and, if it identifies a poten - tial substantial lessening of competition (SLC), it can seek an immediate injunction in the Federal Court to
prevent closing. If the ACCC discovers a completed, unnotified transaction, its enforcement timeline is governed by two distinct statutory limitation periods, alongside a severe indefinite commercial risk: • Civil pecuniary penalties (six years) – To pursue financial penalties, the ACCC has six years from the date the contravention occurred (ie, the date the unnotified transaction was put into effect) to commence civil proceedings in the Federal Court. • Divestiture orders (three years) – If the ACCC deter - mines the unnotified transaction substantially less - ens competition and seeks to structurally unwind it, it has three years from the date of completion to apply to the Federal Court for a mandatory divesti - ture order, which forces the acquirer to dispose of the illegally acquired shares or assets. As such, parties executing high-risk, below-threshold deals (particularly in concentrated markets) often still choose to notify voluntarily to obtain legal certainty. Under the regime as enacted on 1 January 2026, a notifiable acquisition completed without clearance is treated as void. Notwithstanding proposals to replace that automatic invalidity with a court-supervised void - able model, parties executing high-risk or borderline transactions should continue to assess carefully whether voluntary engagement or notification is pru - dent to secure legal certainty. 2.12 Requirement for Clearance Before Implementation For any transaction meeting the thresholds, imple - mentation is strictly suspended. The transaction can - not be “put into effect” (legal title cannot transfer, and operational control cannot be assumed) until the ACCC grants formal clearance, or the statutory wait - ing period expires without ACCC intervention. Con - sequently, M&A transaction documents must now be drafted with robust suspensive conditions and clearly calibrated drop-dead dates. 2.13 Penalties for the Implementation of a Transaction Before Clearance As noted in 2.2 Failure to Notify , implementing a notifiable transaction prior to clearance exposes the parties to significant civil penalty risk and potential
19 CHAMBERS.COM
Powered by FlippingBook