House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Chapter 5: Public benefit

Outline of Chapter

5.1 The amendments create a process for the Commission to determine whether an acquisition may be put into effect even if it would otherwise be anti-competitive. This determination can only be made if the Commission is satisfied that the acquisition would result in a benefit to the public that would outweigh any detriment to the public from the lessening of competition.

5.2 This chapter explains the public benefit application process, including the sequential approach of assessing competitive effects before public benefits, the circumstances in which a public benefit application can be made and the Commission's determination powers.

Detailed explanation of new law

Making a public benefit application

5.3 The notifying party to an acquisition may make a public benefit application if

•

the Commission determines that the acquisition must not be put into effect, or

•

the Commission determines that the acquisition may be put into effect subject to conditions included in the determination and the acquisition has not been put into effect.

This is called a 'public benefit application'.

5.4 The Commission must be satisfied that the acquisition would, or would be likely to, have the effect of substantially lessening competition, or could do so but for specified conditions, before a public benefit application can be made.

5.5 An assessment of the magnitude of the harm to competition and other public detriments will be required to determine the magnitude of the public benefits required to outweigh that harm. The statutory timeframes in Phase 1 and Phase 2 set out the maximum period by which the Commission must make its determination. However, the Commission may expedite its assessment to make a determination in a shorter timeframe (subject to the 15 business day period in subsection 51ABZI(1)), including if the parties promptly provide relevant information to the Commission.

[Schedule 1, item 35, subsections 51ABZP(1) and (5) of the CCA]

5.6 A public benefit application must be made in writing within 21 days of the Commission's determination. The Minister may determine a fee that is payable to make a public benefit application. An application is taken to have not been made if the notifying party has not paid the fee. See below for further information about the requirement for the information to be provided in an application and the impact on the effective application date if information required is not provided.

[Schedule 1, item 35, subsections 51ABZP(2), (3) and (4) of the CCA]

5.7 Acquisitions are time sensitive transactions. As such, the legislation sets specific times within which the Commission must take various actions. To ensure it is clear when the determination period starts, the amendments introduce the concept of effective application date. This is the day the application is made, subject to certain provisions about payment of the application fee, incomplete or misleading information, material changes of fact, and provision of further information. The Commission's deadline for the public benefit process is tied to this effective application date. The parties are made aware of these timeframes as the Commission is required to give written notice that it has received the public benefit application and confirm the effective application date for the application.

[Schedule 1, item 35, subsections 51ABZP(6) and (7), paragraph 51ABZR(1)(a), subsection 51ABZS(5), and paragraph 51ABZT(2)(a) of the CCA]

Public benefit applications that are materially incomplete or misleading

5.8 The Commission may decide that the application does not have an effective application date if it has not already made a determination in relation to the application and it is satisfied that the application is materially incomplete, materially misleading, or contains information that is false in a material particular. The Commission must make a decision that an application does not have an effective application date in writing, within a reasonable period.

5.9 If the Commission decides that the application does not have an effective application date, the Commission must not make a determination in relation to the public benefit application.

5.10 An application could be materially incomplete, materially misleading or contain information that is false in a material particular at the time it is made (for example because it does not include upfront information which may be required by the form) or it can become, because of a change of fact, materially incomplete, materially misleading or contain information that is false in a material particular after the application is made, for the purpose of a decision by the Commission.

[Schedule 1, item 35, subsections 51ABZQ(1), (2), (7) of the CCA]

5.11 Subsection 172(3) of the CCA provides that strict compliance with a prescribed form is not required for the purposes of the CCA and that substantial compliance is sufficient. However, in considering whether a notification is materially incomplete or misleading or contains false information, the Commission may have regard to:

•

the extent to which the application is made in the form determined by the Minister; and

•

the extent to which the application includes, or is accompanied by, the information or documents determined by the Minister;

•

any additional information or documents provided by the notifying party in the circumstances where the Commission has previously determined that the application does not have an effective application date because it is incomplete or misleading; and

•

any change of fact that the Commission becomes aware of after the notification is made, and that is material to the Commission's decision that the notification was incomplete or misleading.

5.12 A determination by the Minister in relation to the form of an application is made and the information or documents that must accompany it will be a legislative instrument that is not disallowable. The exemption from disallowance is appropriate as it is important to provide commercial certainty to parties to an acquisition in relation to compliance with the form and accompanying requirements, particularly for time-critical transactions, that the instruments will not be disallowed.

5.13 Strict compliance with a prescribed form is not required for the purposes of the CCA and substantial compliance is sufficient (see subsection 172(3) of the CCA). Therefore, the application must be materially incomplete or misleading before the Commission amends the effective application date.

[Schedule 1, item 35, subsections 51ABZQ(3) to (6) of the CC A]

5.14 What constitutes a reasonable period of time is not provided for in Schedule 1 to the Bill as it is considered that this will vary depending on the nature and circumstances of the application. If the application is voluminous and complex, it is considered that a reasonable period of time will be longer than if the application is short and straightforward.

5.15 If the Commission decides that an application does not have an effective application date, it must give the notifying party written notice of the decision and the grounds on which the decision was made and must not make a determination about a public benefit application.

[Schedule 1, item 35, sections 51ABZR of the CCA]

5.16 The notifying party may apply for the Commission to undertake an internal review of the decision, or otherwise make an application for a review of the decision in the Tribunal (see Chapter 6 for more information).

5.17 If the Commission determines that the application does not have an effective application date, the notifying party may provide the Commission with additional information and documents.

5.18 The application will get a new effective application date if the notifying party provides the additional information (in writing) and additional documents to address the deficiency of their application.

5.19 However, the additional information and documents are not taken to have been given to the Commission until the fee (if any) determined by the Minister by legislative instrument has been paid.

5.20 The new effective application date will be the day the additional information or documents are provided. The Commission must give the notifying party written notice of the new date.

[Schedule 1, item 35, section 51ABZS of the CCA]

Material changes of fact

5.21 The Commission may also decide a different effective application date if it becomes aware of a material change in fact in relation to the proposed acquisition. The effect of this is that the effective application date changes to the date on which the Commission becomes aware of the change of fact, if the Commission is satisfied that the change is material.

5.22 The Commission may only decide that the application does not have an effective application date if it has not already made a determination in relation to the application.

5.23 The Commission must make this decision in writing and within a reasonable period of time after becoming aware of the material change of fact. The Commission must give written notice to the notifying party of the decision.

5.24 Alternatively, the Commission may extend the determination period for the application by the number of days in the period starting on the day the Commission makes the decision that there is a material change of fact up until and including the day the notifying party gives the Commission information or documents about the material change of fact.

5.25 If the determination period is extended, the timeframes which apply under related provisions (such as the timeframes for the Commission to provide its public benefit assessment, or for the parties to offer commitments or undertakings) will be similarly extended.

[Schedule 1, item 35, section 51ABZT of the CCA]

5.26 The notifying party may apply for the Commission to undertake an internal review of the decision, or otherwise make an application for a review of the decision in the Tribunal (see Chapter 6).

Providing additional information and documents

5.27 If the Commission has decided to extend the determination period due to a material change of fact, and the notifying party provides the Commission with information or documents in response to that decision, the information or documents must be:

•

in writing (in the case of information), and

•

accompanied by the fee (if any) determined by the Minister by legislative instrument.

[Schedule 1, item 35, subsections 51ABZU(1) to (3) of the CCA]

5.28 The information or documents are taken not to have been provided until the required fee (if any) has been paid.

[Schedule 1, item 35, subsection 51ABZU (4) of the CCA]

Ceasing to consider a public benefit application

5.29 The Commission may cease considering a public benefit application if it is satisfied that the parties to the acquisition no longer intend to put the acquisition into effect. For example, the Commission may form this view if there is a public announcement by the parties, or evidence of a good faith intention or agreement to no longer proceed with the acquisition. The Commission must also cease considering an application if requested to do so in writing by the notifying party.

[Schedule 1, item 35, subsection 51ABZV(2) and (3) of the CCA]

5.30 The Commission can only make a decision to cease considering a public benefit application if it has not already made a determination regarding the application.

[Schedule 1, item 35, subsection 51ABZV(1) of the CCA]

5.31 A decision to cease considering a public benefit application must be made in writing and the Commission must give written notice of its decision to the notifying party.

[Schedule 1, item 35, subsection 51ABZV(4) and (5) of the CCA]

5.32 The notifying party may apply for the Commission to undertake an internal review of the decision, or otherwise make an application for a review of the decision in the Tribunal (see Chapter 6).

Determining a public benefit application

5.33 When a public benefit application has been made, the Commission may determine (in writing):

•

that the acquisition would be of public benefit; or

•

not to make the determination applied for.

[Schedule 1, item 35, subsection 51ABZW(1) of the CCA]

5.34 The determination may include conditions.

[Schedule 1, item 35, section 51ABZX]

5.35 The Commission must not make a determination that the acquisition would be for the public benefit, or would be if subject to specified conditions, unless it is satisfied that, were the acquisition put into effect (and any conditions included in the determination complied with):

•

the acquisition would, in all the circumstances, result, or be likely to result, in a benefit to the public; and

•

the benefit would, in all the circumstances, outweigh the detriment to the public that would result, or be likely to result, from the acquisition.

[Schedule 1, item 35, subsection 51ABZW(2) of the CCA]

5.36 The Commission has broad discretion to consider what constitutes a public benefit, providing it with the flexibility to enhance the welfare of Australians by approving acquisitions likely to result in net benefits that are of value to the community generally. However, the public benefit must outweigh any detriment to the public that would result, or be likely to result, from the acquisition, to satisfy the test.

5.37 In making its determination of whether the acquisition would be for the public benefit, or not, the Commission must have regard to all relevant matters, including the interests of consumers, and the object of the CCA, which is to enhance the welfare of Australians through the promotion of competition and fair trading and consumer protection.

[Schedule 1, item 35, subsection 51ABZW(3)]

5.38 The Commission must give the notifying party a written notice of its determination and a written statement of the Commission's reasons for making the determination. This determination is subject to review by the Tribunal.

[Schedule 1, item 35, subsection 51ABZW(4) of the CCA]

5.39 For the purposes of the CCA (other than the provisions relating to consideration of public benefit applications and the acquisitions register), the Commission's determination is taken to be made when the Commission includes a copy of the determination on the acquisitions register.

5.40 This ensures that the date of the Commission's determination is clear for all parties, particularly where it may have implications for the timing of certain review rights (such as judicial review).

[Schedule 1, item 35, subsection 51ABZW(5) of the CCA]

5.41 In considering whether to include conditions in a determination, the Commission must have regard to all relevant matters. Without limiting those considerations, the Commission may also have regard to:

•

the effect on the interests of consumers that compliance with the conditions would have, or would be likely to have; and

•

without limiting that consideration, any consumer benefits that would result, or be likely to result from compliance with the conditions.

[Schedule 1, item 35, subsection 51ABZX(2) of the CCA]

5.42 These matters that the Commission must have regard to are intended to incentivise parties to an acquisition to engage constructively and offer a remedy proposal that address the Commission's concerns. Ordinarily the Commission will not include a condition unless it has been offered by the notifying party and that condition takes into account feedback from consultation with interested market participants.

5.43 In considering whether an acquisition, if put into effect, would result in, or would be likely to result in a benefit to the public that would outweigh any resulting detriment, the Commission must have regard to all relevant matters. Without limiting those matters, the Commission may also have regard to the contract, arrangement or understanding, or proposed contract, arrangement or understanding, pursuant to which the acquisition is to take place.

[Schedule 1, item 35, section 51ABZY of the CCA]

Process for considering public benefit applications

5.44 The Commission has 50 business days from the effective application date to make a public benefit determination unless that period is extended. If the Commission does not make a determination within that period, it is taken to have not made the determination that was applied for.

5.45 The purpose of the statutory timeframe is to provide certainty to businesses. It is in the notifying party's interests to provide information promptly to facilitate an efficient review by the Commission. The statutory timeframe sets out the maximum time period in which the Commission must make its determination, subject to any extensions. The Commission may therefore make a determination in a shorter period of time, provided that any relevant statutory requirements are met (such as the requirement for the Commission to provide a public benefit assessment discussed below).

[Schedule 1, item 35, subsections 51ABZZ(1) and (2) and sections 51ABZR, and 51ABZZE of the CCA]

5.46 If the Commission's determination is invalidly made, or a court sets aside or remits the determination, the purported determination is taken to have never been made.

[Schedule 1, item 35, subsections 51ABZZ(3) and (4) of the CCA]

5.47 If a public benefit application in relation to a notification of an acquisition has an effective application date, the Commission must give the notifying party a public benefit assessment.

5.48 The public benefit assessment will set out the Commission's preliminary assessment of the benefits and detriments to the public that the Commission has identified could result, or be likely to result, from the acquisition, including an assessment of the significance of those benefits and detriments, and the grounds on which the Commission makes the preliminary assessment, referring to the evidence or other material that forms the basis for those grounds.

[Schedule 1, item 35, subsections 51ABZZA(1) and (2) of the CCA]

5.49 The assessment must be given on or before 20 business days, or if it is not practicable to give the assessment by that day, as soon as practicable after that date.

[Schedule 1, item 35, subsections 51ABZZA(3) of the CCA]

5.50 If the Commission does not provide the public benefit assessment within 20 business days after the effective application date, the determination period for the public benefit application may be extended as follows:

•

if the notifying party agrees in writing, the determination period is extended by the number of business days:

-

occurring after the 20th business day from the start of the determination period, and

-

on or before which the Commission does not give the public benefit assessment, for the duration of the notifying party's agreement;

•

regardless of any agreement, the 15-day period during which the Commission must not request or consider late information or submissions (under subsections 51ABZZD(3) and (5)) is reduced by the number of business days:

-

occurring after the 20th business day from the start of the determination period, and

-

on or before which the Commission does not give the public benefit assessment.

•

However, if the reduction under point 2 would exceed 15 business days, the limitations on the Commission's ability to request or consider late information or submissions under subsections 51ABZZD(3) and (5) do not apply at all in relation to making the determination.

[Schedule 1, item 35, subsections 51ABZZA(4) to (6)]

5.51 The Commission must give the notifying party a reasonable opportunity to make oral or written submissions in relation to the public benefit assessment before the Commission makes a determination. However, when making the determination, the Commission must not consider submissions in relation to the public benefit assessment that are received more than 15 business days after it gave the assessment to the party, unless the notifying party requests additional time to make such submissions to the Commission. The Commission may extend the time more than once for the notifying party to make submissions in relation to the public benefit assessment.

5.52 If the Commission extends the period, the determination for the public benefit application is extended by the same number of days.

[Schedule 1, item 35, subsections 51ABZZB of the CCA]

5.53 The Commission may extend the period it has to consider a public benefit application by written notice to the notifying party. It may do so in any of the following circumstances:

•

where a party offers, in writing, a commitment or undertaking in accordance with subsection 51ABZZE(3), and the extension is for no more than 15 business days.

•

where the notifying party does not provide requested information by the date specified by the Commission;

•

where the Commission serves a section 155 notice on the notifying party and the notifying party has not furnished information, produced documents or appeared before the Commission within 10 business days after the section 155 notice being served;

•

where the notifying party has requested the Commission to extend the determination period.

[Schedule 1, item 35, subsection 51ABZZE(1) and (2) of the CCA]

5.54 If the determination period is extended for any reason except for the offering of a commitment or undertaking, the final date to offer a remedy is extended by the same number of days, with corresponding changes to the availability of extensions associated with remedy offers (in accordance with paragraph 51ABZZE(2)(a), subsection 51ABZZE(3) and subsection 51ABZZE(4)).

[Schedule 1, item 35, subsections 51ABZZE(3) and (4) of the CCA]

5.55 It should be noted that extensions may be granted under the same circumstances in relation to the Phase 1 and Phase 2 determination periods.

5.56 When considering a public benefit application, the Commission must not have regard to a commitment or undertaking offered by a party to an acquisition unless the commitment or undertaking is offered during a period to which subsection 51ABZZE(3) applies.

[Schedule 1, item 35, subsection 51ABZZC(2) of the CCA]