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Explained: Merger crackdown targets supermarkets as tie ups deliver higher prices

Mergers between major companies are being targeted in a fresh crackdown.

Mergers between major companies are being targeted in a fresh crackdown. Photo: TND/Getty

An Albanese government overhaul of merger laws is promising to protect consumers from the dangers of a supermarket tie up and deals among other companies that could raise prices.

Treasurer Jim Chalmers told Parliament on Thursday that tougher laws would help prevent big businesses from merging in ways that drive up profits for investors and prices for Australians.

He singled out supermarkets Coles and Woolworths, which are copping a regulatory broadside as the government looks to capitalise on public anger over grocery prices before the election.

“The government intends to make sure the ACCC is notified of every merger in the supermarket sector,” he said.

“We want to make sure supermarket mergers don’t come at the cost of Australians, families and pensioners getting a fair price on their grocery bills.”

What’s changing

There are no proposed supermarket mergers on the table at the moment and any attempt by Coles and Woolworths to buy up a competitor could be blocked under the current regime.

But the merger reforms, which are backed by the Australian Competition and Consumer Commission (ACCC), would significantly strengthen laws designed to protect consumers.

RMIT University Professor Angel Zhong said that Australia has seen “increasing consolidation” in key industries, including supermarkets, pharmaceuticals and banking over recent decades.

“These industries are critical to consumers, and the lack of strong competition can lead to higher prices, fewer choices, and less innovation,” Zhong said.

The new laws will introduce mandatory notifications of merger proposals, which will give the ACCC more oversight over deals that could potentially reduce competition and raise prices.

Additionally, reviews of ACCC decisions on mergers will be made by a Competition Tribunal that includes a federal judge, an economist and a business leader.

That will help address a longstanding bugbear of the ACCC, which has had several of its major merger rejections overturned by federal court judges with no economics training in recent years.

How it will protect consumers

Chalmers said Australia is currently only one of three OECD nations without a mandatory notification scheme for corporate mergers.

“Last year, over 1400 mergers were recorded, at a value of around $300 billion,” he said.

“Meanwhile, the ACCC looked at an average of 330 mergers a year over the past decade. But we don’t know whether these are the right 330, or the mergers with the greatest potential to cause harm.”

The reforms also outline a path for the federal government to get more involved in merger regulation too, creating a designation power that allows them to direct a competition review on purchases.

That will be possible where one of the companies has annual turnover of more than $200 million and intends to purchase 20 per cent or more of an unlisted or private company.

Zhong said the mandatory notifications will give the ACCC a “clearer picture” of the landscape and make it easier to stop corporate tie ups that lead to higher prices for consumers.

“It also improves public trust by ensuring that more mergers are reviewed in a structured and transparent way,” Zhong said.

But the merger regime is also getting easier for companies to navigate under the changes, with a streamlining for deals that don’t threaten competition set to reduce barriers to useful buyouts.

“This streamlined process benefits both sides: it frees up the ACCC to focus on mergers that are more likely to harm competition, while allowing mergers that are beneficial or neutral to the market to proceed with less red tape,” Zhong said.

Topics: Consumer
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