Date of Award
Master of Laws (Thesis)
Schools and Centres
Professor Gerard Ryan
Professor Bernard Evans
The Australian Competition and Consumer Commission (ACCC) does not have adequate tools to prevent creeping acquisitions under the Competition and Consumer Act 2010 (Cth) (CCA).
Section 50 of the CCA prohibits a corporation from acquiring shares or assets if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market. The expression ‘creeping acquisitions’ refers to a number of small individual mergers or acquisitions that, when considered in isolation, do not have a sufficient impact on competition to breach s 50, but when considered together, have a cumulative effect of substantially lessening competition in a market.1 This seeming loophole in s 50 enables entities, particularly those with significant market power, to continue to grow in dominance, potentially to the detriment of incumbents and consumers.
The Director of the National Association of Retail Grocers of Australia (NARGA),
Mr Alan McKenzie, summarised the problem of creeping acquisitions: Section 50 has shown itself to be unable to deal with a series of small acquisitions undertaken by a company with a large market share over a period of time. While each individual acquisition does not have the effect of substantially lessening competition, the overall impact is one that potentially can substantially lessen competition. So, for example, if a major chain were to buy out 100 stores in one go, that would very much come under the ACCC’s spotlight. But, if they make those same acquisitions over a period of years, piecemeal and one by one as part of a strategic plan to acquire that same level of market share, it is very difficult for the commission to find that each acquisition on its own represents a substantial lessening of competition. That is the problem.2
Further, creeping acquisitions have occurred in Australia. Over the past 40 years or so, ‘Australia has seen the demise of hundreds of small grocery stores, butchers,bakers, florists, greengrocers, pharmacists, newsagents, liquor outlets and other small retailers as a direct result of the continued expansion of major supermarket chains and major specialty retailers.’3 Some of this expansion has been organic. Significantly however, some has been due to creeping acquisitions.
The resulting market power and vertical integration of the largest participants in the Australian grocery and food sector have led to a number of difficulties for other participants – including difficulties in suppliers having access to markets, difficulties in other participants competing and lower product choice for consumers (due to the way the largest participants have altered their product range in favour of their own private label products). This article takes a more expanded view of the type of competition that Australia should encourage, arguing that it should be more than low prices for the ultimate consumer. This article takes the view that product choice, access of suppliers to markets and smaller entities being able to compete with larger ones are worthy goals.
The food and grocery sectors are not the only Australian industries with an oligopolistic nature. This article takes the view that if creeping acquisitions can occur in the food and grocery sector, then they could occur in other sectors. Accordingly, s 50 needs to be changed to prevent creeping acquisitions in those sectors.
Viewing the utility of s 50 from that perspective, this article recommends legislative and administrative changes that would enable the ACCC and the Courts to adequately regulate creeping acquisitions. These include reinterpreting the objects clause of the CCA, aggregating all previous piecemeal acquisitions over a two-year period, mandatory notification and Commissioner’s declarations.
Cavagnino, A. (2018). Deficiencies in Australia’s current merger regime: The call to combat creeping acquisitions (Master of Laws (Thesis)). University of Notre Dame Australia. https://researchonline.nd.edu.au/theses/193