Status Quo and Problem
3. The objective of the review is to test whether some possible changes to Part 5 of the Commerce Act could improve the effectiveness and efficiency of the authorisation and clearance systems. The following issues have been identified:
Weak enforcement provisions for section 69A undertakings to divest assets or shares
4. The inability of the Commission to separately enforce undertakings given under section 69A is unsatisfactory. Weak enforcement provisions provide an opportunity for parties to game the legal system as they can consummate a merger that was approved based on an undertaking, and later advise the Commission that they tried to dispose of the relevant shares or assets but were unable to find a buyer that was prepared to pay a reasonable price. This means that a merger would have occurred that the Commission may have otherwise declined if it were not for the undertaking. There has only been one example in recent years where a divestment deed to undertaking was not given effect to. While the magnitude of the problem is small there is an opportunity to improve the effectiveness of the status quo.
Inefficient processes
5. The Commission does not have the ability to amend an undertaking once a merger clearance or authorisation decision has been made. This can mean that the acquirer will lose the protection provided by the approval if it does not implement the merger strictly in accordance with the approved undertaking. Thus, immunity from legal challenge by a third party would be lost even if a variation involved only minor changes that had no bearing on competition.
6. Section 62 of the Act provides time limits within which the Commission would be required to hold a conference following the release of its draft determination for restrictive trade practice authorisation proceedings. The process is inconsistent with the timing for merger authorisations. This lack of consistency between the two processes can be problematic when an application has both merger and trade practice implications, as it can be difficult to operate the procedures in parallel.
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