Creeping acquisitions legislation edges closer

Posted by Daniel Palmer on 7th May 2009

Creeping acquisitions, the notion of large companies purchasing small businesses to beat competition law, are under the spotlight following the release of the Federal Government’s latest discussion paper on the issue.

The idea of strengthening the Trade Practices Act with a “creeping acquisitions” provision was a recommendation that came out of the ACCC’s Grocery Price Inquiry last year. The ACCC’s concern was that the current competition laws gave no power to stop many acquisitions that the major supermarkets were making, which might harm competition in the long-term. With this in mind, they suggested implementing legislation to stop major companies (not just in the grocery sector) from acquiring a number of businesses over time that may collectively raise competition concerns but, when considered in isolation, are unlikely to be captured by current laws.

Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen, released the second discussion paper yesterday highlighting a possible wording for new legislation:

A corporation that has a substantial degree of power in a market must not directly or indirectly:
(a) acquire shares in the capital of a body corporate; or
(b) acquire any assets of a person;
if the acquisition would have the effect, or be likely to have the effect, of enhancing that corporation’s substantial market power in that market.

The discussion paper also outlined a complementary idea, which would see the above law only invoked for certain companies or sectors at the discretion of the Minister. As such, the Minister could trigger the creeping acquisitions law for the supermarket sector, which would mean any acquisitions in the industry would be subject to the ACCC assessing whether the purchase would enhance the “corporation’s substantial market power”.

“The government is committed to addressing concerns that the current regime has failed to apply scrutiny to the small scale acquisitions of corporations, that may have the effect of enhancing their already substantial power, to the detriment of consumers,” Mr Bowen said.

“The paper continues the consultation process that has been important in broadening the discussion and understanding around creeping acquisitions and should ultimately lead to a more effective and a balanced approach to the issue,” he added. “We are determined to get the balance right between protecting consumers from dangerous anti-competitive acquisitions; and promoting efficient, organic growth for business.”

Mr Bowen called for interested parties to submit their opinions on the paper by June 12, with responses to appear on the treasury website unless otherwise indicated by respondents.

To read the views of key members in the food industry with regard to creeping acquisition proposals please visit: www.treasury.gov.au/contentitem.asp?ContentID=1422&NavID=037. In summary, Metcash, the ACCC and independents see a need for a “creeping “acquisitions” law, Coles and Woolworths beg to differ and the Australian Food and Grocery Council believes there must be a stronger argument for implementation but would not necessarily be opposed to new legislation.