Levelling the playing field

Small and medium businesses across Australia will no doubt be cheering the news that the Australian Competition & Consumer Commission (ACCC) will get the power to block serial acquisitions and those that entrench the market power of big players.

In our experience, many smaller players have felt complete powerless under current competition laws and view the regime that is supposed to protect them from predatory behaviour as little more than a sick joke.

The Albanese Government says the current competition laws are not fit for purpose and have resulted in a long-term increase in market concentration, higher profits for businesses and higher costs for consumers.

So, what is the new test that will help reverse this trend and how will it benefit SMEs? 

The ACCC will be required to permit a merger unless it reasonably believes it would or would likely have the effect of substantially lessening competition, including if it “creates, strengthens, or entrenches substantial market power in any market”.

Under the new laws, creeping acquisitions, where firms undertake lots of small mergers over a long period, and the value of mergers over the three years prior, will also be factored into the approval threshold.

If implemented, these proposed changes will be important to the many sectors that oppose acquisition of product lines, or engaging in exclusive supply arrangements with big retailers, often at the expense of smaller retailers who then lose part of their business to a big retailer.

Many such mergers remain out of sight from consumers, often until after the merger is completed. For example, a simple search of the ACCC public mergers register reveals a list of what could be called creeping acquisitions over the past decade in the building and hardware materials sector:

• Bunnings’ acquisition of Beaumont Tiles  – not opposed.
• Bunnings’ acquisition of Adelaide Tools  – not opposed.
• Metcash’s acquisition of Total Tools (majority stake)  – not opposed.
• ACCC – not opposing notifications lodged by Techtronic and Bunnings relating to an exclusive supply arrangement for Ryobi products.
• ACCC – not opposing Wesfarmers’ proposed acquisition of Pacific Brands’ The Workwear Group.

It’s no surprise to consumers that smaller, independent businesses cannot compete with the purchasing power of the larger operators. They lose access to a great product that sold well in their stores but are then no longer able to sell that product because it’s been purchased by a big operator under an exclusive supply arrangement.

The loss of trade for these businesses seriously undermines their viability as each approved merger chips away at their profitability. Under existing laws looked at in isolation by the ACCC, has resulted in many mergers being approved, so it is good news for SMEs that the proposed new laws give the competition regulator greater powers in their ‘decision-making basket’.

The Treasurer has indicated he wants the new merger system to apply from 1 January 2026, assuming it gets through the Parliament. For many smaller independent retailers this can’t come fast enough.