ACCC Appeals Tribunal Decision in Tabcorp-Tatts Merger

Monday 17 July 2017 @ 12.34 p.m. | Corporate & Regulatory | Legal Research | Trade & Commerce

The Australian Competition and Consumer Commission (ACCC) has applied to the Federal Court for judicial review of the Australian Competition Tribunal’s decision in Application by Tabcorp Holdings Limited [2017] ACompT 1 (22 June 2017) to grant authorisation for Tabcorp Holdings Limited (Tabcorp) to acquire Tatts Group Limited (Tatts).

Background to the Issue

When looking at proposed mergers under Australian Law, the ACCC and the Australian Competition Tribunal are authorised to apply separate tests to determine whether the proposed merger is of "public benefit".

Under Section 50 of the Competition and Consumer Act 2010 (Cth) (The Act), acquisitions that would have, or would be likely to have, the effect of substantially lessening competition are prohibited. This is the test the ACCC applies when it is assessing a merger for informal clearance, but this test is significantly different to the test applied by the Tribunal for authorisation of a merger.

Under Section 95AT of the Act, the Tribunal may authorise an acquisition where it is satisfied that a proposed acquisition would result, or be likely to result, in such a benefit to the public (that is, that public benefits outweigh public detriments) that the acquisition should be allowed to occur.

As stated by The Conversation:

"The ACCC typically places more weight consumer welfare, in the form of lower prices and better products, when considering mergers. Whereas the Tribunal is more willing to count benefits that flow to the merging parties, such as cost savings, even when these are not passed on to consumers. However, the Tribunal does acknowledge that these benefits might “carry less weight than gains which flow to the community generally."

Background to the Current Tabcorp/Tatts Case

Tabcorp sought informal merger clearance, and the ACCC commenced a review of the proposed acquisition in November 2016. In March 2017, shortly after the ACCC had published a statement of issues regarding the proposed acquisition, Tabcorp withdrew its application for informal clearance and lodged an application for authorisation with the Australian Competition Tribunal.

In the Tribunal decision of Application by Tabcorp Holdings Limited [2017] ACompT 1 (22 June 2017), the merger was authorised with the Tribunal accepting Tabcorp’s claims that there would be “substantial” public benefit from the merger taking place. The Tribunal thought the possible detrimental effects of the merger (including reduced competition and other factors such as increased problem gambling and reduced employment) were either unlikely to arise or didn’t outweigh the benefits of the merger.

Current Appeal by the ACCC

ACCC Chairman Rod Sims said:

"The ACCC is alleging the Tribunal made three reviewable errors. It is therefore seeking clarification of these three points of law which are central to the Tribunal’s assessment of Tabcorp’s proposed acquisition of Tatts...We are seeking judicial review because we believe these legal principles are fundamental not only to the Tabcorp decision but to all future merger and non-merger authorisation assessments.”

In brief, the three grounds for review include:

  1. The Tribunal’s reasoning that it could only conclude that the proposed acquisition was likely to result in a detriment if the Tribunal concluded that there would be a substantial lessening of competition. The ACCC will submit this is not the correct application of the statutory test, and is inconsistent with previous Tribunal decisions;
  2. A review of the Tribunal’s failure to compare the likely future state of competition both with and without the proposed acquisition in its consideration of whether the proposed acquisition was likely to result in any detriment; and
  3. That the Tribunal made an error in the weight it gave to benefits, such as cost savings and revenue synergies, which would be retained by Tabcorp and not shared with consumers more broadly.

Next Steps and Implications

The ACCC and the Tribunal disagree on how to value the “public benefit” of a merger, based on whether the benefits flow to the merging parties (in this case Tabcorp/Tatts) or to the broader public. The Federal Court will now have an opportunity to clarify this, ensuring that the ACCC and the Tribunal are applying the same standard, giving more certainty to Australian businesses.

The Federal Court won’t review what detrimental effects the Tribunal considered, and will not be able to reverse the Tribunal’s authorisation of the Tabcorp/Tatts merger. The most the Federal Court can do is send the matter back to the Tribunal for reconsideration. However, it will still be valuable as it will determine the correct assessment of the "public benefit" test for all future merger applications.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.


ACCC Media Release - 10 July 2017

Application by Tabcorp Holdings Limited [2017] ACompT 1 (22 June 2017)

The Conversation Article - 12 July 2017

Related Articles: