Australian M&A regulatory overhaul points to broader interventionist-policy pivot

7 August 2024
By Ryan Cropp

Plugging Australia’s merger-law overhaul in Melbourne last week, Assistant Treasurer Andrew Leigh was at his big-picture best, positioning the government’s sweeping new changes as the culmination of over 50 years of policy innovation.

For those considering future deals in Australia, however, one remark stood out from the rest.

According to Leigh, the new merger system will not only enhance the ability of the Australian Competition & Consumer Commission, or ACCC, to identify and stop anticompetitive deals, it will also fast-track any transaction that’s consistent with Australia’s “national economic interest.”

And while the minister’s phrase may have been little more than a rhetorical flourish, it nevertheless pointed to a broader shift in the way the government is approaching markets — one that portends a tentative rethink of the so-called neoliberal consensus that has dominated Australian economic policymaking in recent decades.

That rethink, in its broadest possible terms, stems from the somewhat old-fashioned idea that markets can and do fail to achieve certain social outcomes and that governments of the future should be much less afraid to fill the breach.

This, of course, chimes with a similar vibe-shift in many of the world’s most advanced economies, including in the EU  and the US, where there has been much hand-wringing over the need to foster “national champions,” secure important supply chains and “re-shore” certain critical industries in the wake of recent economic and political shocks.

Crucially, too, this new paradigm touches on a wide array of M&A-adjacent policy areas, from trade and foreign investment to competition and the clean-energy transition.

In this context, Australia’s impending move to an administrative system of merger review — with the ACCC as judge, jury and executioner — looks a bit less like a predictable power grab by a left-of-center government and more like a local manifestation of a much deeper global shift in economic policymaking.

The big, philosophical and largely unanswerable question exercising the minds of lawmakers, regulators and corporate executives, though, is the obvious one: will it work?

The 'new competition'

In Australia, the clearest example of these new winds of political change is the government’s flagship industrial policy, dubbed “Future Made in Australia” — a multi-billion dollar suite of subsidies and incentives for companies operating in critical, forward-focused sectors of the economy.

According to the current outline of the policy, public support for private enterprise will be organized and deployed under two broad umbrellas, which it has designated as the “net-zero transformation” and “economic resilience and security” streams.

“A Future Made in Australia is about creating new jobs and opportunities for every part of our country by maximizing the economic and industrial benefits of the move to net zero and securing Australia’s place in a changing global economic and strategic landscape,” the government said in budget documents released earlier this year.

According to Treasurer Jim Chalmers, the policy isn’t designed to increase public investment, but rather to direct private investment towards industries that the government expects to be critical to the country’s economic future.

Unsurprisingly, Future Made in Australia is not without its detractors.

The main criticism, leveled most forcefully by the Productivity Commission, the government’s top independent advisory agency, is that it will lead to a culture of “picking winners” and run the risk of creating inefficient industries that will eventually become a drag on the broader economy.

“If poorly designed, industry policy such as the [Future Made in Australia] can be costly for governments, act as a form of trade protection, and distort the allocation of Australia's scarce resources towards activities that Australia is not best placed to undertake,” the commission said in its most recent submission to government.

In response, the government has proposed a “National Interest Framework” to assess the viability of such investments. But, as yet, little detail has been released about its rigor or transparency.

Either way, the economic pendulum is shifting. As Prime Minister Anthony Albanese declared in his initial announcement: This is not old-fashioned protectionism or isolationism, but the “new competition.”

“We must recognize there is a new and widespread willingness to make economic interventions on the basis of national interest and national sovereignty,” Albanese told the National Press Club back in April. “Critically, none of this is merely being left to market forces or trusted to the invisible hand.”

Whether this amounts to a coherent new economic program, though, is not entirely clear.

The problem, according to John Quiggin, a senior fellow in economics at the University of Queensland, is that although the economic and political earthquakes of the last decade and a half have slowly delegitimized the previously widespread faith in markets to deliver social outcomes in and of themselves, no viable alternative has emerged to take its place.

“No one really believes in [neoliberal policies] anymore, but people also sound vaguely horrified when you suggest anything else,” Quiggin said.

Instead, he says, governments have ended up with an ad hoc collection of policies largely designed around old ways of protectionist thinking, with politicians “standing in front of a big biscuit factory saying what a pity it is that this biscuit factory closed down,” he says.

Administrative steward

While the government hasn’t explicitly connected its merger-law overhaul to its Future Made in Australia agenda, in effect the policies have many complementary elements.

In January 2026, Australia will replace its existing informal, enforcement-based system of merger control with a new administrative regime, replete with mandatory filing requirements and strict rules around evidence production and appeals rights.

In draft laws released for industry consultation last month, the government described the ACCC as the “administrative steward” of the new system — a description befitting its new role as the key decision-maker on deals done within Australia’s borders.

Local competition lawyers have been largely opposed to the changes since they were first floated by ACCC Chair Gina Cass-Gottlieb in April 2024, objecting to what they see as a potential lack of “procedural fairness” in deal probes under the new regime.

The bitter truth for lawyers, though, is that this is largely by design. If the government’s overall intent is to give itself a greater say in the future shape of key markets and industries, it makes sense for that same government to give its own regulator more control over M&A activity.

For additional evidence of this interventionist shift in dealmaking, look no further than Chalmers’ planned rejig of Australia’s system of foreign-investment control.

Under changes announced in May, Chalmers promised to streamline applications for favored international acquirers, while simultaneously beefing up scrutiny of interventions in critical industries involving key tech, energy and defense assets. In a sign of his seriousness, the government then threw $15 million at the issue in its mid-year budget.

Initial indications, too, that the government would address an overlap between competition assessments conducted by the ACCC and Foreign Investment Review Board appear unlikely to materialize — yet another signal that it has little interest in weakening its control over dealmaking.

Of course, as a program for economic change, the government’s tweaks to its M&A processes are just that: tweaks. And whether or not such technocratic solutions amount to a break with the “neoliberal” policy framework may, in the end, be beside the point.

As Cass-Gottlieb put it in a major speech last week, citing the great architect of postwar economic interventionism, John Maynard Keynes, governments and regulators had to remain open to the “shifting picture of experience.”

“In periods of great change, it is essential that regulation and regulators are flexible and agile, and in doing so, create and administer regulatory frameworks that are ‘of the time’ and can adapt to continuing change,” Cass-Gottlieb said.

Dealmakers beware: That change is here.

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