An article on page 3 of Friday’s AFR caught my eye. It relates to ACCC merger clearance. In particular, the following quotes from John Kench:
“I think the fundamental problem remains that we need to find a way to break open some of the current processes” Mr Kench said. He called for the publication of submissions and “more open discussion of which market opponents or commentators are opposed and their reasons for opposition”
Now if John really thought this was a good idea he would also support the submissions from all parties, including the merging parties, being public. I suspect that he does not support this. If he did he would advise his clients to take the very open, very public ‘formal’ merger clearance route. Just to remind readers, this process came into law around 2006 and has never been used to clear a merger. Why? Because no merger parties have ever applied for formal clearance. In a merger, all parties want everyone else’s submissions to be public – but not their own. Under the formal process (subject to some minor exceptions) everything is public.
The informal merger process works bcause of three key elements:
- The ACCC keeps all submissions confidential so that suppliers, customers and competitors can put information to the ACCC without fear of market retribution;
- The ACCC keeps merger parties well informed during the clearance process so that they know what the ACCC’s concerns (if any) are about the merger and how they can provide information to try and clear that concern; and
- The ACCC casts a skeptical eye over all arguments put before it. After all, it is the ACCC who takes the relevant parties to court if they oppose a merger so it is the ACCC that has to be sure of its facts.
This mix of confidentiality, a ‘no surprises’ policy in communication with merger parties and a hurdle of ‘evidence to convince a Federal Court judge’, has worked well for the Australian business community. It means our merger clearance processes, while unique in international terms, are faster and more efficient than in other countries.
But if the business community really thinks they are broken, as John suggests, they already have a transparent alternative. In economics, we often judge preferences by what parties do, not what they say. The fact that no merger parties – including those John advises – have headed down the formal merger clearance route strongly suggests that the informal process serves the business community amazingly well.