The ACCC Merger Guidelines: A reader’s manual
Henry Ergas,* Eric Kodjo Ralph† and Alex Robson‡
The Merger Guidelines released in March 2008 by the ACCC provide a guide to the analytical approach the ACCC intends to adopt to assessing mergers for the purposes of s50 of the Trade Practices Act. The new guidelines do a relatively good job in listing the factors that the contemporary economic literature identifies as potentially characterising mergers that reduce competition and harm consumer welfare.  However, unlike the earlier guidelines, they rarely explain the mechanism connecting the factors to the harm, and the conditions that need to be met for that harm to occur.  This article provides a ‘user’s guide’ to the guidelines that explains the reasoning that underpins the guidelines’ assertions, and draws attention to the assumptions on which those assertions rest.  We also provide an economic assessment of the guidelines and recommend a simpler criterion by which the ACCC should judge mergers.

The Report of the Dawson Committee has generally been well received by trade practices practitioners. The reasons for that favourable reception are well known and I do not intend to repeat them.

The issue of exclusive dealing and its economic impacts has received extensive attention in a number of recent cases, including Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd1, Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No 2)2 and Melway Publishing Pty Ltd v Robert Hicks Pty Ltd.3 Moreover, concern about exclusive dealing remains high on the public policy agenda, and is especially significant in respect of small business.

Although markets are usually defined in terms of opportunities for demand and supply-side substitution, there are numerous instances in which competition centres on the sale of packages of items which are economically distinct but in some sense complementary.

Recent models which claim to provide examples of profitable foreclosure—when a firm weakens competition by reducing its access to customers or inputs—have led to calls for more aggressive antitrust activity by courts and regulators. However, we show that the alleged anticompetitive behavior of these models is either typical of competition, or simply implausible. In addition, even if foreclosure occurs, it is almost always confined to the short run, and its efficiency consequences are commonly ambiguous. As a result, the new literature on foreclosure provides little impetus for intervention by poorly informed regulators.

Let me say at the outset that I am very pleased to comment on this paper. It deals with an important issue in a thoughtful and thought-provoking way. Having said that, I believe that it is seriously flawed. My purpose here is to set those flaws out. In essence, the paper proposes that s36 be modified through an “effects test” – that is, a test that assesses whether the conduct alleged to be in breach will have the effect or likely effect of substantially lessening competition. The authors recognise that it is not easy to define

The Industry Commission's Information Paper on Merger Regulation (henceforth referred to simply as 'the Information Paper' contains numerous errors of fact, law and analysis. My goal here is not to examine these in detail (a task already well accomplished by Warwick Anderson, Tim Grimwade, Jill Walker and Luke Woodward in a forthcoming paper in the Competition and Consumer Law Journal) but rather to explore some of the central themes in the Industry Commission's Paper.