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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Australia | Publication | februari 2024
The past 12 months have seen some significant developments in the Australian competition regulatory landscape. Further substantive developments are expected to occur during 2024.
In this commentary, we briefly summarise some of the key developments and trends over the last 12 months and provide some practical insights into five key developments expected in 2024 namely:
In August 2023, the Commonwealth Treasurer announced a new Competition Review and established a Taskforce within Treasury to assess whether Australian competition laws, policies and institutions remain fit-for-purpose. The Taskforce involves some 30 staff and is actively considering competition reforms focused on increasing productivity.
Several experienced ACCC employees were seconded into Treasury to participate in the Review, including Marcus Bezzi as Chief Advisor. The Taskforce is being supported by an Expert Advisory Panel comprising a number of commercial and government heavyweights, including Kerry Schott AO, John Asker, Sharon Henrick, David Gonski AC, John Fingleton CBE, Danielle Wood and former ACCC chair Rod Sims AO. The Panel is providing a sounding board for the Taskforce.
The genesis for the Taskforce is Australia’s declining productivity. Most advanced jurisdictions are undertaking similar policy reviews. The Taskforce objective is to enhance Australia’s competition policy and emulate some of the economic benefits achieved by the successful ‘Hilmer’ competition policy reforms from the 1990s. The government is mindful of recent OECD recommendations that suggested competitive tension has reduced in the Australian economy.
Interestingly, the Taskforce is adopting an evidence-intensive approach to law reform, although much of this empirical analysis is occurring in private within government. The Taskforce has been improving data sets and enhancing Treasury’s analytical capacity, then is testing whether proposals for law reform are consistent with the empirical evidence and would deliver meaningful net benefits to the Australian economy. While a number of competition reforms remain outstanding from recent reviews, the Taskforce is selectively focussing on a few key areas that are intended to deliver the greatest policy outcomes. While not yet formally publicly stated, these areas include merger law reform, aviation policy, digital transformation, and labour markets. However, the Taskforce expects that these areas of focus may evolve as the Review proceeds hence the Taskforce priorities are not enshrined.
The first area of focus by the Taskforce has been merger law reform. We comment on this below. We understand the Taskforce is providing important input into the Government’s aviation white paper that could well facilitate greater competition on Australian domestic aviation routes. The Taskforce is also considering labour market impediments in the context of the Australian Government’s 2023 Employment White Paper, including whether non‑compete are negatively impacting job mobility, innovation, and wages growth. As such, watch this space.
ACCC chair Gina Cass-Gottlieb is approaching the end of the second year of her five-year tenure. While she received a recent question in Senate Estimates highlighting a reduced number of ACCC enforcement actions in 2023, the ACCC’s success cannot be measured numerically on enforcement decisions alone. The reality is far more nuanced. With its effective use of the full range of regulatory tools (from media releases up to court outcomes), in our view, the ACCC is delivering against its 2023-24 Compliance and Enforcement Priorities and is having a real market impact.
Gina Cass-Gottlieb is known as a formidable competition lawyer. Two years into her tenure, she is leaving her mark on the ACCC and Australia’s economic landscape. We have seen the ACCC apply greater regulatory scrutiny, adopt a more informed and fact-intensive approach to decision-making, and ultimately deliver strategically-beneficial results well beyond enforcement numbers alone.
The ACCC has demonstrated an increased appetite to test and interrogate evidence and potential harms, including by making more extensive use of its statutory information-gathering powers. Meanwhile, the ACCC continues to selectively pursue enforcement action and litigate when needed, but is also achieving significant ‘wins’ in settlements hence avoiding litigation costs. We expect this trend to continue.
For example:
Proposals for Australian merger law reform are attracting significant media attention. Former ACCC chair Rod Sims AO commenced the debate in August 2021 to much scepticism, but some 30 months later, it now seems merger reform is inevitable.
Based on recent commentary, we think merger law reform is highly likely to occur during 2024 and hence is now a relevant consideration for transactional activity scheduled for late 2024. In essence:
We wrote a client alert on merger law reform in late November 2023 which is at the following URL: Fasten your seatbelts… merger law reform in Australia | Australia | Global law firm | Norton Rose Fulbright
However, this client alert is being overtaken by events – and merger reform is being expedited within government:
Antitrust law is influenced by the economic and political context within which it exists. We are now half-way through the 2020s and this decade has raised complex and unprecedented issues. While COVID is now largely behind us, the macroeconomic and inflationary challenges caused by supply-chain disruptions persist. The resulting cost-of-living pressures for households around the world are playing into domestic politics and ultimately into regulation as governments seek to address political concerns.
While antitrust agencies are usually independent of government, they are not immune from political and social pressure to address prevailing socio-economic concerns. They may also play a direct role in developing and implementing government policy.
In Australia, we are now facing a ‘cost of living’ crisis. Households are facing significantly higher costs in the post-COVID inflationary environment. While inflation is starting to ease, the pressures on households remain.
Some of the recent policy and enforcement initiatives by the ACCC must be seen within this global and domestic political context:
By any measure, we are therefore in for another interesting year with the global and domestic politics causing the ACCC to undertake detailed scrutiny of some economic sectors, irrespective whether underlying concerns result from anti-competitive behaviour.
Regulation of the digital economy remains at the ‘frontier’ of antitrust regulation in the 2020s. During the 2000s, the Internet was largely unregulated, partly due to spectacular innovation and efficiency gains. During the 2010s, we saw growing concerns about the increased economic and political power of the largest technology mega-firms. Now in the 2020s, there has been policy recognition of imperfect competition in technology markets as well as concerns that reliance on generic competition law alone may be insufficient.
The EU has, so far, pioneered the development and implementation of ex ante sectoral regulation. The EU’s experiment with greater regulation is continuing in real time and Australia is watching with interest. A number of other jurisdictions are now also considering and implementing their own sectoral regimes, hence the EU approach has been cascading into the rest of the world, although each jurisdiction is (so far) adopting its own bespoke regulatory solution.
In Australia, we are seeing a swathe of current reforms impacting all areas of the digital economy. The government has been implementing an ambitious reform agenda that has resulted in intensive rolling regulatory reforms covering artificial intelligence, privacy and data, online safety, misinformation, cybersecurity, critical infrastructure, consumer protection and digital platforms regulation. The four key digital economy regulators have also formed the ‘Digital Platform Regulators Forum’ namely the ACCC, the Australian Communications and Media Authority (ACMA), the Office of the Australian Information Commissioner (OAIC) and the eSafety Commissioner.
In Australia we have already seen the implementation of new and expanded economy-wide consumer measures, including an economy-wide prohibition against unfair trading practices and strengthening of the unfair contract terms laws, both of which are partly intended to address consumer concerns arising in digital markets.
Within this environment, the ACCC has been world-leading in conducting an extensive inquiry into digital platform services since 2020. The ACCC has been publishing interim reports every 6 months. In its fifth interim report of September 2023, the ACCC made a series of recommendations for sectoral regulatory reform.
In December 2023, the Government responded to the ACCC recommendations and indicated its ‘in principle’ support, although precise details were not provided. As such, we will see the development and likely implementation of a new regulatory regime for digital platform services in Australia in 2024. This is most likely to follow the EU and UK regulatory precedents, hence involve the targeted application of regulatory measures to certain digital services supplied by particular digital platforms that exceed specified regulatory thresholds. Once regulation is triggered, these digital platforms will become subject to more granular competition obligations that promote competition.
The global regulatory environment is still evolving and the Australian government will no doubt watch what happens in the EU and UK with significant interest. In Europe the Digital Platforms Act will become fully operational on 6 March 2024 with a myriad of new rules applying to designated gatekeepers. In the UK the Digital Markets, Competition and Consumer Bill is expected to receive royal assent in the UK parliament in April 2024 and the initial designation process will commence in October 2024. A key issue will be the appropriate level of granularity of regulation in the context of highly dynamic technology markets. Again, watch this space.
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