Threshold tests for the control of mergers: The Australian experience

Merger policy in Australia has been formulated for a small open economy. Tight merger control has been avoided in order not to impede rationalisation and improved international competitiveness. From 1977 to early 1993 a merger or acquisition was only prohibited if it would lead to a firm gaining a dominant position in a substantial market. As a result, few mergers were stopped and some which would probably have substantially lessened competition were allowed to proceed without detailed investigation. Since January 1993 a threshold test of substantial lessening of competition has applied — a reversion to the test included in the original 1974 Trade Practices Act. This is likely to mean that more proposed mergers will come under scrutiny and the trade-offs between efficiency gains and anti-competitive detriments will need to be evaluated in a greater number of individual cases. New draft merger guidelines released in November 1992 generally reflect contemporary thinking in industrial economics.