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At the International Institute of Communication’s Telecommunications and Media Forum, Sydney 2023 our Economist Warwick Davis joined a panel on competition issues in the sectors and commented on proposed merger reforms in Australia and the United States. He suggested that the Australian Competition and Consumer Commission (ACCC)’s proposed reforms for processes and legal tests for merger clearance will be contentious but seem more likely to produce economic benefits than the proposed changes to merger guidelines in the United States. This note explains the reasons for his view.


Merger reform proposals are a response to increasing market concentration

Competition authorities in many parts of the world are steering the debate on mergers towards sterner enforcement. The recently released details of proposed changes to merger enforcement in Australia and the United States show that competition authorities are on quite different paths to achieve that goal.

In Australia, details of the ACCC’s proposals for merger reform, as provided to Australian Treasury in March 2023, were recently released under Freedom of Information laws.[1]

The US Department of Justice and Federal Trade Commission (the Agencies) issued new draft merger Guidelines[2] for comment in July 2023. As in Australia, merger guidelines do not have the status of law, but they have been influential in US court merger proceedings.

The proposed changes are different, but they are both reactions to similar concerns – perceived harms from increasing market concentration that have not been prevented by merger laws and/or enforcement practices:

There is growing evidence to support the view that Australian markets are becoming more concentrated…It is important that Australia’s merger regime is effective in preventing increases in concentration before they occur.[3]


[In the United States] Empirical research…has documented rising consolidation, declining competition, and a resulting assortment of economic ills and risks.[4]

Proposed changes to US Merger Guidelines renew emphasis on market concentration

The Agencies’ draft Guidelines have undergone a substantial change in form and substance from earlier versions.[5] The draft Guidelines show the Agencies’ desire to simplify the analysis of mergers that increase concentration or occur in concentrated markets, tied where possible to legal precedent. The FTC Chair has stated the draft Guidelines do not rely on “a formalistic set of theories” but “seek to understand the practical ways that firms compete, exert control, or block rivals”, and offer several ways to analyse transactions.[6]

The draft Guidelines have 13 specific guidelines that address analytical frameworks and specific challenges relating to serial acquisitions (creeping acquisitions in Australian parlance), buyer power in labour markets, platform markets and minority interests. This includes a return (in Guideline 1) to a stricter application of the ‘rebuttal presumption’ of market concentration that was first developed by the Supreme Court in 1961[7], and the introduction (in Guideline 6) of a rebuttable presumption in the case of vertical mergers, where a market share of more than 50% is involved.[8]

The changes from the 2010 version of the Guidelines on the significance of increasing market concentration are stark, as highlighted in Table 1. The thresholds at which the rebuttable presumption is engaged are reduced: in rough terms, a 6 to 5 merger of equally sized firms would now be subject to the rebuttable presumption while under the 2010 version it would not. For reference, the current ACCC Merger Guidelines approach (2017) is also highlighted, but these thresholds do not create rebuttable presumptions but instead provide an indication of the likelihood of concerns being raised.

Table 1: Changes in treatment of market concentration, US DOJ/FTC Merger Guidelines

Table 1 showing the changes in treatment of market concentration from 2017, 2010 and 2023, US DOJ/FTC Merger Guidelines

Source: US Department of Justice and the Federal Trade Commission, Horizontal Merger Guidelines, August 19, 2010, draft Guidelines, p. 6, ACCC Merger Guidelines, 2017.

Similar problems, but different responses in merger reforms

The ACCC also has expressed concern with increasing market concentration. But the ACCC’s proposed reforms do not specifically focus on elevating market concentration to a more central role in merger analysis. Rather, the key elements of the ACCC’s reform proposals include:

Concentrating on the right measure of competition?

We have previously suggested that the ACCC’s proposed changes to the process by which mergers are assessed, including formal merger clearance, are worthy of serious consideration. The changes would address defects in the current informal clearance regime and adjudication processes, particularly by empowering the ACCC to be the principal decision-maker and increasing the transparency of its decisions.

On the added measures, the proposed ACCC reforms are better for not aiming directly at market concentration, albeit that concentration will remain a significant element of merger investigations. This is for two reasons:

  1. Since the 1970s, economists have grown more sceptical of the causal connections between market concentration, competition, and economic performance. Concentration is only one factor in competitive health, and other market structures and conduct factors can be equally or more important.[10] For example, product differentiation, which is relevant to most mergers in Australia, highlights that the identity of competitors, and the similarity of their products, can have a greater influence on the competitive effects of mergers than aggregate concentration measures.
  2. So much emphasis on concentration places an undue reliance on the defined markets. The definition of markets is rarely clearcut, particularly where products are differentiated, and is inevitably a matter of judgement.

Striking the right balance on the cost of errors

The ACCC’s proposed changes to the section 50 legal test are likely to have a significant impact on the chance of contentious mergers being proposed and approved. Mergers that have uncertain effects would be more likely to be blocked than under the current system.

One framework through which to view the proposed changes is whether they minimise the total costs of decision-making errors:

  1. from not blocking anti-competitive mergers, and
  2. from blocking mergers that pose no threat to competition.

Compared with the existing legal test, the ACCC’s proposed changes will reduce errors of the first kind while increasing errors of the second kind. Both kinds of errors are relevant: while errors of the first kind harm consumers directly, blocking mergers that are pro-competitive will also harm consumers.[11] Undoubtedly, the balance of errors is complex to assess and we expect further debate over whether the proposed change restores or upsets the right balance.

Other proposals to structural merger factors seem more likely to be positive. The proposals focusing on accumulation of market power address long-standing concerns about creeping acquisitions but avoid placing increased weight on market concentration thresholds. This leaves more room for nuance in the merger analysis.

A step in the right direction

The ACCC’s proposals are a serious attempt to improve the processes and outcomes of merger reviews. Although the ACCC may be concerned about market concentration, it is helpful that the ACCC has not looked to tie its proposals directly to that concern – as is being pursued in the United States. While further debate on changes to the legal test is justified, we expect the ACCC’s proposed changes have reasonable prospects of improving competition and economic welfare.


[1] (ACCC proposals)


[3] ACCC proposals, pp. 4-5.

[4] Remarks of FTC Chair Lina M. Khan, Economic Club of New York, July 24, 2023, p.3.

[5] The Agencies have amended the guidelines several times since the first guidelines were released in 1968, including in 1982, 1984, 1992, 1997, 2010, and 2020.

[6] Remarks of Chair Lina M. Khan, Economic Club of New York, July 24, 2023, p.2.

[7] United States v. Philadelphia Nat. Bank, 374 US 321, 363 (1961).

[8] Draft Guidelines, p. 17: “If the foreclosure share is above 50 percent, that factor alone is a sufficient basis to conclude that the effect of the merger may be to substantially lessen competition, subject to any rebuttal evidence.”

[9] ACCC proposals, p. 11.

[10] For example, in oligopoly settings, common market features such as cost asymmetry between firms or economies of scale can reverse the standard intuition that increasing concentration reduces economic performance.

[11] The ACCC suggests that the increased costs of errors will be borne by the merger parties rather than the public. That would only be true if the merger produced no efficiencies or did not otherwise benefit competition.

Frontier Economics Pty Ltd is a member of the Frontier Economics network, and is headquartered in Australia with a subsidiary company, Frontier Economics Pte Ltd in Singapore. Our fellow network member, Frontier Economics Ltd, is headquartered in the United Kingdom. The companies are independently owned, and legal commitments entered into by any one company do not impose any obligations on other companies in the network. All views expressed in this document are the views of Frontier Economics Pty Ltd.

The Australian Competition and Consumer Commission has opened up consultation on its draft bargaining code between digital platforms and news media.

The bargaining code arises from the digital platforms inquiry, completed in 2019, and looks to address issues of power between the two groups in negotiating payments for content.  In particular, the digital platforms considered are Google and Facebook, while the news media covers all media organisations providing news to Australian services.

The concepts paper sets out 59 questions it is seeking input on, with submissions required by 5 June (a brief 14 working days consultation window). The consultation questions pose range from the definition of news to be covered under the code, to issues around bargaining, use of user data, and the way the digital platforms algorithms operate.

The ACCC anticipates it will release a draft mandatory code for public consultation in late July 2020. With digital platforms attracting attention from regulators around the world, it is likely that Australia’s response will be of interest as one of the first regulators to take action in this particular area.

Frontier Economics regularly advises clients on issues in telecommunications, media and digital platforms.

For more information, contact us.

The Australian Competition and Consumer Commission (ACCC) announced today that it would not act to prevent the acquisition of Pacific Magazines by Bauer Media. Over the last decade, all magazine titles have been losing circulation to online sources. Pacific Magazines was one business Seven West Media wished to sell.

The ACCC acknowledged the constraint imposed by online sources; nevertheless it was concerned that the acquisition would place two pairs of magazines in the same hands: Woman's Day and New Idea, and Take 5 and That's Life!. Frontier Economics was retained by lawyers for both Bauer Media and Pacific Magazines to undertake detailed empirical analysis of scan data to test in various ways the degree of substitution within each of these pairs of magazines. Our work found that the scan data over recent years did not reveal a high degree of competition within each of these pairs of magazines.

Frontier Economics regularly advises clients on competition matters involving the use of quantitative analysis.

The inaugural event of the Regulatory Policy Insitute ANZ (RPI ANZ), “Rebuilding faith in institutions, markets and competition – what is the way forward?” will be a full house this evening, with the event reaching capacity registration.

The panel discussion will feature George Houpis, Director of Frontier Economics alongside Professor George Yarrow, former chair of the Regulatory Policy Institute in Europe, Rosemary Sinclair, CEO of Energy Consumers Australia and Peter Kell, former deputy chair at regulators the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC).

George will focus on issues and challenges that governments and consumers face in the area of digital platforms. The ACCC’s report into digital platforms was released in mid-2019, and raised certain areas that the Australian regulator was looking into. Many of these same issues are concerning other regulators around the world. George’s presentation will discuss whether existing frameworks are enough to regulate this sector, with particular insights from the European context.

Frontier Economics is jointly sponsoring this event with Herbert Smith Freehills.

Frontier Economics (Europe) director George Houpis is visiting Australia and will present at the inaugural seminar of the Regulatory Policy Institute ANZ on Thursday 29 November.  "Rebuilding faith in institutions, markets and competition: what is the way forward?" will look at challenges revealed in regulated markets such as financial services, energy and the digital space. Is competition in these markets working effectively to deliver beneficial outcomes to consumers?

To respond to these challenges, there have been calls for greater regulation, greater competition and more enforcement. Different types of intervention have been put forward, and other issues are also now on the policy table: fairness, culture, ethics and trust. So what next for the policy environment? What comes next for regulation, markets and consumer?

George is a founding director of Frontier Economics and specialises in the theory and application of regulation and competition policy, market research and forecasting in the telecoms, postal and other sectors.

Along with George Houpis, the panellists discussing these issues include Professor George Yarrow, former chair of the Regulatory Policy Institute in Europe, Rosemary Sinclair, CEO of Energy Consumers Australia and Peter Kell, former deputy chair of ASIC and the ACCC. The panel will be chaired by Liza Carver, Regional Head of Practice, Competition, Regulation and Trade at Herbert Smith Freehills.

To register for this event, please visit the event booking page.

Frontier Economics is jointly sponsoring this event with Herbert Smith Freehills.

For more information, contact us.

Frontier Economics chairman Lord Gus O'Donnell and former Australian Minister for Trade and Investment Andrew Robb AO presented to a full house at the 'Brexit & Australia" event in Singapore held on 25 September. The audience was treated to the unique perspectives in government and international trade offered by both presenters, with the occasional controversial statement thrown in!

The Frontier Economics chairman spoke about how Brexit came to pass and the decisions made by the British Government along the way, stretching over three years and three Prime Ministers . He also spoke about the challenges faced by the current government in trying to negotiate a deal that would result in the UK leaving the EU in a more orderly fashion than crashing out with no deal Such a deal would mark the end of the beginning of the negotiations required between the UK and the EU. The next stage is to sort out the details of the UK’s trading relationship with the EU, to replace the deals the EU has with other countries and to negotiate trade deals with countries like Australia, Canada, New Zealand and the USA. Andrew Robb drew parallels between Australia’s program of microeconomic reforms in the 70s and 80s to show that while that transition was difficult, it was followed by substantial economic growth as the country became more liberalised and trade opened up. The parallel drawn with Brexit is that it may have long term beneficial effects on trade, particularly with countries outside of the EU (e.g., Australia).

The event was co-presented by the Australian Chamber of Commerce, Singapore, and the British Chamber of Commerce, Singapore, with the discussion moderated by Juliette Saly from Bloomberg Radio & Television.

Frontier Economics was delighted to sponsor this event as part of our 20th anniversary celebrations.

For more information, contact us.

The Australian Chamber of Commerce and British Chamber of Commerce in Singapore are presenting a joint event, "Brexit & Australia" on Wednesday 25 September 2019.  Frontier Economics is co-organising this event as part of our 20th anniversary celebrations. Brexit & Australia will discuss what is happening in the lead up to and following October 31st when Brexit is due to take place. Prime Minister Boris Johnson promised that the UK will leave the EU regardless, however, there is still considerable uncertainty about the process and what it form it will take. Further ahead, what does Brexit look like for Asia and Australia?

Join our key speakers, Lord Gus O'Donnell, former British senior civil servant & economist, now Chairman of Frontier Economics (Europe) and Andrew Robb AO, former Minister for Trade and Investment in Australia (2013-2016) as they share more on relations between the UK, Australia and the rest of the world.

We would like to thank AustCham and BritCham for co-organising this event. To register, please visit the event page.

In 2019, Frontier Economics is celebrating 20 years of economics.

For more information, please contact us.

The Australian Competition and Consumer Commission (ACCC) today published its final report on its inquiry into digital platforms with a particular focus on the impact of the platforms on media and advertising.

The ACCC’s inquiry has extended beyond competition issues, as it addresses concerns regarding privacy and the provision of certain kinds of content which promote the public interest (particularly news journalism). The ACCC does, however, identify certain competition concerns in markets where digital platforms and traditional media compete, particularly that current regulations do not facilitate “competition on the merits”.

The report includes 23 far-reaching recommendations, although it has avoided recommendations that seek structural reforms of digital platforms. The report includes a recommendation to set-up a dedicated tech regulator, which would provide ongoing monitoring of whether digital platforms are engaging in any anti-competitive conduct and would have the power to enforce any necessary remedial actions.

A recommendation relating to merger law is likely to prove particularly contentious. The ACCC proposes that Section 50(3) of the Competition and Consumer Act 2010 (CCA) be amended to incorporate the following additional merger factors to the non-exhaustive list:

(j) the likelihood that the acquisition would result in the removal from the market of a potential competitor;

(k) the nature and significance of assets, including data and technology, being acquired directly or through the body corporate.

Frontier Economics does not support this recommendation. We consider that Australia’s merger law is deliberately drafted broadly and is capable of addressing issues relating to digital platforms. Past mergers have often included the impact of removal of potential competitors (for example, this was a key consideration in mergers between the Australian Stock Exchange and Sydney Futures Exchange, and between Foxtel and Austar). Considerations relating to barriers to entry created by control of data and technology are very similar to other kinds of barriers to entry. In our view, adding further to lists of extensive lists of non-exhaustive factors is unlikely to assist the courts in making better decisions regarding mergers or acquisitions by digital platforms.

The ACCC has also flagged that it may lobby government for amendments to merger laws to make it more difficult for mergers or acquisitions in certain circumstances, reflecting its dissatisfaction with the resolution of past cases. Frontier Economics does share some of the ACCC’s concerns regarding the treatment of evidence from parties to transactions (see our bulletin Is that a fact?) and the acceptance of behavioural undertakings.

Frontier Economics regularly advises clients in the media and communications sector on a range of matters, including competition. We advised a client in regard to the digital platforms inquiry.

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The Australian Competition and Consumer Commission (ACCC) has determined that wholesale regulation of short message service (SMS) termination will no longer be applied. Previously, these services were captured within the ACCC’s definition of Mobile Terminating Access Service (MTAS) but the definition will now only capture mobile voice services. Voice services will be regulated by the ACCC for a further five years.

The MTAS is an essential wholesale service that allows consumers on different mobile networks to make calls or send SMS to each other. It requires mobile network operators to connect or ‘terminate’ calls or SMS between their different networks.

Frontier Economics prepared an analysis for the Vodafone Hutchison Australia of the effects of the imposition of SMS regulation in 2014. Since regulation was introduced five years ago, the price of sending an SMS has dropped considerably. As a consequence, there has been a significant increase in “spam” SMS and the use of SMS in “scams”, which have had significant negative effects on consumers.

Frontier Economics advises clients in the telecommunications sector on a range of regulation issues.

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The Australian Competition and Consumer Commission (ACCC) today announced it would oppose the proposed merger of VHA and TPG.

The ACCC cited Australia’s concentrated mobile and fixed services markets in its media release, but particular emphasised the potential lessening of competition in retail mobile markets as being of concern.

Critically, the ACCC found that TPG has the capability and commercial incentive to resolve the technical and commercial challenges it is facing, including the Federal Government’s ban on the use of Huawei equipment for 5G networks. It cites TPG’s mobile spectrum, an extensive fibre transmission network which is essential for a mobile network, a large customer base and well-established telecommunications brands as reasons why there was a “real chance” TPG would enter as the fourth mobile network operator in Australia.

The merger parties have a number of options if they wish to proceed with the merger, including:

As a result of 2017 reforms, the parties no longer have the option of directly seeking authorisation of the merger through the Australian Competition Tribunal.

The parties have advised that they will seek a declaration from the Federal Court that the merger should be permitted on the basis it will not substantially lessen competition.

Frontier Economics has been advising the merging parties.

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