Chapter 3 - Federal Court proceedings

3.1        Under Australia's informal merger clearance regime, if the ACCC decides to oppose a proposed acquisition and the merger parties subsequently decide to proceed, the ACCC would need to take legal action through the courts to stop the acquisition.

3.2        Choice noted that there are a number of alternative processes available for merger parties such as Metcash to obtain formal clearance of a proposed acquisition if they consider the decision reached by the ACCC under the informal review process was incorrect. These avenues include:

• formal clearance from the ACCC (under this process the ACCC is limited to considering only the competition effects of the proposed transaction);
• authorisation from the Australian Competition Tribunal; or
• a declaration from the Federal Court that the transaction would not contravene section 50 of the Trade Practices Act 1974.[1]

3.3        However, on 23 November 2010 Metcash announced that it had informed the ACCC of its intention to proceed with the proposed acquisition.[2]

3.4        On 8 December 2010, the ACCC instituted proceedings in the Federal Court of Australia seeking:

• an injunction restraining Metcash from completing the proposed acquisition; and
• a declaration from the Federal Court that, by completing the proposed acquisition, Metcash would contravene section 50 of the Trade Practices Act (now the Competition and Consumer Act 2010). 

3.5        As the ACCC's decision in this matter was made under the informal merger clearance process, the Federal Court will not review the ACCC's decision but will instead be required to form its own view on the proposed acquisition (the court may take into account the findings the ACCC reached during its review). Choice submitted that 'although the ACCC has come to a decision in the general sense, there is no decision in the technical legal sense of being determinative of an issue of fact falling for consideration'.[3] Unlike the ACCC's informal decision, however, the decision of the Federal Court, subject to any rights of appeal, will be binding on Metcash.

Information available for public scrutiny

3.6        The limited information which is publicly available about the ACCC's analysis in this matter, and therefore the limited ability for interested parties to provide detailed comments to this inquiry, was also noted by submitters. After undertaking an informal merger clearance review, the ACCC generally publishes a Public Competition Assessment if it has decided to oppose the transaction. This document outlines the basis for the ACCC's final decision, subject to any confidentiality issues. The matters taken into account when deciding to prepare and release these documents are summarised on the ACCC's website as follows:

The ACCC will endeavour to publish public competition assessments on the website shortly after making a decision, recognising that more complex matters that raise significant competition issues may require more time to ensure the reasons are in a publishable form, taking into account any legal and commercial sensitivities.[4]

3.7        In its submission, Choice noted that it was not possible for it to comment on the facts considered or analysis undertaken by the ACCC at this time due to the absence of a Public Competition Assessment. However, Choice stated that it:

...has no reason to believe that the ACCC would have departed from its usual procedures under the Merger Process Guidelines. These procedures have been developed over many years and have formed the basis of a large number of mergers. In this particular case, it is also relevant that the ACCC conducted an inquiry into the grocery sector in 2008. Based on these considerations, there seems little reason to doubt the ACCC was well placed to reach the view it announced on 17 November 2010.[5]

Committee view

3.8        The committee notes that since the ACCC's decision to oppose Metcash's proposed acquisition of the Franklins supermarket business was referred to it for inquiry and report, proceedings related to this matter have commenced in the Federal Court of Australia.

3.9        Notwithstanding the significance of any competition issues associated with the proposed acquisition, the committee recognises this matter will be examined in detail through the judicial process. The committee believes this is an appropriate manner in which to test the arguments and resolve the matter.

Senator Alan Eggleston
Chair

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