Merger law reform: Luke Wainscoat discusses how we should assess our merger control regime

Luke Wainscoat has published an editorial in the current issue of the Australian Journal of Competition and Consumer Law on the debate that Rod Sims started last year regarding the potential for merger law reform in Australia. The editorial is accessible here.

Luke examines how we can assess whether the current merger control regime is operating effectively. He says that we should not start by examining market power in Australia because this is very difficult to do at an economy wide level, and there are many potential causes of market power other than mergers.

Rather, Luke suggests that we focus on examining the effect of errors made by the merger control regime. Errors can occur when a merger that would have benefitted consumers is blocked, and when a merger that harms consumers is allowed. He finds that consumer welfare is maximised in the long run when the expected effects of errors and the operating costs of the regime are minimised.

With that in mind, Luke recommends that evidence should be collected on:

• the lost benefits to consumer welfare, if any, from mergers that were proposed but opposed by the ACCC (and did not go ahead) in the last ten years;
• the harms to consumer welfare, if any, from a selection of mergers that the ACCC opposed, but went ahead anyway in the last ten years; and
• the costs to operating the merger control regime, and how they may be changed by the ACCC’s proposals.

This evidence could be used to assess whether the merger control regime should be changed, and in particular whether it is too lenient.

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