The ACCC notched its first victory after the Federal Court held that the Australian Competitions Tribunal faulted in its reasoning that led to the approval of the Tabcorp/Tatts merger.

Background

The Tabcorp/Tatts merger proposal has been opposed by the ACCC ever since it was announced in November 2016. The ACCC’s primary concern was the potential detriment the merger could have on competition. After attempts were made by Tabcorp to sidestep the ACCC, by applying to and gaining approval from the Australian Competitions Tribunal, the ACCC was determined to take the case to the Federal Court for judicial review.

ACCC’s submission

In their submissions, the ACCC set out three grounds for judicial review:

  1. ACCC is seeking review of the Tribunal’s reasoning that it could only conclude that the proposed acquisition was likely to result in a detriment if the Tribunal concluded that there would be a substantial lessening of competition.
  2. The ACCC is also seeking review of the Tribunal’s failure to compare the likely future state of competition both with and without the proposed acquisition in considering the possibility of detriment.
  3. The ACCC is seeking review on the ground that the Tribunal made an error in the weight it gave to benefits, such as cost savings and revenue synergies, which would be retained by Tabcorp and not shared with consumers more broadly.

The Decision

Federal court passed judgement regarding the ACT decision. The ACCC was successful in only 1 of the 3 grounds and it was held that the ACT did not apply the test appropriately in considering whether there was a detriment to competition.

In its original decision, the ACT applied the test of whether there was a substantial lessening of competition to determine the existence of detriment. This means that minor reductions in competition would have been discounted from the considerations. The ACCC argued against this, maintaining that the test applied should have been whether there was any lessening of competition (as opposed to substantial), in effect including reductions in competition of all degrees. They expressed two reasons for this.

Firstly, in weighing the benefits of the merger against the detriment, even minor benefits were given weight. Therefore, it was only fair that minor detriments were considered. Secondly, previous decisions included minor detriments in their considerations, so suddenly disregarding them would result in inconsistency.

Final Thoughts

The merger proposal is high stake as it could profoundly affect the ability for competition to exist in the gambling industry. The ACCC recognises the important role competition plays in the prosperity of an economy and is therefore active in preserving its integrity.

The Federal Court has set aside the decision, but has called for more submissions to be made by all parties before another hearing on Thursday September 28.

Let us know your thoughts on the Tabcorp and Tatts merger proposal by tagging us #lawpath or @lawpath

Tony Zhen

Tony is a legal Intern at LawPath who is working with the contents team to provide legal insight for SMEs. With an interest in contract and business law he is currently completing his Finance and Law degree at the University of New South Wales.