In announcing its proposed reforms to the Trade Practices Act 1974 (TPA), the Government has articulated its aim clearly: to empower the Australian Competition and Consumer Commission (ACCC) to reject acquisitions that would "substantially lessen competition in any local, regional or national market", as well as prevent companies buying up land to shut out new competitors. Supermarket chains - and creeping acquisitions - are the primary targets.

Lawyers in the space are cautious, if not outrightly opposed to the changes, with some questioning their necessity given the ACCC's existing expansive powers.

"The [ACCC] has always had the power to stop mergers in certain circumstances," says Brett Bolton, special counsel, Competition and Trade Practices at HopgoodGanim Lawyers.

There are also fears that in curbing the predatory growth of major retailers through new laws, all corporates will be affected, and that the ACCC's revised powers could lead to a considerable reduction in the number of approved M&As.

Fuelling the legal sector's response is the Government's fiddling with the "substantial lessening of competition" test, applied when deciding whether or not to block a merger.

"Although the current test is sometimes difficult to apply, it at least focuses the Commission's attention on the key issue of market definition, and on the related question of whether the proposed merger is pro-competitive," notes Bolton.

"The problem with the proposed changes is that not only do they substitute the current uncertain test for an equally uncertain lower test (namely whether the proposed merger would result in a 'material' lessening of competition), they also shift the focus away from whether the proposed merger will be pro-competitive in practice."

He's not alone in this criticism, with Henry Davis York partner and acquisitions specialist Scott Murray voicing similar concerns.

"The change from 'substantially lessen competition' to 'materially lessen competition' is reflective of a government's urge to tinker with things and will mean the ACCC has greater opportunity to influence M&A deals and the competitive landscape in certain industries," he says. "There is a loss of guidance from past examples in this country."

Overall, both believe the reforms are significant and unnecessary, with Murray arguing that the changes "add an extra layer of uncertainty and confusion to the legality of some M&A deals" in Australia.

"I think the existing laws allow for the competition effects to be assessed by the ACCC in local geographical markets and also to judge creeping acquisitions so, to my mind, the proposed laws are not essential," he adds.

However, Mallesons Stephen Jaques competition partner Caroline Coops suggests the latest amendments are an improvement on previous proposals, which were problematic from both competition and legal standpoints.

The reforms are an election promise, Coops notes. "In that context, the proposed reform is more economically rational than some of the previous proposals."

While not ruling out potential negatives, she says the reforms' bearing will largely depend on how the Government goes about implementing them.

"It remains to be seen whether the ACCC will seek to review all mergers at a local area level or whether merger clearances will become more data-intensive to address possible local area issues."

As for the overall impact on M&As, Coops does not necessarily anticipate significant change.

"All corporates will be subject to the changes, but, in practice, they are most relevant to businesses that operate in local markets such as supermarkets, child-care centres and petrol players," she says. "It is unlikely that these reforms will have a major chilling effect on M&A activity."

Bolton argues, however, that while he can appreciate the argument to restrict creeping acquisitions, he is also uneasy about the focus on market share.

"Under the new laws, a company which already has a substantial share of the market will not be allowed to acquire another company if that would have the effect of lessening competition in the market."

Bolton says the proposed laws do not provide guidance on how market "share" is to be assessed, creating uncertainty for business, and that the amendments do not "focus attention on the key question, which is whether the proposed acquisition is anti-competitive".

Despite a mixed response from the legal community, lawyers specialising in the area agree the changes will affect their workloads.

"Careful thought will need to be given in each case to competition aspects and there will no doubt be an increased need to further engage with a well resourced ACCC on line-ball cases," says Murray.

Coops and Bolton anticipate lawyers will be required to assist with the ACCC's merger clearance process. While parties will still be able to seek a formal or informal clearance, Bolton says the ACCC will have to apply the "new lower test" in deciding whether to issue one.

Consequently, there may be a short-term increase in merger parties seeking legal advice about clearances "which would not raise any concerns under the current 'substantial lessening of competition' test", says Bolton.

Coops also notes the likelihood that more parties will seek early assessment on whether the new reforms require informal clearances to be sought.

"This will particularly be the case in industry sectors where greenfields site acquisitions are common, given the ACCC's increased focus on this type of activity."

As for the competitive landscape, lawyers are hesitant to speculate on the market impact. On a global scale, however, Bolton believes the reforms could endanger the ability of Australian companies to grow and compete in the international marketplace.

"I am concerned that the new laws will prevent Australian firms from merging and growing to a size where they can effectively compete with their overseas competitors in all markets."

But says Dave Poddar, head of Mallesons' competition group, it won't prevent mergers overseas, becuase the laws apply only in Australia.

"The area where it may raise questions is the removal of the requirement for a market to be 'substantial'," he emphasises, "as this may lead to issues such as at what monetary or turnover level the merger control provisions start to apply."