The incorporation and consequent extinguishment of the lesser in the greater, such as the extinguishment of a smaller interest by a larger interest in the same thing when the two interests come together in the hands of one person, or the absorption of one company into another.

In the latter case (the absorption of one company into another), the word ‘merger’ will often be used to refer to the voluntary agreement that unites two existing companies into one new company. Mergers allow firm to achieve efficiency and diversify risk across a range of business pursuits, pleasing members and promoting the profile of the business.

However, the Competition and Consumer Act 2010 (Cth) prohibits mergers that would have the effect, or likely effect, of substantially lessening competition in the market. Parties to a merger and the merger itself may be regulated and/or investigated by the Australian Competition and Consumer Commission (ACCC) to ensure that the merger in two ways:

  1. Informal review – this allows parties to seek non-binding advice from the ACCC as to the impact of the merger on the market, and whether or not it would substantially lessen competition. A favourable review cannot be used as legal protection if the merger goes ahead.
  2. Merger authorisation – an application for merger authorisation may be lodged with the ACCC under section 50 of the Competition and Consumer Act 2010 (Cth). This will provide legal protection to both parties, and can only be sought prior to the merger being carried out. A merger authorisation cannot be granted unless the merger is deemed by the ACCC to be unlikely to substantially lessen competition, or to pose likely public benefit that outweighs any likely public detriment, including the lessening of competition.