ACCC tech-merger focus could spell trouble for big IT consulting deals

ACCC chair Gina Cass-Gottlieb has proposed a suite of new merger oversight measures focused on the technology industry, some of which could carry implications for Australia’s largest consulting firms.

The Australian Competition and Consumer Commission (ACCC) has set its sights on the tech industry, with calls for an overhaul of the country’s merger laws and greater powers of intervention.

In an address to the National Press Club in Canberra last week, ACCC chair Gina Cass-Gottlieb said that present regulations were no longer fit for purpose in a contemporary world where technology is central to the economy and everyday society.

“A handful of large tech companies are playing increasingly important roles in our lives, as gatekeepers over how we interact with each other and businesses, and yet in many cases these companies face only limited competitive constraint,” Cass-Gottlieb stated. “I am concerned that consumers and the Australian economy are particularly exposed in the current environment of uncertainty and vulnerability.”

As it stands, parties to a merger are not required to notify the ACCC until after the process is complete, by which time the regulator must apply to the courts for intervention should it determine the deal to be anti-competitive. A switch to a ‘clearance’ model would require companies to satisfy the ACCC that a proposed merger is unlikely to substantially lessen competition before it goes ahead, while granting the body more space to assess the deal.

“A proper process, without going to court cases, will allow us to be assured that we have sufficient time to scrutinise and take action where there are likely to be competition harms and also be looking more transparent to the public, to participants interested, and also to parties themselves about the process,” Cass-Gottlieb said, while noting a recent increase in the number of informal merger authorisation requests.

While the big tech platforms came in for special mention, it’s unclear at present how large-scale IT consulting and services firms might also be impacted by the proposed suite of changes, with the Big Four and Accenture among those to have embarked on a local tech buying spree in recent years. One of the suggested reforms would be to give consideration as to whether a merger grants increased access to or control of data or technology.

The big consulting firms might also be troubled by Cass-Gottlieb’s call for the new oversight framework to include an assessment of not only the actual but potential loss of competitive rivalry and whether the acquisition is part of a series of related ones, such as to “ensure that the focus is not just on the incremental change arising from a merger but also the overall enhancement of dominant positions by large firms in the market.”

While transaction size and company revenue thresholds would be the most likely triggers under a mandatory reporting regime – inviting closer attention to the likes of Capgemini’s $233 million purchase of Empired for example – any instruments around data access and overall market dominance could have implications for the bolt-on strategies commonly employed by the Big Four and Accenture, especially in areas such as cloud.