Section 1.    Background to the guidelines

Liberalisation of trade across the globe has led to steady growth in international commerce, facilitated by improvements in international communication, technology and transportation. For over a decade Australia has embarked on a series of trade and other reforms that have internationalised the economy and further integrated it with the world economy.

Developments in information technologies also contribute to internationalising Australia's economy, for instance, by facilitating growth in electronic commerce. Such developments can create export opportunities to Australian businesses by enhancing information flows. At the same time, a growth in electronic commerce can accentuate the competitive discipline of imports in the Australian marketplace. ¹

Australia's economy is now more exposed to international competition than at any other time this century. ²

In this environment it is becoming increasingly important for Australian companies that compete in the trade-exposed sector of the economy to increase their share of export markets. This may involve entering new international markets, whether to attract new customers or to remain competitive to their Australian customers who are increasingly doing business abroad.

The international environment affects not only firms that export. The need to enhance international competitiveness is also an issue for the many Australian firms that compete with imported products or depend upon imports for essential inputs. Domestically sourced inputs are also affected by international competitiveness.

Mergers and acquisitions, and other collaborative arrangements such as joint ventures and export agreements, may be the vehicles used to enhance the international competitiveness of Australian firms. These arrangements often fall for consideration under competition laws, particularly the merger and authorisation provisions of the Trade Practices Act 1974, administered by the Australian Competition and Consumer Commission.

The Act is a flexible piece of legislation and is adaptable to changes in the competitive environment in which Australian firms find themselves. The Commission's administration of the Act is similarly responsive. This is particularly important in an increasingly competitive international environment where the administration of competition policy will intersect with trade and industry policies.

Competition policy has a close and complementary relationship with trade policy. Both trade and competition policy aim to enhance welfare through providing a more efficient allocation of resources, whether by lowering government barriers to trade or through promoting competition. Trade liberalisation will impact on the competitiveness of a market through the increased exposure of domestic industry to the discipline of international competition, just as competition regulation can impact on the trade policy objective of achieving open and accessible markets. The Commission accordingly takes account of the international trading framework when considering collaborative arrangements, including mergers, that aim to enhance the international competitiveness of Australian firms.

Competition policy is similarly an adjunct to the industry policy goal of enhancing exports and international competitiveness. It is an industry policy keystone that there is a need for certain sections of Australian industry (particularly in the trade-exposed sector) to rationalise and restructure to enable it to face international competition. It has been recognised in recent reports on industry policy that international competition is necessitating a reshaping of Australian industry. ³ Expanding exports, enhancing competitiveness and encouraging innovation are some of the strategies that can assist industry to meet the challenges of an increasingly competitive international marketplace.

The Commission recognises that Australian industries need to meet the challenges of this new enviroment.

It has published these guidelines to clarify its approach to international competitiveness issues in its administration of some of the provisions of the Trade Practices Act.

What is the purpose of these guidelines?

These guidelines outline the Commission's approach to collaborative arrangements (particularly mergers and acquisitions) where exports and international competitiveness are an issue, and the types of information which are relevant to the Commission's consideration of these arrangements. They also outline the Commission's concerns with respect to minimising domestic anti-competitive effects. The Commission's aim is to improve understanding of its approach and to assist the business community in understanding its options.

The guidelines supplement the Commission's Merger Guidelines (revised July 1996) which outline its policy for administering and enforcing those provisions of the Trade Practices Act which deal with mergers and related matters.

The central feature of these export guidelines is merger administration. Of course, there are other collaborative arrangements besides mergers which might be used by firms to enhance international competitiveness and the Commission's approach to such arrangements is discussed.

In particular, the guidelines examine:

• in Section 2, the process of reviewing and authorising mergers and joint ventures, including the Commission's procedures and priorities in determining:
  • whether s. 50 is breached in situations where firms merge to enhance their international competitiveness; and

  • whether authorisation should be granted to mergers that enhance international competitiveness;

• in Section 3, the ability of firms under the Act to form other collaborative arrangements such as export agreements and consortia; and

• in Section 4, some general issues the Commission takes into account when considering the international framework of a collaborative arrangement.

Endnotes

Section 1

¹ Advances in information technologies have led to worldwide Government initiatives identifying principles for electronic commerce so that the advantages of such technologies can be harnessed for the benefit of business, and in particular small business. For instance, on 1 July 1997, President Clinton released a report A Framework for Global Electronic Commerce outlining the principles that will guide the actions of the U.S. Government for global electronic commerce. Similarly, on 8 July 1997, Ministers from 29 European States agreed on a number of key principles that will pave the way to rapid growth in Europe of the use of global information networks: Press Release, Ministerial Conference on Global Information Networks, Bonn, 8 July 1997. back

² Mina G, and Gibbons P,, Trade and Competition Policy: A Survey of the Issues, DFAT International Trade Research Paper Series, AGPS, 1995, at 13. back

³ See, for example, Review of Business Programs, Going for Growth -- Business Programs for Investment, Innovation and Export, June 1997 (the Mortimer Report); MTIA and The Economist Intelligence Unit, Make or Break -- 7 Steps to Make Australia Rich Again, July 1997. back