The Competition and Consumer Protection Act 2014 (the “2014 Act”) established the Competition and Consumer Protection Commission (“CCPC”) and introduced changes to the Irish merger control regime, with significant impact on property sales.
Parties to a property transaction must now consider the 2014 Act in structuring the transaction and ask the question whether a notification to the CCPC might be required.
What types of transactions are notifiable?
The 2014 Act identifies the types of transactions that are notifiable:
- where two or more undertakings previously independent of each other merge;
- acquisitions where one or more individuals who already control one or more undertakings, or one or more undertakings, acquire direct or indirect control of the whole or part of one or more other undertakings (usually share purchase acquisitions or joint ventures); or
- acquisitions of assets (including goodwill) that constitute a business to which a turnover can be attributed.
What are the thresholds triggering a requirement to notify?
A transaction will require notification to and clearance by the CCPC where, in the most recent financial year:
- the aggregate turnover in the State all of the undertakings involved is at least €50 million; and
- turnover in the State of each of two or more undertakings involved is at least €3 million.
Previously the threshold was met if at least two of the entities involved had worldwide turnover of over €40 million and the turnover in the State of one of the entities was at least €40 million. Note that the turnover of the seller is not relevant for this – just the turnover of the buyer and the target business or asset.
The provisions regarding the acquisition of assets that constitute a business to which a turnover can be attributed combined with the new thresholds brought in by the 2014 Act have the effect of bringing many property transactions within the merger regime. Transactions which only involve property, such as the sale of rented property, which would not have been caught under the previous legislation, could now be subject to the notification requirement. If a property generates an annual rental income of over €3 million and if the combined turnover of the target asset and the buyer is more than €50 million, then the sale will be notifiable. The implications for a seller of such property is that this requirement will normally result in a contract for sale being conditional upon merger clearance which could delay completion and, in theory, prevent the sale proceeding. In a competitive sale situation this could also make a buyer who does not require merger control clearance more attractive than one who does and the possibility that merger clearance might be required would need to be allowed for where relevant properties are put up for sale by way of tender.
Other Points to Note
- Who Notifies? In practice the seller and the buyer will usually liaise on the preparation of the notification and the target and buyer will present a joint notification, although they are not obliged to. Although the seller is not a notifying party, the CCPC will expect to see details relating to the seller in the notification. There is a filing fee of €8,000.
- Timing It is important to identify early whether a transaction is a notifiable, so that timescales for CCPC determination are factored in, if necessary, to the completion timescale. The CCPC has up to 30 working days from notification to make an initial assessment.
- Confidentiality within a week of receiving the notification, the CCPC will publish on its website brief (but not commercially sensitive) information relating to the notification. It will also publish its determination in full, however the notifying parties will have an opportunity to request the CCPC to redact specific information.
- Consequences of not notifying Failure to notify is a criminal offence and can result in hefty fines. A notifiable acquisition which has not been notified is void.