Key Changes
Merger Control
Comment
When fully implemented, the Competition Act 2002 will replace all existing Irish competition legislation (other than the Groceries Order). Its provisions generally follow the recommendations in the 2000 Report of the Competition and Mergers Review Group (for further information please see Review Group Proposes Competition Law Reforms).
The act will not change the existing substantive competition rules. In particular, the prohibitions in the Competition Act 1991 against restrictive agreements, decisions and concerted practices, and against abuses of a dominant position, will continue to apply in essentially the same form. However, the act will change the existing regime in some fundamental ways.
The principal changes introduced by the act include the following:
- Notifications - the regime established by the 1991 act for the notification of restrictive arrangements to the Competition Authority will be abolished. The authority will lose its exclusive right to decide whether a restrictive agreement should nonetheless be regarded as compliant with the act because, on balance, its beneficial economic effects outweigh its negative impact. In practice, therefore, businesses and their advisers will have to make this assessment for themselves instead of relying on a decision of the authority. However, the authority retains the power to issue declarations stating that, in its opinion, specific categories of agreement which satisfy stated conditions comply with the act.
- Offences and penalties - the act identifies certain hardcore offences which will expose those convicted of them to imprisonment for up to five years. These offences involve participation in cartels relating to price-fixing, limitation of output or sales, or the sharing of markets or customers. The increased penalty results in enhanced powers of detention and questioning. Fines of up to €4 million or 10% of the turnover of the undertakings involved (whichever is the greater) may be imposed where a conviction is obtained in respect of any infringement of the act (not just hardcore offences).
- Authority's powers - the authority's powers of investigation have been greatly increased. For example, a search warrant for a 'dawn raid' will continue in force for one month and will allow repeat raids within that period. The authority will be entitled to take original documents and not merely copies, and will be entitled to raid the homes of company executives (using reasonable force to gain entry when necessary).
- EU law - infringements of EU competition law become criminal offences under the act. They attract the same powers of investigation and enforcement, and are subject to the same penalties, as infringements of Irish competition law.
The act introduces a new merger control regime, which is expected to commence later this year. The essential change is that any merger to be notified under the act will be notifiable to the authority, which will take the final decision in relation to the merger. In doing so, the authority will consider only the competition implications of the transaction.
In the case of media mergers, the minister will be entitled to prohibit or impose conditions regardless of the authority's decision. However, the minister will not be able to approve a media merger which has been prohibited by the authority on competition grounds. Therefore, only in media mergers will there continue to be any political involvement in the decision-making process.
The new legislative framework should allow the authority to concentrate its enforcement activities on pursuing the more harmful infringements of competition law, such as hardcore cartels, which can, if left unchecked, seriously damage the interests of those affected (whether they be final consumers or business customers). The more frequent contact between the business community and the authority which will result from its new role in relation to merger control should produce a better understanding of competition law generally and, in particular, lead to a better appreciation of the contribution which it can make towards improving the competitiveness of the economy generally.
For further information on this topic please contact Gerald FitzGerald or Damian Collins at McCann FitzGerald by telephone (+353 1 829 0000) or by fax (+353 1 829 0010) or by email ([email protected] or [email protected]).