The Competition and Consumer Protection Act (“Act”) was signed by the President on 28 July and is scheduled to come into force on 31 October 2014.
The Act contains important reforms including:
- Merger of the Competition Authority and the National Consumer Agency to create a new body, the Competition and Consumer Protection Commission (“CCPC”);
- New merger notification thresholds and procedural changes to the merger control regime;
- Fundamental restructuring of the media merger regime which will be commenced separately by the Minister for Communications;
- Creation of a new competition offence and strengthened enforcement powers; and
- New provisions to prohibit certain unfair trading practices between businesses in the groceries sector.
Merger of the Competition Authority and the National Consumer Agency
The CCPC will comprise the current Chairperson of the Competition Authority and a maximum of six members, including the three current Members of the Competition Authority and the Chief Executive of the National Consumer Agency.
The statutory functions of the CCPC are the same as the originating bodies, namely, to promote competition and consumer welfare, in particular by enforcing competition and consumer laws.
Changes to Merger Control Regime – new thresholds and procedures
The Act significantly amends the financial thresholds, certain procedures and time periods that form part of the current Irish merger control regime. The substantive test against which a merger or acquisition is reviewed remains unchanged (ie, whether it is likely to lead to a substantial lessening of competition in the State).
- New financial thresholds: Mergers or acquisitions now require prior notification where:
- the aggregate turnover in the State of the undertakings involved is not less than €50 million, and
- the turnover in the State of each of two or more of the undertakings involved is not less than €3 million.
The alteration to the current financial thresholds represent a major change from the existing regime, in place since 2003, which requires each of two of the undertakings involved to have worldwide turnover of €40 million with both undertakings carrying on business in the State and one undertaking having turnover of €40 million in the State. It is hoped that the new financial thresholds will only capture mergers that have a strong nexus to the State and eliminate the notification requirement for some ‘foreign to foreign’ mergers.
- Greater flexibility as to the date of notification: Mergers can now be notified where there is a ‘good faith intention’ to conclude an agreement or, in the case of public bids where there is an announced intention to make a public bid. Under the current regime, a notification cannot be made until a binding agreement has been entered into or a public bid made.
- Merger review timescales increased: Phase I review period is increased from one calendar month to 30 working days, essentially a nine working day increase. Phase II review period is increased from the current four month period from notification to 120 working days, essentially a 36 working day increase.
- New ‘stop the clock’ powers in Phase II: The Competition Authority has always had a power to ‘stop the clock’ on its merger review in Phase I by making a formal request for information, a process used fairly frequently. The Act now allows the CCPC exercise this power in Phase II.
- Warehousing exemption eliminated: The Act now prohibits the use of so-called warehousing provisions to avoid the requirement to notify a merger or acquisition where the acquisition of control is constituted by the undertaking holding on a temporary basis securities in another undertaking for the purpose of arranging for onward sale.
- Out with the old, in with the new! Only mergers or acquisitions notified to the Competition Authority prior to commencement of the merger control rules in the new Act will be subject to the existing rules in the Competition Acts 2002-2012. On commencement of the merger control part of the Act, parties preparing to notify (but not yet done so) will not benefit from a transitional period and will be subject to the new timescales.
The Act radically amends the existing media merger regime. Although not confirmed, the Minister for Communications is expected to commence the media merger changes on the same date as the remainder of the Act (31 October 2014). Key changes include:
- New definition of ‘media business’ requiring notification: The definition now includes (i) ‘publication of newspapers or periodicals consisting substantially of news and current affairs on the internet’, and (ii) ‘making available on an electronic communications network any written, audio-visual or photographic material, consisting substantially of news and comment on current affairs, that is under the editorial control of the undertaking making available such material’.
- New jurisdictional requirement for carrying on a media business in the State: This requires either (i) a physical presence in the State and making sales to customers located in the State, or (ii) having made sales in the State of at least €2 million in the most recent financial year.
- Requirement to make two notifications: This will involve making one notification to the newly formed CCPC which will carry out the substantive competition review to determine whether the merger is likely to give rise to a substantial lessening of competition (SLC) and a separate notification to the Minister for Communications, each attracting a separate (as yet unspecified) fee.
- New substantive test for identifying a plurality concern: The new test is “whether the result of the media merger will not be contrary to the public interest in protecting the plurality of the media in the State” and this includes a review of ‘diversity of ownership and diversity of content’.
- Transfer of media review role: The Minister for Communications will have responsibility for consideration of media mergers in place of the current Minister for Jobs who retains responsibility for competition policy matters.
- New role for Broadcasting Authority of Ireland (BAI): If the Minister for Communications initiates a second phase “full media merger examination”, the BAI must prepare a report for the Minister for Communications outlining its view on the new plurality of the media test (above). An advisory panel may be set-up to assist the BAI in its review. The Minister for Communications will make the ultimate decision, taking into account the BAI report and, if applicable, the advisory panel.
- Extended timelines for media mergers: Phase I review period by the Minister for Communications is 30 working days but this can take place concurrently with the CPPC review period. A Phase II review period may now take up to 130 working days from notification. However, the Act’s drafting leaves a residual doubt that the review periods run concurrently, in which case timing for media merger review could take considerably longer.
New Criminal Offence Created and Strengthened Enforcement Tools
The Act introduces some important new provisions. Key changes are:
- Introduction of a new criminal offence: The Act introduces for the first time a new offence for failure, by any person, to disclose information to the police which he knows or believes might be of material assistance in relation to the prevention of the commission of a hard-core cartel offence (agreement to fix prices, limit output or share markets) or the investigation of any such offence. This new offence is punishable by fines of up to €5 million and/or imprisonment.
- Protection of whistle-blowers: Whistle-blowers are given protection from any penalisation by an employer on account of having communicated information regarding an alleged breach of law to the CCPC (insofar as the communication was made in good faith) or from any liability for damages.
- Treatment of legally privileged material: The Act makes clear that legally privileged material can be seized by the CPPC in the context of an authorised inspection. It also introduces new provisions designed to deal with disputes about whether business records taken as part of a CCPC competition investigation include legally privileged material giving the High Court the power to determine whether material is legally privileged, on application by the CCPC or the owner of the material.
Previously, the Government considered introducing a voluntary code of practice to address concerns in the groceries sector. However, a mandatory approach has been adopted. On 31 July 2014, the Minister for Jobs stated that the new Act is designed to “ensure fairness between suppliers and retailers in the grocery goods sector”. A consultation on the precise content of the Regulations is on-going. Therefore, key changes in the Act will allow:
- New ministerial powers: The Act empowers the Minister for Jobs to introduce secondary legislation for the regulation of certain unfair trading practices by a defined group of grocery businesses. This secondary legislation (regulations), if issued, will mandate and / or prohibit certain unfair supply chain practices by grocery retailers and suppliers that are part of a group of undertakings with an annual turnover of more than €50 million worldwide, known as ‘relevant grocery good undertakings’.
- Power to outlaw “unfair” practices: The Act lists a range of consumer and competition objectives that may form the basis of such regulations, as well as an illustrative list of practices that they must not incorporate that may be mandated or prohibited in such regulations. These practices relate to the form of contracts, how they can be varied, terminated or reviewed.
- Power to impose obligations: The Act allows for secondary legislation to require relevant grocery undertakings to implement new compliance procedures, including staff training, preparation of annual compliance reports and maintenance of records.
- New powers of enforcement: The CCPC will have the power to undertake investigations, “name and shame” offenders and issue ‘contravention notices’ directing a relevant grocery good undertaking to remedy a contravention of the regulations. Failure to comply with a contravention notice is an offence that could result in a criminal prosecution (punishable by fines) or a civil damages claim by an aggrieved party.