The Competition Authority (the Authority) was established in 1991 and is governed by the Competition Act 2002 (the 2002 Act), as amended. 2010 saw considerable flux in the membership of the Authority, with three members leaving the Authority during the course of 2010, including the chairman, William Prafiska (to assume the position of financial service ombudsman), and one member leaving the Authority in January 2011.
In 2010, the 2002 Act was amended to take account of a practical difficulty which arose in the operation of the Authority. The 2002 Act had required the Competition Authority to have a chairperson and at least two other ‘wholetime’ members in order to be quorate. In 2010, following the resignation of the chairman and two other members, the Authority was left with only two members. The appointment of new members to the Authority could only be made following a public competition. The Competition (Amendment) Act 2010 (the 2010 Act) permits the minister to fill member vacancies with temporary members. Since the passing of the 2010 Act, the minister has appointed two temporary members (Gerald FitzGerald and Isolde Goggin) so that together with the Authority’s only remaining permanent member (chairman Declan Purcell) the Authority has the required statutory number of members.
The minister for enterprise, trade and innovation (the minister) launched a public consultation in respect of the potential revision of the 2002 Act in late 2007 and is expected to bring forward amending legislation during the course of 2011 which will bring about substantial changes to the operation of competition law in Ireland, including providing for the amalgamation of the Authority and the National Consumer Agency (NCA). Further, in June 2009, the minister for finance announced that the ‘consumer and education’ role of the Irish Financial Regulator is expected to be assigned to the NCA and a report published in July 2009 has recommended that the Authority be amalgamated with the Irish Takeover Panel. It should be noted, however, that a government election is due to take place in spring 2011 which is likely to lead to a change of government and may involve a change of policy.
The Authority investigates alleged breaches of the competition rules either on its own initiative or in response to complaints. Although investigations usually begin with requests for voluntary submission of information, the 2002 Act confers extensive powers on the Authority to compel the production of evidence – including powers to summon witnesses, compel the production of documents and carry out dawn raids. The Authority is not empowered to determine whether a breach of the 2002 Act has occurred, nor can it impose penalties. Proceedings in both civil and criminal matters are instead brought to court. For this reason, Ireland has designated the national courts, in addition to the Authority, as relevant ‘competition authorities’ for the purposes of EC Regulation 1/2003.
The Authority may bring summary criminal proceedings for ‘minor’ competition offences or submit a file to the director of public prosecutions (DPP) for prosecution of more serious offences. There have been a number of convictions for competition law offences in the past five years, with a total of 32 convictions on indictment secured by the DPP for offences under the 2002 Act, involving the heating oil and retail motor sales sector.
Most recently, during the course of 2008 and 2009, the DPP brought charges under both the 1991 Act and the 2002 Act against a number of Citroën dealerships and individual officers and directors of those dealerships for membership of a price-fixing cartel covering Citroën vehicles. Proceedings are ongoing; however, a number of the companies and individuals involved have been convicted. Most notably, in April 2009, a director and his company were each fined e30,000 for entering into the Citroën cartel and e50,000 each for implementing the cartel’s anti-competitive activities. These are the highest fines imposed by an Irish court under the 2002 Act to date for involvement in a cartel. The director in question was also sentenced to 15 months in prison, which was suspended; however, in November 2009, he was sentenced to 28 days in prison for failure to pay the fines imposed on him. With the exception of the above case, all custodial sentences imposed to date for competition offences under the 1991 and 2002 Acts have been suspended by the courts. However, the High Court’s specialist competition law judge, Mr Justice Liam McKechnie, has indicated in a recent judgment (DPP v Patrick Duffy & Duffy Motors (Newbridge) Limited) that the practice of suspending custodial sentences for cartel activity or price-fixing is likely to cease in the near future as, in his view, the imposition of fines does not constitute a sufficient deterrent to cartel activity.
The Authority has, in conjunction with the DPP, put in place a cartel immunity programme under which full immunity from criminal prosecution under the 2002 Act can be obtained by the first member of a cartel to come forward with sufficient evidence to warrant a referral of a completed investigation file to the DPP, provided that the cartel member in question:
- did not coerce other undertakings into joining or remaining in the cartel;
- did not instigate the cartel; and
- was not its ringleader.
In July 2010 the Authority announced a review of the cartel immunity programme. The most significant change proposed by the Authority and the DPP is to remove the prohibition on the ringleader of a cartel from availing of immunity. However, the Authority proposes to maintain the current exclusion of undertakings that coerce other undertakings into joining or remaining in the cartel or who instigated the cartel activity.
The Authority may also bring civil proceedings seeking civil remedies (such as an injunction or court order) where in its view that produces a more appropriate result. In July 2006 the High Court found against the Authority in an action taken by the Authority against a plan to rationalise the Irish beef industry, alleging output limitation and market-sharing. The High Court found that the Authority had failed to produce credible evidence to show that the plan, if imposed, would prevent, restrict or distort competition in the relevant market. The Authority appealed this decision to the Supreme Court, the hearing of which was suspended in March 2007, when the Supreme Court took the view that the European Court of Justice’s interpretation of article 81(1) of the EC Treaty (now article 101(1) of the Treaty on the Functioning of the European Union (TFEU)) was necessary to enable it to give judgment. The European Court of Justice published its decision in November 2008. It agreed with the Authority. On 3 November 2009, the Supreme Court allowed the Authority’s appeal with respect to article 101(1) and remitted the case back to the High Court to determine the application of article 101(3) of the TFEU (previously article 81(3)) to decide whether a good defence existed under article 101(3) (which states that it is a good defence to show that the agreement or arrangement contributes to improving the production or distribution of goods or provision of services, or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, without imposing terms that are not indispensable to the attainment of those objectives or affording undertakings the possibility of eliminating competition). However, before the High Court had an opportunity to reach a decision on the issue, BIDS (the Beef Industry Development Society) withdrew its claim on 25 January 2011 and agreed to pay a substantial contribution to the Authority’s costs in the case.
Under Regulation 1/2003, it is not possible for undertakings to pre-notify agreements to the Authority for clearance. Instead, undertakings and their legal advisers are responsible for ‘selfassessment’ to ensure that their agreements comply with the 2002 Act. The Authority provides guidance to businesses by publishing declarations (broadly equivalent to block exemptions) and enforcement decisions, setting out its reasoned analysis in cases where it has closed an investigation without initiating court proceedings, either following receipt of undertakings from the parties or where no breach of the competition rules was established.
The 2002 Act provides for a mandatory obligation to notify the Authority of mergers if: the worldwide turnover of each of two or more undertakings concerned is not less than e40 million, and each of two or more undertakings concerned carry on business in any part of Ireland or Northern Ireland, and the turnover in the state (Ireland) of any one undertaking is not less than e40 million. An undertaking is regarded as ‘carrying on business’ in the island of Ireland if it has a physical presence in the island, or without having a physical presence there, has made sales into Ireland of at least e2 million in the most recent financial year. Mergers below these thresholds may be notified to the Authority on a voluntary basis. The substantive test for assessment is whether the merger would ‘substantially lessen competition’ in the markets in the state. To date, the Authority has blocked three mergers: in October 2004, it blocked IBM from purchasing an Irish subsidiary of Schlumberger; in October 2006 it blocked the acquisition by Kingspan of Xtratherm; and in August 2008 it blocked the proposed acquisition by Rye Investments Limited (Kerry) of Reox Holdings Plc (Breeo). The first appeal against the prohibition of a merger under the 2002 Act was decided in 2009, with the High Court overturning the Authority’s above-mentioned decision to block the proposed acquisition by Kerry of rival consumer foods company, Breeo. Although the transaction proceeded, in April 2009 the Authority appealed the High Court’s decision to the Supreme Court. At the time of writing, the Authority’s further appeal to the Supreme Court is pending.
In October 2008, the Credit Institutions (Financial Support) Act 2008 (the Act) was enacted to give effect to the state guarantee of certain credit institutions in the wake of the banking crisis. Section 7 of the Act provides for the application of a special merger regime in circumstances where the merger involves a credit institution and the minister for finance is of the opinion that the merger is necessary to maintain the stability of the financial system in the state. In those circumstances, the power to determine whether the merger should be approved under the merger control provisions of the Competition Act will lie with the minister for finance and not the Authority. Such mergers will be notifiable to the minister for finance, rather than the Authority, and such mergers may not be implemented without ministerial approval. The approval of the minister for finance has yet to be sought under the special merger regime provided under the Act.
In January 2009 the minister published the Report of the Advisory Group on Media Mergers, which recommended significant changes to the rules and procedures governing the media merger regime in Ireland. While no indication has been given by the minister as to whether these recommendations will be accepted, it was anticipated that legislation would be brought forward in 2011 which would make significant changes to the media merger legislation in Ireland. However, as noted above, a government election is due to take place in spring 2011 which is likely to lead to a change of government and may involve a change of policy. In December 2010, the Authority launched a public consultation in respect of its Merger Guidelines, which remains ongoing.
The Authority’s advocacy division conducts studies and makes recommendations on competition in specific markets or market sectors; advises the government on competition implications of proposed legislation; and identifies competition constraints arising from administrative and regulatory practices. The advocacy division has published reports and recommendations on competition in the legal, dental, private health insurance and retail grocery sectors, and has successfully campaigned for the repeal of the Groceries Order – a statutory instrument that prohibited below-cost selling in the grocery trade – and introduced three new subsections into the Competition Act prohibiting certain conduct on the part of grocery goods undertakings.
The ongoing climate of economic uncertainty in Ireland continued in 2010, leading to further cuts in public expenditure and, consequently, to the Authority’s budget, which has had a significant impact on the Authority’s already constrained resources. In the emergency budget introduced by the Irish government in April 2009 a moratorium was implemented on recruitment and promotions in the public sector. The Authority, when fully staffed, has a staff of 59 (including members); however, as a result of the moratorium, the Authority has not been in a position to replace departing staff members. The Authority has expressed its concern that a lack of funding and resources is impeding its ability to effectively enforce competition rules in Ireland. In a speech to a conference in Dublin in October 2010 the chairman of the Authority noted that at its current level of resources the Authority is ‘no longer in a position to investigate and assist the [DPP] in the prosecution of criminal cartels to the extent [it has] done in the past’ and that the Authority ‘will be doing well’ if it concludes one major civil (ie, non-criminal) investigation per year.
The worsening economic situation in Ireland culminated in late 2010 with the Irish government obtaining an e85 billion rescue loan package for Ireland by member states of the European Union through the European Financial Stability Fund and the European Financial Stability Mechanism; bilateral loans from the United Kingdom, Sweden and Denmark and the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) on the basis of specified conditions. A programme for support was agreed by the Irish government with the EU Commission and the IMF, in liaison with the European Central Bank, and the conditions governing the programme have been set out in a memorandum of understanding. In late November 2010, the IMF met representatives from the Authority to discuss the Authority’s views on structural reforms required in competition law and policy in Ireland. Encouragingly for the Authority, the structural reforms proposed by the IMF in the memorandum of understanding endorse a number of the recommendations previously made by the Authority to the Irish government , including:
- the removal of restrictions to competition incertain sectors including the medical, legal and pharmacy professions;
- the amendment of the law to empower judges to impose civil financial penalties and other sanctions in non-criminal competition courtactions in order to generate more credible deterrence; and
- in response to the Authority’s concern regarding the Irish government’s promises to exempt certain sectors from competition law, a requirement that the Authority list restrictions in competition law which exclude certain sectors from its scope and consider the possible impact of any such exemptions.