Increase in the number of Irish merger notifications
2018 saw 98 notifications of mergers and acquisitions to Ireland's Competition and Consumer Protection Commission (CCPC). This was an increase of 36% in terms of the number of notifications over the number notified in 2017. The number of notifications in 2018 equalled the highest number of notifications on record for either the CCPC or, its predecessor, the Competition Authority. The 2018 tally of notifications was high not just compared to 2017 but historically too. It was 36% higher than the average notifications in 2015-2017 (inclusive) and 164% higher than the average number of notifications for the period 2009-2014 inclusive.
The steady increase in the number of notifications in recent years is outlined below:
While there was no prohibition of a notified transaction during 2018, the level of CCPC activity associated with the review of transactions has risen considerably. Prohibitions are rare in Ireland – of the 958 notifications made between 2003 and 2018 (inclusive), there were only three prohibitions and one of those was overturned by the High Court leaving only two intact (neither of which had been appealed to the High Court). It is a matter of speculation as to whether this elevated activity is due to increased vigilance or if it was necessary. Irrespective of the rationale, it is now a reality that notification review in Ireland is more intensive and generally longer than in the past. Merger control in Ireland is also different than merger control in other jurisdictions.
Sectoral analysis of notifications
It is interesting to consider the sectoral breakdown of notifications. Real estate/property was the most significant sector in terms of notifications in 2018 but this could fall in 2019 given the changes in the turnover thresholds which entered into force on 1 January 2019 (see below). The other economic sectors which were most active in 2018 were financial services, communications, healthcare and the motor sector. There was less activity in 2018 in the motor fuel sector than there was in 2017.
Merger review processes
Non-extended Phase 1 notifications were dealt with in an average of 24 working days which was the same as in 2017 despite the increase in the volume of notifications. This sustained performance should be welcomed by the CCPC and its stakeholders. Some reviews went close to the maximum review period under the legislation (i.e. 30 working days) but, there was also the exceptional situation of the CCPC review lasting as briefly as 13 working days in one case.
There were more extended Phase 1 notifications in 2018 than in 2017. 14 extended Phase 1 investigations in 2018 represented a 78% increase on 2017 when there had been nine. An extended Phase 1 investigation involves the issuance of a request for information which is a detailed questionnaire that can often involve the disclosure of a large volume of information and documentation to the CCPC. This results in a much longer process as the statutory review period re-starts when an RFI response is submitted and deemed to be satisfactory.
Of the 14 extended Phase 1 investigations in 2018, three of them became Phase 2 investigations in 2018 (there had been none in 2017) and six of the 14 were still being investigated in 2019 so could become Phase 2 investigations.
There were more Phase 2 notifications in 2018 than in 2017. Three Phase 2 investigations occurred in 2018 but there had been none in 2017. This shows an apparent change in approach by the CCPC and/or that notified transactions have become more complicated. Of these three Phase 2 cases in 2018, the CCPC cleared two in 2018 (i.e. Trinity Mirror / Northern & Shell and Enva / Rilta) while the third one was still under review at the start of 2019 (Live Nation / Gaiety).
While the Irish competition legislation refers to working days, business people usually plan in terms of calendar days. Using the latter approach, the average assessment of a Phase 1 case was 33 calendar days while the average assessment of a Phase 2 case was 193 calendar days.
The CCPC used formal powers to obtain required information more in 2018 than in previous years. This is again a change in approach. To minimise the risk of delays by the use of formal powers, notifications to Ireland's CCPC need to be completed in accordance with the needs of the CCPC.
During 2018, 95 determinations were issued and commitments had to be given to secure approval in five of them. Commitments were given in three extended Phase 1 notifications and in two Phase 2 notifications.
Enva’s proposed acquisition of the Rilta Group was cleared after the proposed acquirer committed to sell a waste disposal facility as well as behavioural commitments to secure approval.
Interestingly, in the remaining four cases, the commitments offered by the acquirer to secure approval were aimed at preventing potential exchanges of confidential information among the parties involved. This continues to be a trend which was already established in other cases. The four cases in 2018 where such exchange of information commitments were offered were:
- Uniphar’s acquisition of Sisk Healthcare
- BWG Foods’ acquisition of 4 Aces
- the acquisition by Trinity Mirror (now known as Reach) to buy newspaper assets owned by Northern & Shell
- Oaktree Capital Group’s purchase of 50 per cent of residential property management company Lioncor
This concern by the CCPC about the potential exchange of competitively sensitive information is likely to continue. What is welcome is that the CCPC showed a willingness to accept behavioural remedies in all five cases and not just structural remedies (which was the case in one of the five cases).
In essence, quicker clearances occur in relatively straight-forward events but the cases which are more complex from a competition law perspective took longer.
Four media-related notifications took place in 2018 which was the same number in 2017. There were three no-issues Phase 1 clearances (two in 2017). The average duration of a Phase 1 non-issues media merger determination was 30 calendar days (i.e. 21 working days) compared to 26 calendar days (i.e. 18 working days) in 2017. There was one Phase 2 assessment of a media merger and it was cleared but it took 216 calendar days (i.e. 150 working days) which seemed extraordinarily long.
It is possible to notify a transaction to the CCPC even if the turnover of the parties falls below the thresholds in the statute specifying when a transaction is compulsory. Such a notification is often known as a voluntary notification. There were no voluntary notifications in 2018 while there had been two in 2017.
Gun-jumping is a failure to notify a transaction and/or implementing it ahead of competition approval. This became a bigger concern for the CCPC in 2018 than in most previous years and is in line with international trends (e.g. at the European Union level). It is unsurprising because Ireland operates a system whereby clearance is needed before closing and it can be tempting for some parties to jump the gun before clearance is obtained. The CCPC has issued a general warning for businesses to notify transactions which are compulsorily notifiable and has requested for these not to implemented pending clearance. It is a criminal offence not to make a notification where one is needed as a matter of law and it is a civil wrong to implement a notified transaction without clearance.
There are some possible trends which could emerge in 2019:
- There may be a reduction in the number of notifications to the CCPC because the turnover thresholds at which notifications must be made (i.e. mandatory notifications) have been raised since 1 January 2019. Early indications are that the change in the thresholds may have depressed the number of notifications more than might have been contemplated by the CCPC.
- There could be a simplified procedure introduced by the CCPC. A robust simplified procedure would be very welcome.
- Assuming Brexit occurs in 2019, it is likely that some transactions, historically notifiable to the European Commission under the European Union's Merger Control Regulation (i.e. Regulation 139/2004), would be notifiable to various national competition agencies including the CCPC. The number of additional transactions which would be notified to Ireland instead of the European Commission because of Brexit would be quantitatively small but would be qualitatively significant. This is because the number of notifications of Irish-related transactions to the European Commission has always been small but many may no longer have a "Union" or "Community" dimension because UK turnover would no longer qualify as Union or Community dimension turnover. However, some of the cases have been complex (e.g. Ryanair / Aer Lingus and Hutchison Whampoa / Telefonica O2 Ireland).
- But less likely, the Irish regime might not capture transactions where the target has a very low or no turnover and the CCPC may well advocate change in this area depending on what is happens with the European Commission's review of this issue. Such a change in the thresholds for notification is a matter for the Irish parliament (the Oireachtas) rather than the CCPC.