The Irish merger control rules are mainly contained in Part 3 of the Competition Act 2002 as amended.
The main features of the Irish regime are:
- turnover thresholds and carrying on business requirements for mandatory notifications;
- no completion before clearance;
- the application of the “substantial lessening of competition” test;
- special provision for “media mergers”; and
- the possibility of voluntary notifications.
Special rules also apply to mergers involving credit institutions where there is a risk to the stability of the financial system (please see our briefing on “Credit Institutions – The New Irish Merger Control Regime”).
2. Qualifying Mergers
A qualifying merger or acquisition occurs where:
- two or more previously independent undertakings merge;
- there is sole or joint acquisition of direct or indirect “control” of the whole or part of an undertaking (including the creation of a “full-function” joint venture); or
- one undertaking acquires all or a substantial part of the assets, including goodwill, of another undertaking so as effectively to replace the second in the business concerned.
A qualifying merger or acquisition will not occur in cases of a receivership, a liquidation or an intra-group transaction.
The concept of “control” is similar to that under the EU Merger Regulation. It will exist if decisive influence is capable of being exercised with regard to the activities of an undertaking, by reason of securities, contracts or other means, or any combination of these, in particular by:
- ownership of, or the right to use all or part of the assets of another undertaking; or
- rights or contracts which enable decisive influence to be exercised with regard to the composition, voting or decisions of the organs of an undertaking.
3. Notification Requirements
A qualifying merger or acquisition must be notified to the Competition Authority if it is agreed or, in the case of a public bid, if a formal offer is made, and:
- in the most recent financial year the world-wide turnover of each of two or more of the undertakings involved is not less than €40 million; and
- each of two or more of the undertakings involved carries on a business in any part of the island of Ireland (including Northern Ireland); and
- one of the undertakings involved has a turnover in the State of not less than €40 million.
These financial thresholds do not apply in the case of media mergers, to which a special regime applies (see 8, below).
According to the Authority, the entire group of companies to which a merging undertaking belongs constitutes an “undertaking involved”. “Turnover in the State” comprises sales made or services supplied to customers within the Republic of Ireland.
Generally, the vendor is not “involved” in the merger or acquisition. In the case of an acquisition of assets, however, the undertaking whose assets are being acquired is considered to be involved for the purposes of determining whether the acquisition is notifiable (with the relevant turnover being the turnover generated from the assets being acquired), but is not obliged to notify the transaction to the Authority.
In the view of the Authority, the carrying on business in any part of the island of Ireland criterion is satisfied where an undertaking:
- has a physical presence on the island of Ireland (including a registered office, subsidiary, branch, representative office or agency) and makes sales and/or supplies services to customers on the island of Ireland; or
- has made sales into the island of Ireland of at least €2 million in its most recent financial year.
Notification should be made by each undertaking involved using the prescribed merger notification form, which may be submitted jointly or separately. A joint notification is normally submitted.
A fee of €8,000 applies to each notification. Failure to notify a notifiable merger or acquisition or to supply information required is a criminal offence and can result in significant fines (€3,000 on summary conviction or €250,000 on conviction on indictment). A notifiable merger or acquisition which has not been notified is void.
Once notified, the merger or acquisition may not be put into effect until:
- the Authority has determined that it may be put into effect;
- the Authority has made a conditional determination; or
- specified time periods have elapsed without the Authority informing the notifying parties of a determination.
4. Voluntary Notifications
Qualifying mergers and acquisitions below the financial thresholds may be voluntarily notified to the Authority. A voluntary notification should clearly be considered where the proposed transaction is likely to give rise to competition concerns attracting the interest of the Authority.
Non-notifiable transactions which raise competition concerns can be challenged under other provisions of the Competition Act 2002 as amended (Section 4, on anticompetitive arrangements, and Section 5, on abuse of dominant position). The Competition Authority or aggrieved third parties may bring proceedings before the courts for breach of either of these provisions.
5. Notification Procedures
Written notification of the proposed merger or acquisition, with full details of the transaction, must be made to the Authority within one month commencing on the date of the conclusion of an agreement or the making of a formal public bid. Brief details of each notification are published on the Authority’s website. This is intended to make the process transparent and thereby facilitate third party submissions.
The parties may request a meeting with staff of the Authority’s Mergers Division prior to making a notification. While not binding on the Authority, these confidential discussions provide an opportunity to discuss the scope of information to be submitted and to identify possible competition concerns at an early stage.
There is a two-phase review procedure, the second phase of which will be initiated where the Authority is not satisfied, during its firstphase analysis, that the merger will not substantially lessen competition in the relevant market(s).
The Authority must inform the notifying parties and third parties that have made submissions, within one month (45 days where a notifying party submits a proposal aimed at addressing competition concerns) commencing on the date of receipt of the notification (or the date of the provision of the response(s) to a formal request for information) that it has made a determination either:
- allowing the transaction to proceed; or
- initiating a full investigation.
The Authority may hold discussions with the notifying and/or third parties to identify measures to limit the anti-competitive effects of a merger or acquisition; these can develop into formal commitments binding the parties. If cleared at the end of the first phase, the merger must be put into effect within twelve months. If the Authority fails to inform the notifying parties of its determination within the above period, the merger is deemed to be cleared and may be put into effect within thirteen months of receipt of the notification (or receipt of further information).
The Authority must publish its determination (with confidential business secrets removed) within two months of making it.
If the Authority initiates a second-phase investigation, it has four months from the notification date (or the date of provision of additional requested information) to make a determination that the merger or acquisition may:
- take effect;
- take effect subject to conditions; or
- not take effect.
If the Authority concludes that the merger will not substantially lessen competition, it will make an early determination within eight weeks of the beginning of this second phase, allowing the merger to proceed. If not, it can furnish an Assessment to the notifying parties, who may make written and oral submissions to the Authority prior to its determination.
If cleared, the merger must be put into effect within twelve months of the determination. If the Authority fails to make a determination within the four month period, the transaction is deemed to be cleared and may be put into effect within sixteen months of receipt of the notification or further information. The Authority’s determination must be published after allowing parties an appropriate period to indicate whether any information contained in it is confidential.
6. The Substantive Test
The substantive test is whether the result of the merger or acquisition will be to substantially lessen competition in markets for goods or services in the State. This test is used in the US and is similar to the “significantly impedes effective competition” test contained in the EU Merger Regulation.
In carrying out its analysis, the Authority first defines the relevant product and geographic markets in terms of supply- and demand-side substitutability (applying the SSNIP test). It then assesses the effect of the transaction on market structure in terms of market concentration, using the HHI test as an indicator of pre- and post-merger concentration levels. Finally, it assesses whether the merger will result in a substantial lessening of competition, taking into account, in particular:
- whether the merger facilitates overt or tacit collusion between competitors, resulting in raised prices;
- whether the merged firm is enabled to raise prices unilaterally;
- opportunities for market entry; and
- the “efficiency defence” - the extent to which the merger leads directly to efficiency gains that cannot be realised by other means and which offset any anti-competitive effects.
Any notifying party can appeal to the High Court within one month against a decision to block a merger, or to allow a merger subject to conditions. Issues of fact and law may (subject to certain limits) form the subject of such an appeal. As far as practicable, the High Court must rule on such an appeal within two months. The High Court can annul the Authority’s decision or confirm it (with or without changes). There is no provision in the Act for appeal by third parties in the event of clearance by the Authority. Such parties may however seek remedies under normal principles of judicial review.
8. Media Mergers
“Media mergers” are defined in the Competition Act 2002 as amended as mergers or acquisitions in which at least one of the undertakings involved carries on a media business in the State. Media mergers must be notified regardless of the turnover of the undertakings involved, in cases where at least one undertaking involved carries on a media business in the State and at least one other undertaking involved carries on a media business either in the State or elsewhere. “Media business” is broadly defined to mean print media, broadcasting services (radio, cable, multipoint microwave system) and the provision of a broadcasting services platform, but excludes services provided by means of the Internet.
A special procedure - with the possible intervention of the Minister for Jobs, Enterprise and Innovation - applies to the assessment of media mergers. The Minister may require a second-phase review of a media merger and, at the end of that phase, override a decision of the Authority that a merger may be put into effect (whether or not with conditions). In doing so, the Minister must take into account a number of public interest criteria set down in the Act such as the plurality of the media and the competitiveness of indigenous media businesses. Additional periods are given for the Minister to decide whether or not to act (10 days at the end of the first phase and 30 days at the end of the second phase).
9. Application of Sections 4 and 5 of the Competition Act 2002 as amended
Provisions of the Competition Act 2002 as amended dealing with anti-competitive arrangements (Section 4) and abuse of a dominant position (Section 5) will not apply to mergers cleared under the Act or to ancillary restrictions in the relevant agreements covered by the clearance.