1 Relevant Authorities and Legislation
1.1 Who is/are the relevant merger authority(ies)?
The Irish Competition Authority (the "Competition Authority") is responsible for the promotion and enforcement of competition law in Ireland. It is an independent body originally established under the Competition Act, 1991. The workings of the Competition Authority are governed by the Competition Act, 2002, as amended (the "Competition Act"). Part 3 of the Competition Act, which came into force on 1 January 2003, governs Ireland's merger control regime. The Competition Authority has sole responsibility for non-media mergers and mergers not involving "credit institutions" necessary to maintain the stability of the financial system of the State. Currently each of the Competition Authority and Minister for Jobs, Enterprise and Innovation (the "Minister") has a role as regards media mergers. Draft legislation in the form of the Consumer and Competition Law Bill is expected to be published in late 2012 and is discussed further below. It is expected that the Bill will transfer responsibility for media mergers to the Minister for Communications, Energy and Natural Resources (the "Minister for Communications").
As regards mergers involving "credit institutions", in circumstances where the Minister for Finance considers that a merger or acquisition involving a credit institution is necessary to maintain the stability of the financial system in the State, then the power to determine whether or not the merger or acquisition should be approved lies with the Minister for Finance and not the Competition Authority. Section 7 of the Credit Institutions (Financial Support) Act (the "Credit Institutions Act") provides that such mergers will be notifiable to the Minister for Finance, rather than the Competition Authority and that such mergers may not be implemented without Ministerial approval.
The draft heads of the Consumer and Competition Law Bill provide for the amalgamation and updating of the powers and functions of the National Consumer Agency ("NCA") and the Competition Authority. The new Authority will carry out all the functions currently carried out by both agencies. The NCA is the statutory body charged with defending consumer rights and interests through, inter alia, the enforcement of consumer law. It is possible, therefore, in order to accommodate the NCA's objectives, that the "new" Competition Authority may be required to accord consumer welfare greater prominence in the assessment of mergers.
1.2 What is the merger legislation?
Ireland's merger control regime is governed by Part 3 of the Competition Act 2002 and the Credit Institutions Act 2008. The Competition Authority has published a number of helpful guidance notes including "Access to the File in Merger Cases" and "Revised Procedures for the Review of Mergers and Acquisitions".
1.3 Is there any other relevant legislation for foreign mergers?
Irish law contains no foreign investment control legislation.
1.4 Is there any other relevant legislation for mergers in particular sectors?
The acquisition of shares in financial services companies is subject to additional rules under Irish law. Directive 2007/44/EC (the "Directive") has been implemented in Ireland by the European Communities (Assessment of Acquisitions in the Financial Sector) Regulations 2009. These Regulations amend rules contained in the Central Bank Acts, the Markets in Financial Instruments Directive Regulations 2007, the European Communities (UCITS) Regulations 2003 and the Life and Non-Life Insurance Regulations adopted under the European Communities Act, 1972. The prior consent of the Central Bank of Ireland (the "Central Bank") is required in respect of the direct or indirect acquisition of shares which will result in a person holding more than 10 per cent of the capital or voting shares of such Irish authorised entities including, an (MiFID) investment firm (e.g. stockbroker), a UCITS management company or insurance company. The approval of the Central Bank is also required for all such entities once a 10 per cent threshold is exceeded where further acquisitions would result in the holder owning more than 20 per cent, 33 per cent or 50 per cent of the shares in the company. Similar rules apply to "local" brokers and other intermediaries regulated by the Investment Intermediaries Act 1995. Other instances when the prior consent of the Central Bank is sought arise where the holding is less than 10 per cent but where the Central Bank considers it possible to exercise control or a significant amount of influence over the management of the entity in question. Such transactions must not proceed without the approval of the Central Bank and there is a prescribed assessment period as set out in the Directive (broadly 60 working days).
2 Transactions Caught by Merger Control Legislation
2.1 Which types of transaction are caught - in particular, how is the concept of "control" defined?
Under Section 16(1) of the Competition Act, a merger or acquisition is deemed to occur if:
1 two or more undertakings, previously independent of one another, merge;
2 one or more individuals or other undertakings who or which control one or more undertakings acquire direct or indirect control of the whole or part of one or more other undertakings;
3 the result of an acquisition by one undertaking (the "first undertaking") of the assets (including goodwill), or a substantial part of the assets, of another undertaking (the "second undertaking"), is to place the first undertaking in a position to replace (or substantially to replace) the second undertaking in the business or, as appropriate, the part of the business in which that undertaking was engaged immediately before the acquisition; or
4 a joint venture is created which performs, on an indefinite basis, all the functions of an autonomous economic entity. Tests one, two and four outlined above replicate the tests set out in the European Union Merger Regulation ("EUMR"). The term "control" is defined in Section 16(2) in similar terms to the EUMR, i.e. the ability to exercise "decisive influence" over the activities of an undertaking.
Section 16(3) of the Competition Act provides that "control is acquired by an individual or undertaking if he, she or it:
(a) becomes the holder of the rights or contracts, or entitled to use the other means, referred to in subsection (2) above; or
(b) although not becoming such a holder or entitled to use those other means, acquires the power to exercise the rights derived there from".
Section 16(5) provides that "in determining whether influence of the kind referred to in subsection (2) is capable of being exercised, regard shall be had to all the circumstances of the matter and not solely to the legal effect of any instrument, deed, transfer, assignment or other act done or made".
In interpreting concepts such as "mergers and acquisition", "control" and "decisive influence" in the Competition Act, the Competition Authority may be influenced by European Commission ("Commission") practice and decisions, including relevant parts of the Commission's Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings.
2.2 Can the acquisition of a minority shareholding amount to a "merger"?
The acquisition of a minority shareholding can only amount to a "merger" in a situation where that minority interest is sufficient to give the undertaking involved joint or sole control.
2.3 Are joint ventures subject to merger control?
Part 3 of the Competition Act applies to full-function joint ventures. Section 16(4) of the Competition Act provides that "the creation of a joint venture to perform, on an indefinite basis, all the functions of an autonomous economic entity shall constitute a merger falling within subsection (1)(b)". In relation to full-function joint ventures, as with other areas outlined above, the Competition Authority is influenced by the Commission's guidance and case law.
2.4 What are the jurisdictional thresholds for application of merger control?
In respect of non-media mergers the financial thresholds which trigger the mandatory obligation to notify are found in Section 18(1)(a) of the Competition Act. Section 18(1)(a) provides that a merger or acquisition is notifiable where, in the most recent financial year:
the worldwide turnover of at least two of the undertakings involved in the transaction is not less than €40 million; two or more of the undertakings involved in the transaction carry on business in any part of the island of Ireland (i.e. Ireland and Northern Ireland); and any one of the undertakings involved has turnover in the State (i.e. Ireland) of not less than €40 million. The treatment of media mergers is set out in response to question 2.7 below.
The Competition Authority has published an amended Notice N/02/003 "Notice in respect of certain terms used in Section 18(1) of the Competition Act 2002" (the "Notice") to clarify the Competition Authority's understanding of the term 'carries on business'. The Competition Authority understands that term as including undertakings that either:
have a physical presence in the island of Ireland and make sales or supply services to customers in the island of Ireland; or without having a physical presence in the island of Ireland, have made sales into the island of Ireland of at least €2 million in the most recent financial year. The concept of "undertakings involved" in the transaction is broadly equivalent to the concept of an "undertaking concerned" under the EUMR, and specifically does not include the vendor. As part of the ongoing review of the Competition Act, the Competition Authority has sought to have a provision included in the new legislation which would lower the turnover threshold in the State, and possibly abolish the worldwide turnover threshold test. However, there are no indications at...