Overview of merger control activity during the last 12 months
If merger activity is an indicator of economic performance, any economic recovery being experienced in Ireland is slow and fragile. In 2012, the number of merger filings to the Competition Authority (Authority) fell for a second year in a row to a total of 33 filings. By comparison, there were 40 filings in 2011, 46 in 2010, 27 in 2009, 38 in 2008, 72 in 2007 and 98 in the 'Celtic tiger' peak of 2006. However, the overall downward trend masks a significant increase in activity towards the end of 2012. While only one filing was submitted to the Authority during January and February 2012, when the Eurozone debt crisis intensified with the downgrade of nine Eurozone sovereign ratings, there was a step-change in the last quarter of 2012 when 14 out of 33 mergers (42%) were notified.
No Phase II investigations were initiated by the Authority during 2012 (or 2011). Even in this context, it is unusual that the merger of greatest note during 2012 was not mandatorily notifiable to the Authority. Eason/Argosy is the first case where Authority intervention led to the withdrawal of a non-notifiable merger that was advanced so far as a signed purchase agreement. A press release by the Authority states that the merger would have reduced the number of wholesalers of new books in Ireland from two to one. It further states that the parties alerted the Authority of their proposed merger post-signing and the parties subsequently withdrew the merger for competition reasons. At the time of the parties' decision to withdraw in October 2012, the Authority had not published any record of an investigation under its general jurisdiction to review all agreements for competition law compliance, which applies in relation to non-notifiable mergers. However, the Authority's report indicates that a decision to commence proceedings against the parties had been made prior to the parties' decision to withdraw. This case demonstrates the need for parties to conduct an early and detailed analysis of non-notifiable transactions that present potential competition issues, and to evaluate the appropriate strategy for interaction with the Authority.
During 2012, no merger approvals were issued by the Minister for Finance under section 7 of the Credit Institutions (Financial Support) Act 2008 (Credit Institutions Act). The Act was introduced at the height of the 2008 financial crisis and provides the Minister for Finance with powers to review mergers involving credit institutions where he/she is of the opinion that the proposed merger is necessary to maintain the stability of the financial system in the State, and there would be a serious threat to the stability of that system if that merger or acquisition did not proceed. 2011 saw the first merger control approval by the Minister pursuant to this Act.
Only one determination published by the Authority during 2012 (Millington/Siteserv M/12/002) makes reference to a target company being in financial difficulty, and failing firm arguments were not addressed in this case or in any other. In previous years, cases involving firms in difficulty have not led to any new failing firm analysis, but rather have involved the Authority expediting its normal review process from one month to shorter periods including, on one occasion, to ten working days to deal with the timing realities where firms are in liquidation or receivership.
The Authority has the power to extend the one-month statutory timescale for a Phase I investigation by issuing a Requirement for Further Information that 'stops the clock'. During 2012, this tool was employed by the Authority on two occasions. The longest period between notification and clearance during 2012, resulting from issue of a Requirement for Further Information, was 79 days (United Care/Pharmexx M/12/017). To put this timescale in context, the average duration of a Phase IIinvestigation by the Authority in the period 2003-2011 was 113 days.
New developments in jurisdictional assessment or procedure
Ireland's merger control regime, as set out in Part 3 of the Act, is mandatory and imposes a prohibition on the merging parties putting a merger into effect prior to Authority clearance.
The Consumer and Competition Bill is expected to be published in the first quarter of 2013. It is expected to introduce significant changes to the procedure and tests applicable to media mergers (see 'Reform proposals' below). The Authority has sought changes to some procedural issues also (see 'Reform proposals' below).
One area of on-going interest is the issue of implementation of a transaction prior to clearance. The Authority has always been implacably opposed to implementation prior to clearance. However, the way in which the merger regime operates so as not to permit notification prior to conclusion of a binding agreement/announcement of a public bid, and the absence of a discretion to exempt implementation prior to clearance, causes real difficulties for merging parties. The Authority has suggested that the Act be amended to allow early notification of transactions, reducing the number of occasions where this issue arises.
Issues around implementation prior to clearance came under renewed focus in December 2010 when the Authority criticised the implementation of a notified merger, Stena/DFDS (M/10/043). In this case, the merger, which was notified to both the UK's Office of Fair Trading and the Authority, signed and completed on the same day so that the authorities were considering an implemented merger. While this did not raise concerns under the UK's voluntary merger control system, where hold separate undertakings are relatively commonplace, it did raise Authority concerns.
The Authority issued a stern press release as follows:
Stena Acquisition of Certain Assets of DFDS A/S Void By implementing the acquisition of certain assets of DFDS A/S before receiving clearance from the Competition Authority, Stena AB (Stena) and DFDS A/S, have infringed section 19(1) of the Competition Act 2002. Consequently, as provided for by section 19(2) of the Act, this acquisition is void.
Dr Stanley Wong, Member of the Competition Authority and Director of the Mergers Division, said: It is not acceptable for parties to implement a notifiable merger or acquisition prior to obtaining approval from the Competition Authority. Any such merger or acquisition is void.
The Competition Authority will proceed to assess the notified transaction in accordance with the provisions of the Competition Act 2002.
The merger was subsequently treated by the Authority as a proposal to put an acquisition into effect and cleared by the Authority following a Phase II Investigation.
However, it is clear that this case is not unique. The main practical difficulty that arises in multijurisdictional transactions involving Ireland is that the merging parties may wish to sign and complete a transaction simultaneously, or may have...