Article by Helen Kelly1
The Competition Act 2002-2012 ('the Competition Act') governs Ireland's merger control regime. The Competition Authority has primary responsibility for most mergers notifiable under the Competition Act (i.e., where the EU Merger Regulation2 does not apply). The applicable merger control test used by the Competition Authority is whether the merger is likely to substantially lessen competition for goods or services in the state.
Currently, both the Competition Authority and the Minister for Jobs, Enterprise and Innovation ('the Minister') have a role as regards 'media mergers'. The Consumer and Competition Law Bill ('the Bill'), to be published in mid-2013, will alter the treatment of media mergers in a significant way and will involve the transfer of responsibility for media mergers away from the Minister to the Minister for Communications, Energy and Natural Resources ('the Minister for Communications').
There is also a special regime for mergers involving 'credit institutions' necessary to maintain the stability of the financial system of the state pursuant to Section 7 of the Credit Institutions (Financial Support) Act 2008 ('the Credit Institutions Act'). The Credit Institutions Act was introduced at the height of the financial crisis in 2008 when concern about the survival of retail banks was at its height. Where a merger relates to credit institutions necessary to maintain the stability of the financial system of the state, mergers will be notifiable to the Minister for Finance, rather than the Competition Authority, and the Minister for Finance has sole jurisdiction to determine whether or not the merger or acquisition should be approved. To date, there has been just one such merger, AIB/EBS (in 2011).
Notification under the Irish system of merger control is mandatory where the jurisdictional thresholds are met, and a filing must be made by each of the undertakings involved in the transaction within one month of conclusion of the merger agreement or the making of a public bid. Failure to notify a notifiable transaction within the onemonth period can constitute a criminal offence. Implementation of a transaction prior to clearance is prohibited but does not amount to a criminal offence, albeit that it would amount to a criminal offence to put a merger into effect in defiance of a Phase II prohibition or in breach of conditions attaching to a clearance.
Under Section 16(1) of the Competition Act, a merger or acquisition is deemed to occur if:
a two or more undertakings, previously independent of one another, merge;
b 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;
c 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
d a joint venture is created that performs, on an indefinite basis, all the functions of an autonomous economic entity.
Section 16(2) of the Competition Act provides that 'control' shall be regarded as existing 'if, by reason of securities, contracts or any other means, or any combination of securities, contracts or other means, decisive influence is capable of being exercised with regard to the activities of the 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; or (b) although not becoming such a holder or entitled to use those other means, acquires the power to exercise the rights derived therefrom'. 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 the practice and decisions of the European Commission, including relevant parts of the Commission's Consolidated Jurisdictional Notice under Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings.
Section 18(1)(a) of the Competition Act provides that a merger or acquisition is notifiable when, in the most recent financial year:
a the worldwide turnover of at least two of the undertakings involved in the transaction is not less than 40 million;
b 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);
c any one of the undertakings involved has turnover in the Ireland of not less than 40 million; and
d certain mergers involving 'media business'3 must be notified regardless of the size of the undertakings involved.
II YEAR IN REVIEW
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 fell for a second year in a row to a total of 33 filings. The downward trend seems to have stabilised in the first quarter of 2013, when nine notifications were received. By comparison with 2012, 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 period of 2006.
Industry sectors most likely to be subject to merger control review by the Competition Authority are mergers involving financial services. This reflects the facts that the Irish merger control system is mandatory, and the only relevant factor is...