The Competition Act 2002 as amended ('the 2002 Act') sets out the statutory framework for merger control in Ireland. The Competition Authority ('the Authority') is the state body responsible, under Part 3 of the the 2002 Act, for the enforcement of merger control law in Ireland.
The Authority's merger control function under the 2002 Act is to determine the competitive impact that a merger may have on competition in Ireland. The Authority will assess a merger to determine whether it is likely to 'substantially lessen competition' in markets for goods or services in the state.
The Authority has sole responsibility for non-media mergers and shared responsibility with the Minister for Jobs, Enterprise and Innovation in relation to media mergers. The Minister for Finance may intervene in a merger or acquisition involving a credit institution where the transaction is necessary to maintain the stability of the financial system in the state.
Mergers may fall within the scope of either the European merger control regime, or the Irish merger control regime. If the annual combined turnover of the undertakings concerned in a merger exceeds certain thresholds, then the transaction falls within the scope of the European Commission's jurisdiction under the EC Merger Regulation ('the ECMR').1 If the merger falls below the turnover thresholds in the ECMR then national competition authorities may apply their respective legislation.
The obligation to notify under Part 3 of the 2002 Act applies to a proposed 'merger or acquisition' where the undertakings involved satisfy thresholds set out in the 2002 Act. Under Section 16(1) of the 2002 Act, a 'merger or acquisition' occurs if:
two or more undertakings, which were previously independent of each other merge; or one or more individuals or undertakings that control one or more undertakings acquire direct or indirect control of the whole or part of one or more other undertakings (including the creation of a joint venture performing indefinitely all the functions of an autonomous economic entity); or the result of an acquisition by one undertaking of the assets (or a substantial part of the assets), including goodwill, of another undertaking, is to put it in a position to replace or substantially replace that other undertaking in the business or, as appropriate, the part concerned of the business it carried on before the acquisition. The term 'control' is defined in Section 16(2) of the 2002 Act as the ability to exercise 'decisive influence' over the activities of an undertaking, whether such influence is conferred by the acquisition of securities or contract, or a combination thereof, or by any other means. In practical terms, this will be demonstrated by ownership of assets, or by rights or contracts that enable decisive influence to be exercised over the voting or decisions of the organs of an undertaking.
In respect of non-media mergers, the financial thresholds that trigger the mandatory obligation to notify are found in Section 18(1)(a) of the 2002 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 no less than 40 million; two or more of the undertakings involved in the transaction carry out business in any part of the island of Ireland;2 and any one of the undertakings involved has turnover in the Republic of Ireland of no less than 40 million. Sections 18(1)(b) and 18(5) of the 2002 Act provide that the Minister for Jobs, Enterprise and Innovation may specify certain classes of mergers and acquisitions that must be notified to the Authority regardless of the thresholds set out in Section 18(1)(a) of the 2002 Act. The Minister has done so in relation to media mergers, which are defined in Section 23(10) of the 2002 Act as 'a merger or acquisition in which one or more of the undertakings involved carries on a media business in the state'. In consequence, media mergers are treated separately under the 2002 Act.
The concept of 'undertakings involved' in the transaction, from a competition law perspective, will be those undertakings that will influence the competitive behaviour of the entity once the transaction has been completed. The term therefore, generally covers the buyer and the target, and specifically does not include the vendor. This is because after the transaction has been completed, the vendor will no longer control the competitive behaviour of the business sold.
The term 'carries on business' is set out in an Authority Notice.3 This states that the 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. While mergers or acquisitions that do not meet the jurisdictional thresholds set out above do not have to be notified, provision is made for voluntary notification to the Authority under Section 18(3) of the 2002 Act. Clearance by the Authority protects the parties involved from a subsequent challenge to the merger by the Authority or third parties under Sections 4 and 5 of the Act. Mergers that are voluntarily notified are subject to the same procedural rules as mergers to which the mandatory notification obligation applies.
The Authority's guidelines for merger analysis4 set out a general rule for voluntary notification as follows:
consider notifying the Authority if the post-merger market share is above 40 per cent on any reasonable definition of the relevant market; do not notify if post-merger the market is not very concentrated; and for in-between cases, cases where the assessment relies critically on market definition or cases where a foreign entrant is involved, informal pre-notification discussions with the Authority are encouraged. II YEAR IN REVIEW
Following a strong recovery in 2010, merger and acquisition activity in 2011 commenced in a similar vein. For the second year in a row, the Irish mergers and acquisitions market remained ahead of the lows experienced in 2009. The total number of deals recorded in 2011 was 187 with a total reported deal...