Rye Investments Ltd v Competition Authority

JurisdictionIreland
JudgeMr. Justice Cooke
Judgment Date19 March 2009
Neutral Citation[2009] IEHC 140
CourtHigh Court
Date19 March 2009

[2009] IEHC 140

THE HIGH COURT

[2008 No. 145 MCA]
Rye Investments Ltd v Competition Authority
COMPETITION

BETWEEN

RYE INVESTMENTS LTD
APPELLANT

AND

THE COMPETITION AUTHORITY
RESPONDENT

COMPETITION ACT 2002 S16

COMPETITION ACT 2002 S18(1)

COMPETITION ACT 2002 S20

COMPETITION ACT 2002 S21

COMPETITION ACT 2002 S20(1)(A)

COMPETITION ACT 2002 S22

COMPETITION ACT 2002 S22(3)(B)

COMPETITION ACT 2002 S24

RSC O.63B r25

COMPETITION ACT 2002 PART III

COMPETITION ACT 2002 S18

COMPETITION ACT 2002 S19(1)

COMPETITION ACT 2002 S22(3)

COMPETITION ACT 2002 S22(3)(C)

COMPETITION ACT 2002 S24(3)

COMPETITION ACT 2002 S24(7)

DUNNE v MIN FOR FISHERIES 1984 IR 230 1984/4/1272

GLANCRE TEORANTA v CAFFERKEY & ORS 2004 3 IR 401 2004/19/4338 2004 IEHC 123

RSC O.84

PLANNING & DEVELOPMENT ACT 2000 S50(2)

ILLEGAL IMMIGRANTS (TRAFFICKING) ACT 2000 S5

COMPETITION ACT 2002 S24(9)

WADE ADMINISTRATIVE LAW 5ED 1982 34-5

PLANNING & DEVELOPMENT ACT 2000 S37

PLANNING & DEVELOPMENT ACT 2000 S37(6)(G)

COMPETITION ACT 2002 S24(6)

COMPETITION ACT 2002 S24(4)

COMPETITION ACT 2002 S15

COMPETITION ACT 2002 S4(3)

TREATY OF ROME ART 81 PARA 3

COMPETITION ACT 2002 S4(1)

COMPETITION ACT 2002 S4(5)

EEC REG EEC/4064/89

ULSTER BANK INVESTMENT FUNDS LTD v FINANCIAL SERVICES OMBUDSMAN UNREP FINNEGAN 1.11.2006 2006/56/11976 2006 IEHC 323

POSTAL AND TELECOMMUNICATIONS SERVICES ACT 1983 S111(2B)(i)

COMPETITION ACT 2002 PART II

EEC REG EC/1/2003 ART 3

EEC REG EC/1/2003 ART 5

EEC REG EC/1/2003 ART 11

EEC REG EC/1/2003 ART 16

TREATY OF ROME ART 81

TREATY OF ROME ART 82

EEC REG EC/139/2004 ART 4(4)

EEC REG EC/139/2004 ART 9

TETRA LAVAL BV v EUROPEAN COMMISSION 2002 5 CMLR 28 2002 ECR II-4381 2003 AER (EC) 762

EUROPEAN COMMISSION v TETRA LAVAL BV 2005 4 CMLR 8 2005 ECR I-987 2005 AER (EC) 1059

MICROSOFT CORP v EUROPEAN COMMISSION 2007 5 CMLR 11 2007 ECR II-3601

COMPETITION LAW

Mergers and acquisitions

Analysis of competition - Definition of product market - Statutory appeal from determination of Competition Authority - Nature and scope of appeal - Standard of review to be applied by Court - Interpretation of evidence by Authority - Adequacy thereof - Whether product substitutability disregarded by Authority - Whether extent of countervailing power of retailers disregarded - Whether approach of Authority ambiguous and incoherent - Whether proposed acquisition would substantially lessen competition in market for products - Whether material error in determination- Orange v Director of Telecommunications Regulation (Unrep, Macken J, 4/10/1999) applied; Glancré Teo v Cafferkey [2004] 3 IR 401 and Microsoft v Commission (Case T-201/04) [2004] ECR II-4463 considered - Competition Act 2002 (No 14), 24 - Appeal allowed and determination annulled (2008/145MCA - Cooke J - 19/3/2009) [2009] IEHC 140

Rye Investment Ltd v Competition Authority

Facts: The appellant agreed to acquire from Reox Finance Limited the entire issued capital of two wholly owned subsidiaries. The two companies previously comprised the consumer foods division of Dairygold. The appellant and Reox Finance Ltd. notified the transaction to the Competition Authority in accordance with s. 18 of the Competition Act 2002. The Authority determined in 2008 that the proposed acquisition could not be put into effect on the grounds that the result of the acquisition would substantially lessen competition in the markets for the goods concerned in three markets for rashers, non-poultry cooked meats and processed cheese. In respect of the relevant markets and competitive effects of the acquisition, the issue arose as to the adequacy of the information relied upon and the economic conclusions drawn from the evaluation of the information by the Authority. The issue further arose as to the distinction between an appeal and judicial review and the procedure provided for in s. 24 of the Act of 2002 with respect to the function of the High Court and the question of appropriate curial deference arose as to the standard of review.

Held by Cooke J. that the determination made by the Authority was vitiated by material error. The Authority erred in its finding of the product market for cheese and erred in finding that there would be a substantial lessening of competition resulting from the acquisition in the markets for rashers and non-poultry cooked meats in that it failed to assess correctly the post-acquisition existence of sufficient countervailing buyer power on the part of retailers to deter a price increase imposed by a merged entity. The definition of the product market in the cheese sector was inadequate and unsound. The conclusions drawn as to the absence of sufficient countervailing buyer power were flawed and unsound as they were inconsistent with the broad thrust of the evidence. The errors vitiated the finding of substantial lessening of competition and the appeal would be allowed and the Determination annulled. The procedure under which the Court considered the findings of the Authority pursuant to s. 24 was wider than judicial review but narrower than other appellate procedures provided in the Act of 2002, for example in s. 15 of the Act of 2002. Appropriate curial deference had to be exercised by the Court

Reporter: E.F.

1

Mr. Justice Cooke delivered the 19th day of March, 2009.

1. Introduction
2

2 1.1 By a share purchase agreement dated 12 th March, 2008, the appellant agreed to acquire by purchase from Reox Finance Ltd. the entire issued capital of two wholly owned subsidiaries of the latter namely, Breeo Foods Ltd. and Breeo Brands Ltd.

3

3 1.2 The appellant is a wholly owned member of Kerry Group plc., a quoted public company with a market capitalisation of €3.5 billion: it is a leading producer of foods and food ingredients in the State and the supplier of such goods in some 140 countries around the world. (Kerry Group plc and the appellant are referred to in this judgment as "Kerry".)

4

4 1.3 Reox Finance Ltd. is a wholly owned subsidiary of Reox Holdings plc ("Reox") an Irish unlisted plc whose shares are held as to 26% by Dairygold Co-Operative Society Ltd. ("Dairygold") and as to the balance by some 7,500 shareholders who are mainly members of Dairygold.

5

5 1.4 Reox is an international food company operating in the State, the United Kingdom of Great Britain and Northern Ireland, the Netherlands and the United States of America and which exports to European countries and the Middle East.

6

6 1.5 As part of a restructuring of Dairygold, the two above Breeo companies which previously comprised the consumer foods division of Dairygold were transferred into Reox. The two Breeo companies (which will be referred to hereinafter as simply "Breeo") had a turnover of €200 million of which some €166 million was generated in the State.

7

7 1.6 Breeo has outsourced most of its manufacturing operations to third parties and at the date of the acquisition agreement was involved in manufacturing or processing at only two locations in the State, namely, the manufacture of dairy spreads at Mitchelstown, County Cork and the slicing of cooked hams at Tallaght in County Dublin.

8

8 1.7 In practical terms, the effect of the proposed acquisition would be to transfer from Dairygold to Kerry the consumer foods division of Reox together with a number of properties including the plants at Mitchelstown and Tallaght and its business and assets, including intellectual property assets and in particular, some 225 trade marks comprising a number of well known brands including Dairygold, Galtee, Shaws, Roscrea, Mitchelstown and Calvita. Kerry is the proprietor of other brands for similar food products including, Denny, Ballyfree, Clover, LowLow, Easisingles.

9

9 1.8 Because of the size and value of the operations of the Kerry Group and Dairygold respectively and because the transfer of those assets and properties constituted a "merger or acquisition" for the purposes of s. 16 of the Competition Act 2002 ("the Act") the appellant and Reox (hereinafter referred to jointly as "the notifying parties") notified the transaction to the Competition Authority in accordance with s. 18(1) of the Act.

2. Notification Procedure and Appeal
10

2 2.1 The proposed acquisition was notified to the Authority on 20 th March, 2008 and the notification was accompanied by 1) an economic report by Compecon Ltd. and 2) econometrics reports furnished by Dr. Vincent Hogan. The steps taken by the Authority in the course of its first phase examination as provided for in ss. 20 and 21 of the Act can be summarised as follows.

11

a) Notice of the notification was published pursuant to s. 20(1)(a) of the Act.

12

b) A questionnaire was sent to 9 retailers to which 8 responded and a questionnaire was sent to 23 competitors of the notifying parties to which 12 responded;

13

c) Requests for further information were issued to Kerry and Breeo;

14

d) On 29 th May, 2008, the Authority made a determination pursuant to s. 21(2) of the Act to carry out a "full investigation" pursuant to s. 22 of the Act.

15

3 2.2 The steps taken during the full investigation phase can be summarised as follows:-

16

a) A second request for further information was issued to Kerry on 5 th June, 2008;

17

b) Further questionnaires were sent respectively to 6 retailers and 11 competitors;

18

c) The Authority meet with the parties and their experts to discuss the econometrics expertise on 3 rd July, 2008;

19

d) Further econometrics reports from Dr. Hogan on behalf of the notifying party and Dr. Walsh on behalf of the Authority were exchanged and submitted;

20

e) A third questionnaire was issued to 5 retailers relating to the cheese market;

21

f) On 15 th July, 2008, a meeting with the parties and their experts took place;

22

g) On 25 th July, 2008, the...

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