Ireland introduces enhanced merger control powers

The Competition (Amendment) Act 2022 (the “2022 Act”), which will enter into force in September 2023, introduces a number of new provisions into the Irish merger control regime by way of amendment to the Competition Act 2002 (the “2002 Act”).

The most significant changes (1) expand the jurisdiction of the Irish competition regulator, the Competition and Consumer Protection Commission (CCPC) to review transactions which do not satisfy the statutory turnover thresholds (so-called “below-threshold” mergers), and (2) enhance the CCPC’s existing investigatory powers in respect of notified transactions.  Given the nature of the changes, transactions with a potential Irish nexus are likely to face increased uncertainty while the CCPC’s practice in implementing its new powers develops. 

Here we highlight three key areas where the changes are likely to impact on deal timings.

New call-in power

For the first time the CCPC is empowered to “call-in” (i.e., require notification of) below-threshold mergers.  This is a broad discretionary power which entitles the CCPC to require parties to notify a transaction where the CCPC is of the opinion that the transaction may have an effect on competition in Ireland.  The power must be exercised within 60 working days of the CCPC becoming aware of the transaction, the transaction being implemented, or the announcement of an intention to make a public bid.

At an elementary level, this change requires merging parties to examine any potential competitive overlaps in Irish operations even in circumstances where the Irish turnover thresholds are not satisfied (the turnover thresholds will be satisfied if the merging parties’ combined Irish turnover in the last financial year was in excess of €60 million and if two or more merging parties generated turnover in Ireland in excess of €10 million).

In circumstances where a transaction may be expected to have an effect on competition in Ireland, the CCPC’s newly-revised merger guidance encourages merging parties to engage with the CCPC with a view to commencing informal discussions.  Alternatively, merging parties may decide to wait until the CCPC contacts them with questions on the transaction and to react accordingly.

This will be familiar territory for those accustomed to the UK Competition and Markets Authority (CMA) processes, pursuant to which the CMA may assert jurisdiction in cases where it considers the share of supply test is satisfied.  There, merging parties may seek to engage proactively with the CMA by submitting a short briefing paper outlining why the transaction does not, inter alia, give rise to competition concerns, or they may simply wait and see whether they receive outreach from the CMA.

The European Commission operates a similar process which allows parties to seek guidance on whether their transaction could be a suitable candidate for a referral under Article 22 of the EU Merger Regulation (“Article 22 EUMR”).

For relevant cases, the CCPC’s new power and associated procedures are likely to add to the timeline for achieving merger approval in Ireland (to date, pre-notification has not been standard practice in Ireland, even in potentially complex deals).  Given the wide-ranging discretionary nature of the power, there is some uncertainty as to the types of transactions which are likely to attract scrutiny and/or be subject to the CCPC’s call-in power. 

However, the CCPC has publicly indicated that it anticipates utilising its call-in power only to examine deals which have a specific impact on the Irish market and not to extend its reach to international transactions which have the potential to impact competition on a wider (e.g., European-wide or global) scale.

Such an approach would likely rule the CCPC out of reviewing cases which are considered appropriate for referral to the European Commission under Article 22 EUMR (see for example the most recent Article 22 referral of Qualcomm’s proposed acquisition of Autotalks).  Indeed, while the CCPC is among a growing number of increasingly interventionist national competition regulators, it is likely to continue to allocate its resources to examining Ireland-centric issues.

Interim measures to prevent implementation of transactions

The 2022 Act also introduces powers for the CCPC to impose “interim measures” in respect of notified transactions where the CCPC “considers it appropriate to do so due to the risk that the merger may have an effect on competition in any markets for goods or services” in Ireland.  Such interim measures may include requirements to refrain from taking steps (or any further steps) to put a transaction into effect or to mitigate the effects of any steps already taken to implement a transaction.

As Ireland operates a mandatory merger notification regime, with an obligation on notifying parties not to complete a transaction before approval has been granted, the imposition of interim measures is likely to be of greatest relevance in cases of below-threshold transactions which have been subject to the CCPC’s call-in power.

In such cases the CCPC will have the power to impose wide-ranging obligations on the merging parties.  Section 18B of the 2002 Act provides a non-exhaustive list which includes obligations preventing the sale or closing of trading sites or requiring the merging parties to participate in a tender process. 

Failure to comply with the interim measures is a criminal offence and may result in fines, including daily fines for each day the company is in breach, being imposed on notifying parties or their directors. In addition, companies which implement a transaction in contravention of an interim measure imposed by the CCPC would face a potential gun-jumping investigation which could result in further fines.

Third–party requirements for information

New provisions introduced by the 2022 Act give the CCPC the power to issue a requirement for information (RFI) to third parties in merger proceedings.  Failure to comply with an RFI issued pursuant to such powers is a criminal offence and may result in fines being imposed on the relevant company or its directors. 

The CCPC routinely contacts a range of industry participants in the course of a merger review, including customers, suppliers and competitors of merging parties. Information gathered in this way contributes to the CCPC’s assessment of competitive dynamics within the relevant markets and can assist in verifying the views presented by the merging parties in their notification.

However, the CCPC’s practice to date has been to request input on an informal basis, meaning that responses have been entirely voluntary. Given the heavy compliance burden associated with the new RFI power, we would expect the CCPC to use it sparingly in respect of third parties to a transaction.

A separate limb of the new RFI power fills a technical gap which will allow the CCPC to issue an RFI (with the same compliance obligations) to all “undertakings involved” in the merger, where previously its practice was to do so only in respect of notifying parties. The distinction between “undertakings involved” and “notifying parties” is referred to in the merger notification form and means that in certain cases, such as the asset acquisitions, the seller will not be a notifying party.

So, for example, in the 2022 notification of Bank of Ireland’s purchase of assets from KBC Bank Ireland plc, the latter bank was not a notifying party and as referred to in the CCPC’s Phase 2 determination, was issued with an information request rather than an RFI. The main practical impact of this change will be to align compliance obligations and timelines for RFI responses for all undertakings involved in a notified transaction.

The issuing of RFIs can impact significantly on the timetable for obtaining clearance from the CCPC. RFIs issued to the undertakings involved, if issued in phase 1 of a merger review, have the effect of suspending and restarting the 30 working day phase 1 review period. RFIs issued to third-parties will not have any suspensory effect.

However, gathering information from third-parties in a merger review by way of an RFI, which requires compliance to be certified by the relevant addressee, could potentially delay a CCPC determination being issued (albeit within the 30 working day timeline).  In more extreme circumstances, a non-compliant third-party RFI response could potentially force the opening of a phase 2 investigation to enable the CCPC to gather the required information.

Conclusion

In 2022, the CCPC marked 20 years of merger review under the 2002 Act and the new provisions reflect the experience of the agency in applying its merger powers over this period.  The CCPC continues to be active in the area of merger control (it issued a record six phase 2 determinations in 2022, including one prohibition), and alongside the new administrative competition enforcement regime introduced by the 2022 Act, businesses can expect even greater scrutiny of any transaction with potential to impact competition in Ireland.